Asset Transfers and Medicaid Planning
Long Term Care Insurance and Medicaid
If you listen to the Chicken Littles who represent the long term care insurance industry you'd believe the Medicaid sky is falling. They cry (with crocodile tears) that Medicaid is in trouble because thousands of affluent elderly are impoverishing themselves to qualify for Medicaid in nursing homes and for home care.
For example, Stephen A. Moses, president of the Center for Long-Term Care Financing, which is supported by the insurance companies, writes in an essay on "How to Save Medicaid," that of the $333 billion spent on Medicaid in 2002, $59 billion went to nursing home and home care for people who didn't deserve the help.
Moses figured that $20 billion a year could be saved if the federal and state governments cracked down on "Medicaid planning" and forced the undeserving elderly, most of them in the middle class, to mortgage their homes, and give up their savings to finance their care. Better yet, they could buy long-term care insurance. That way Medicaid would serve only the truly deserving and genuinely poor.
Moses might have more credibility if he truly cared about and advocated for more generous Medicaid or Medicare funding, but he is ideologically opposed to such programs. He has not protested the $12 billion Medicaid cuts just passed by his allies among House Republicans. And he cheered their proposed restriction on asset transfers. A few years ago Moses advocated legislation, thrown out by the courts, to jail the elderly or the attorneys who helped them transfer funds to qualify for Medicaid.
Now, as Long Island elder lawyers Ron Fatoullah and Penny Kassel reported to us, the Government Accountability Office, in a new study, has found that Moses' assertions are exaggerated, and that the level of assets being transferred by the elderly are relatively trivial. Three Democratic congressmen asked for the study when Republicans sought to restrict transfers to save money. The study found that 22 percent of the elderly made such transfers, but they could not be related to Medicaid planning. And in any case the median amount transferred was only $3,000, and the average was $8,000.
Moses seems to believe that the very rich are, in effect, applying for space in a nursing home when they can afford a country-club retirement home. Fatoullah said the study showed that "'millionaires on Medicaid' is a myth and it's the very rare exception." The GAO study concludes that little would be saved by tightening restrictions on transfers. And a Kaiser Family Foundation study concluded, "the best available data on asset changes in the elderly population suggest only a weak association between asset transfers and Medicaid coverage for nursing home care."
Nevertheless, congressional Republicans have ignored the GAO and Kaiser studies and bought the myth. Consequently they have sought legislation to make it tougher for a couple to hang onto, or shelter certain assets, including annuities, when one spouse applies for Medicaid. And several states seeking to save on Medicaid, including New York, are seeking to restrict and further penalize couples who transfer assets legally before applying for Medicaid.
And although New York law permits the spouse who remains at home to file a "spousal refusal," to keep enough of the couple's assets (up to $95,100 is allowed) to generate income to live on, reader John W. sends word that Nassau County has embarked on another campaign to dun, sue and threaten to take a chunk of those savings if it exceeds what the law allows. John writes that the county is "chasing every spousal refusal claim," without regard to how much money is involved. If you're among those being dunned, let me know.
What all these Chicken Littles seem to forget is that Medicaid is the last resort, the only safety net for older, ill and disabled Americans who cannot afford to pay for nursing home care, now over $100,000 a year. And because the U.S. has no long-term care policy except Medicaid, the very old are asked to sell or mortgage their homes, give up their modest savings, and leave nothing to their children or grandchildren to get long-term care for themselves or a loved one. And how will the spouse who remains at home survive? Perhaps if and when Medicare expands, in another administration, long-term care will be on the agenda.
In the meantime, Penny Kassel sends along some suggestions to avoid Medicaid hassles because of what she calls the most common elder care mistakes. Many people approaching old age, "freeze in place and put off doing what's necessary because the subject is too hard to understand," Kassel says. "It is not."
Also, have your personal documents up-to-date and in a safe and easily accessible place to the kids or someone you trust: wills, a durable power of attorney, and health proxy that enables a trusted person to make health and financial decisions, when you cannot, as well as a living will as recommended by your state to alert medical professionals about end-of-life treatment preferences.
If you intend to give away assets to loved ones, don't wait until you are ill and need a nursing home. Medicaid looks back 36 to 60 months (for some trusts) into your finances and will penalize you by delaying Medicaid eligibility, if you have given away assets during that period. Why not reduce your assets, if you feel you can afford to do so, long before you need Medicaid, when you and your kids or grandchildren can enjoy the gifts?
If you intend to apply for Medicaid for long-term care, keep good financial records. Medicaid will require bank and brokerage statements and other relevant papers for three years preceding the Medicaid application, or 5 years if you have transferred assets into certain trusts.
Finally, Kassel says, be careful with conventional wills in which each spouse is the other's beneficiary. "If one spouse ever needs Medicaid nursing home care, the healthy spouse can keep half their assets up to $95,100. But if the spouse at home dies before the nursing home spouse, the latter would inherit those assets and exceed the $4,000 limit for a Medicaid patient and lose coverage."
Questions? We'll talk further about Medicaid and alternatives for long-term care.
Saul Friedman, Newsday, 235 Pinelawn Rd., Melville, NY, 11747-4250, or by e-mail at [email protected]