How will the "Death of Medicaid" impact my family's future?


When Edna F. got Alzheimer's disease, her daughter, Mary, hired at-home caregivers to watch over her mother. To cover the tremendous financial outlay, Mary took title to her mother's home. When Edna finally needed 24-hour facility care, she had no insurance, no savings or home to sell, so the State picked up the tab of over $4600 per month for her long term care.

It's a common tale: So, families plot to shield assets in order to qualify for state welfare, in order to avoid the inevitable nursing care "spend-down" required by the stare welfare program, which administers federal funds for the needy. Lawyers used to call this "Medicaid Asset Planning." In 1996, it became a felony to perform this type of planning.

"I don't think that it should be a precondition that, if a husband must go into a nursing facility, that his wife should have to go into the poorhouse." - Bill Clinton.

Still, you and I both know that this happens every day. We can expect that it will continue no matter who is in office, Clinton, Bush whomever...

On Jan. 1, 1997, it became a crime to give assets away to someone other than a spouse in order to try to qualify for state assistance with long term nursing or custodial care. The law states that if one "knowingly and willfully disposes of assets...in order...to become eligible for (Medicaid)," one could spend up to 10 years in prison and pay a $25,000.00 fine, depending on their state of residence.

The Tucson-based National Academy of Elder Law Attorneys, in a recent report to its members, points out that this law may extend to "anyone who aides, abets, counsels, commands, induces or procures the commission of an offense by another." This presumably includes legal counsel and "crafty" family members.

Another provision is designed to encourage the purchase of private long term nursing home care and at-home care insurance by bestowing tax-favored status on these policies. Supporters of the provision, part of the Kennedy-Kasselbaum health insurance reform bill passed in August, 1996, say that these tax incentives for private insurance will reduce the runaway cost of Medicaid.

Nursing homes and assisted living facilities will benefit as well. Operators stress that state welfare (Medicaid) doesn't fully pay for the labor-intensive, custodial-type care required by those afflicted with Alzeimer's, Parkinson's or strokes. Higher-paying insured and private-pay residents help to subsidize those on the dole by paying an inflated rate. The new law strives to increase the number of full-pay facility residents.

The tightening of loopholes continues with the Deficit Reduction Act (DRA) that was signed into law on February 8, 2006.

It is clear that the field of retirement financial planning has changed dramatically. With respect to eldercare, the message is obvious: Your future is up to you. Get long term care insurance if you can.