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Welfare
for the Well-to-do by December
17, 2005 With
expenditures topping $300 billion and rising 8% annually, Medicaid is a huge
entitlement -- larger even than Medicare. State
governors in particular are howling that their share of the overall costs -- 43%
-- are burning through state budgets uncontrollably.
As Virginia's Mark Warner put it, "We are on the road to a
meltdown." Now, as
the first session of the 109th Congress winds down, House and Senate members are
attempting to hash out a compromise in conference that could provide some
overall budget relief. The spoiler
is AARP, which is dispensing clouds of self-serving rhetoric while attempting to
divert the program's scarce resources to the senior lobby's more affluent
members. What's going on? Most
people think of Medicaid as the health-care payer of last resort for poor women
and children. But long-term care is
Medicaid's biggest single cost -- and many recipients of this largesse are
anything but poor. One reason is
that, for purposes of Medicaid nursing home eligibility, people are allowed to
retain unlimited income as long as their medical expenses -- including long-term
care -- are high enough. Another
big reason is that they can also keep unlimited assets in the form of home
equity, a business or other kinds of wealth. In
theory, once they die the government could recover Medicaid costs from their
estates. In practice, most of this
wealth disappears, often in gifts to family members. Consider
home equity, seniors' largest asset. According
to the National Council on the Aging, 81% of America's 13.2 million householders
aged 62 and over own their own homes, and 74% own their homes free and clear.
Altogether, seniors possess nearly $2 trillion worth of home equity.
Yet, by the time they apply for Medicaid, few own their homes.
Are they giving the homes away to their grown-up children or other
relatives? Such a transfer of
assets carries no legal penalty as long as it is done at least three years and a
day before applying for Medicaid. That's
just one of hundreds of eligibility "loopholes" that allow
individuals, especially those advised by Medicaid planning attorneys, to qualify
for Medicaid long-term care benefits without spending down their own wealth for
care. If you doubt this, try an
Internet search for "Medicaid planning" and read some of the sales
pitches on the more than six million hits.
You'll learn how to purchase noncountable assets, buy and give away a
string of luxury cars without penalty, hide wealth in exempt annuities, sell
your ailing parent a "life-care contract," even buy a farm or business
-- all for the express purpose of "impoverishing" yourself or a loved
one artificially and qualifying for Medicaid long-term care benefits. Ten
Congresses and four presidents have tried to stop these legal scams.
They've closed loopholes, discouraged Medicaid qualifying trusts, made
recovery from recipients' estates mandatory, and offered tax incentives to
encourage private insurance. They
even criminalized Medicaid planning in 1996, only to be accused of
"throwing granny in jail." When they repealed that measure and
replaced it a year later with another to "throw granny's lawyer in
jail," the law was deemed unconstitutional. Congress
is trying Medicaid reform once again. The
House of Representatives recently passed legislation to curtail a few of the
most egregious abuses. It would
move the look-back period for asset transfers from three to five years,
eliminate Medicaid planners' favorite "half-a-loaf" giveaway strategy,
and cap exempt home equity at $750,000. Even
if these measures move out of the conference committee with the Senate and
become law, elderly Americans could still give away $10 million (actually
unlimited assets) without penalty five years and one day before applying for
Medicaid. They could still retain a
home worth three-quarters of a million dollars while getting taxpayers to pick
up the costs of their long-term care. AARP has
nevertheless gone ballistic, claiming that the House reforms "seriously
threaten the ability of millions of Americans to get needed long-term care
services" and "will deny millions of older and disabled Americans the
long-term care services they need and leave them vulnerable to substandard
care." They've targeted
members of Congress with advertisements in their hometown papers attacking the
House's efforts to curtail Medicaid abuse; they've run radio and TV spots, and
full-page ads appear in Capitol Hill papers almost daily.
House staffers report that scared and angry AARP members have been
deluging members' offices with calls and letters parroting AARP's distortions
and hyperbole. AARP's
position and tactics are wrong, hurtful and dangerous.
Preventing asset giveaways to qualify for public assistance does not
threaten one's access to quality long-term care:
If people keep their wealth instead of giving it away, they will command
red-carpet access to top-quality care in the private market instead of becoming
dependent on Medicaid's low-cost nursing home care of highly questionable
quality. Denying
public welfare to people with three-quarters of a million dollars in home equity
does not reduce their access to care. With
a reverse mortgage, such people can tap their home equity to pay for long-term
care, or indeed to pay for private long-term care insurance.
As private payers, such people will have better access to a wider range
of higher quality long-term care services than they would have as Medicaid
dependents. The more
fundamental questions to ask are why Medicaid should be used as a kind of
inheritance insurance for middle-class baby-boomer heirs -- and how this
practice protects Americans most in need? AARP's
resistance to Medicaid reform anesthetizes boomers to the risk and cost of
long-term care at the very time in their lives when they should be saving,
investing and insuring against such risks.
It lines their pockets now at the expense of taxpayers, to the detriment
of the poor, and with a huge risk to Medicaid's solvency. Boil it
all down and you're left with only one conclusion.
Faced with the choice of supporting the use of Medicaid for people
genuinely in need, or grabbing what it can for its well-heeled members and their
heirs, AARP took the low road. Mr.
Moses is president of the Center for Long-Term Care Reform in Seattle. URL for
this article: |
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