LTC Bullet: Free LTC Loan With No Pay Back Required
Friday, August 22, 2014
LTC Comment: What if you could get unlimited long-term care after you need it at no cost and without reimbursement required? Learn how after the ***news.*** [omitted]
LTC BULLET: FREE LTC LOAN WITH NO PAY BACK REQUIRED
LTC Comment: As we’ve explained often in this space and in dozens of national and state-level reports here, it is much easier than commonly understood to qualify for Medicaid-financed long-term care with little or no asset spend down. Here’s a quick review:
Income rarely stands in the way of Medicaid eligibility because most states subtract private medical and LTC expenses from income before asking if you’re poor enough to qualify. So, you don’t need low income, but only insufficient cash flow. That’s how people with large incomes qualify easily. Even in the minority of states with “income caps,” Miller income diversion trusts make qualification easy.
But what about assets? No problem. For starters, you can keep a home with equity up to as much as $543,000 to $814,000 depending on the state where you live. Without any dollar limit, you can also retain a business including the capital and cash flow, one auto, home furnishings, personal belongings, prepaid burial plans for yourself and immediate relatives, your IRAs, etc. Still have too much to get Medicaid to pay for your LTC? No problem. With an elder law attorney’s help you can score a Medicaid-friendly annuity, a special trust, a reverse half-a-loaf, or any number of special self-impoverishment vehicles to become “poor” quickly and qualify.
So, no matter where you are in the USA, if you choose not to spend your own money (your heirs’ inheritance) on long-term care, you have the option to shift the cost to Medicaid. That’s not the most desirable outcome in terms of the access to and quality of care you’ll receive, but by that time you probably won’t be making such decisions about your care. Those decisions will be made by the people who will receive your wealth when you die if it is not consumed to purchase top-quality LTC in the private market.
Now, the government knows that easy access to free LTC after the insurable event occurs might discourage responsible long-term care planning. So, in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93), the federal government required that every state Medicaid program recover from the estates of deceased recipients the cost of the care they received. Because the biggest exempt asset most older people have is their home equity, that law turned Medicaid long-term care into a de facto home equity conversion program.
The idea was simple. If you have to pay it all back out of your estate, you would be less likely to game the Medicaid eligibility rules in the first place and more likely to plan early and save, invest or insure for long-term care privately. That was the explicit intent of the OBRA ’93 law.
But here’s the problem: most states have not energetically enforced the estate recovery mandate and the federal government has failed to require them to do so. The net effect is what we stated in the tickler for today’s Bullet: many people can get unlimited long-term care after they need it at no cost and without reimbursement enforced. As long as that is true, it should come as no surprise that so few people plan ahead for LTC risk and cost.
So the big questions is this: why do the state and federal Medicaid programs subsidize this high-cost perverse incentive by failing to enforce the estate recovery requirement? The answer is politics and crony capitalism. Politicians like to promise their constituents free benefits; they hate to be seen as taking anything away. Likewise, lawyers and financial advisers who profit from taking advantage of Medicaid’s elastic eligibility rules support politicians who help them dodge those rules and oppose estate recovery.
Why do we return to this subject today? Because we anticipate that new information will soon be available to document—for the first time in a decade—the level of estate recoveries in the United States and the success or failure of state Medicaid programs to implement and enforce laws bearing on Medicaid LTC eligibility and estate recovery. Today’s Bullet tees up the topic. We’ll bring you the follow-through as soon as the new data is published.
In the meantime, if you’d like to dig deeper, “LTC Bullet: The Role of Estate Recoveries in LTC Financing” will direct you to many of the key published resources on the topic.