Wednesday, June 22, 2005
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 BULLET: SHOULD
MEDICAID PROTECT RETIREMENT SAVINGS?
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
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
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 http://www.brookings.edu/comm/events/20050621.htm
To read the report discussed at the Brookings briefing,
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 http://www.retirementsecurityproject.org/pubs/File/AssetTestReport.final.pdf .