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LTC Bullet:  Should Medicaid Protect Retirement Savings?

Wednesday, June 22, 2005 

Washington, DC-- 

LTC Comment:  Analysts at a Brookings Institution convocation yesterday recommended exempting retirement savings from Medicaid eligibility limits for working families, BUT NOT for elderly LTC benefits, to our surprise.  


LTC Comment:  Should people with hundreds of thousands of dollars be able to retain those assets and receive public welfare benefits?  Most people would respond with outrage at such a suggestion.  Yet that's what some elder law attorneys and their trade association have proposed.  And that's why "LTC Bullets" monitored a Brookings Institution briefing yesterday titled "Protecting Low-Income Families' Savings."  We wanted to see what conceivable rationale might be offered to justify sheltering IRAs and 401-Ks from Medicaid eligibility limits.  To our surprise and satisfaction, the presenters came down much closer to our position than we expected.  Here's the story: 

Public welfare programs like Food Stamps, TANF (Temporary Assistance for Needy Families), SSI (Supplemental Security Income), and Medicaid have complicated, conflicting and counterproductive rules regarding treatment of assets, including tax-favored retirement savings, in determining program eligibility.  Sometimes, those rules force working families on the cusp of poverty to liquidate their retirement savings accounts before they can receive temporary help from public programs to get them through a brief bout of unemployment or illness.  Advocates maintain that the rules should be changed and unified to help such marginal individuals and families avoid losing their savings.  Why should people be penalized and forced to start saving over again from scratch just because they need a little short-term help? 

The rationale for exempting retirement savings from eligibility limits for these programs is that, if the savings are protected, they will grow and someday, when the savers retire, families and individuals who might have become dependent on public welfare for retirement, health, and long-term care benefits will be better able to pay their own way.  It is in those later years, when the public benefits are most expensive and least likely to be sustainable, given the impending fiscal strains on Social Security, Medicare and Medicaid.  Thus, or so the argument goes, exempting retirement savings in the early working years, will help build the savings over time so people will be able to pay their own way someday when the burden on public programs would otherwise be much greater. 

OK, so far it makes sense:  let people get temporary help from public assistance programs without forcing them to spend their small, but growing, tax-favored retirement accounts.  But we expected the next step in the argument to be a justification for protecting retirement savings from eligibility determination for Medicaid's long-term care benefits at a time when the accounts would likely be much, much larger.  Not so.  Presenter Robert Greenstein, Executive Director of the Center on Budget and Policy Priorities, expressly stated that retirement savings should not be exempted for Medicaid LTC benefit eligibility.  In fact, in response to a question from Center for Long-Term Care Reform president Steve Moses, he said he favored stronger controls on Medicaid planning and transfer of assets gimmicks that allow people with substantial assets to circumvent the rules and take advantage of Medicaid benefits. 

In a conversation after the briefing, Greenstein told Moses that he is very interested in conferring with the Center for Long-Term Care Reform about ideas and methods to discourage Medicaid planning abuses and to ensure scarce Medicaid resources are preserved for people truly in need.  Greenstein wants to see Congress find as much of the $10 billion savings in Medicaid mandated by the 2006 budget resolution achieved in ways that do not hurt genuinely needy recipients, such as discouraging Medicaid planning abuses.  That is our goal too.  We will follow up with Mr. Greenstein and his Center on Budget and Policy Priorities to pursue mutually compatible ideas toward that end. 


For more about the Brookings briefing, go to .  

To read the report discussed at the Brookings briefing, titled "Protecting Low-Income

Families' Retirement Savings:  How Retirement Accounts Are Treated in Means-Tested Programs and Steps to Remove Barriers to Retirement Saving," by ZoŽ Neuberger, Robert Greenstein and Eileen P. Sweeney, go to .