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Long-term care: Just who should pay?

June 10, 2006|by Stephen A. Moses

A series of letters to the editor by a pair of lawyers and U.S. Rep Roscoe Bartlett, R-6th, (March 25, April 4, and April 16) illustrate that our country has a severely dysfunctional, welfare-financed, nursing-home-based long-term care system that serves no one well, least of all the poor.

How in the world did we get into such a mess in the wealthiest country in the world?

If the question is "Who should pay for long-term care?," the average person will answer, "Anybody but me." Next best, they'll say, "Everyone should pay."

Last, they'll say, "me."

In 1965, Medicaid came along and started paying for nursing-home care. A new practice of law, Medicaid estate planning, evolved to impoverish people artificially so they could qualify for Medicaid without spending down their own assets for care.

What have been the consequences? The vast majority of all formal long-term care services are financed by taxpayers. With expenditures topping $300 billion and rising 8 percent annually, Medicaid is a huge entitlement - larger even than Medicare. State governors in particular are howling that their share of the overall costs - 43 percent - are burning through state budgets uncontrollably.

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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 (up to $500,000), a business and other kinds of exempt wealth. Why buy insurance or use your home equity for long-term care if the government is so willing to pay?

In theory, once they die, the government is required to recover Medicaid costs from their estates. However, many loopholes 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 and without having to pay back Medicaid from their estates. In the past, most of this wealth disappeared, often in gifts to family members.

Congress passed the Deficit Reduction Act of 2005 (DRA) to help stop abuse of Medicaid by lawyers who artificially impoverish their clients to qualify them for public welfare.

Two of the most egregious abuses were curtailed and the safety net was strengthened. Congress extended the look-back period for improper asset transfers from three to five years. The date for imposing a penalty was changed.

Under prior law, the penalty began running as of the date of the gift, which meant that the penalty period could expire before the person applied for Medicaid. Now, the penalty will begin after the person has applied for Medicaid.

The DRA did not change the procedure for evaluating intent to deplete one's assets. The new law is aimed at preventing people from depleting their assets with the intent of making taxpayers pay for their nursing home care.

These changes eliminate the incentive to give away assets to qualify for Medicaid. Even so, Congress strengthened the safety net for any senior who is penalized. Under the new law, states must provide a hardship waiver process to ensure that no senior will be deprived of needed medical care, food, clothing, shelter or other necessities.

It is extremely misleading for anyone to say that seniors can no longer give to their church, charity, children and/or grandchildren without being penalized.

It is outrageous, and simply wrong, to say that gifts as small as $1 could trigger a penalty. To cause an eligibility penalty, asset transfers, including gifts and donations, must be made for the purpose of qualifying for Medicaid.

You can take steps to prevent misinterpretations of your intent when you give gifts or contribute money to your church or charity. First, you should keep all health and financial records (including tax records). Second, you can pressure your state to make sure it appropriately evaluates gifts. If you are penalized, you can apply for hardship waivers.

Misrepresenting these changes is harmful. Members of Congress who voted for the Deficit Reduction Act took important steps to give Medicaid back to the people it was originally intended to serve - the poor and underprivileged. Seniors should be reassured that reasonable gifts to family members and moderate contributions to charities will not threaten their access to long-term care.




Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington. The Center's mission is to ensure quality long-term care for all Americans.

E-mail him smoses@centerltc.com.

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