Spending Down for Medicaid Coverage
Since when does a nursing home require that all assets be given to them, including life insurance policies before going on Medicaid? Why should they get every penny while the person is alive and after they die too?
You ask an interesting question from both philosophical and policy points of view.
First, we should clarify that the nursing home itself only gets the resident’s assets to the extent that they are spent down paying for the resident's care. Once they are gone, Medicaid will pick up the cost of care. Medicaid is a joint federal and state safety net program that provides health care coverage, including nursing home care, for the indigent. In the absence of any other program, it has also become the main source of payment for nursing home care for both the poor and the middle class.
While Medicaid only kicks in when the nursing home resident has run out of other funds, the rules do provide some exceptions. For instance, the spouse of a nursing home resident may keep the couple's house plus about $110,000 in savings and investments. Assets may be transferred into trust for children or others with disabilities. Other assets may be protected through careful planning.
The philosophical question is whether people should have to spend everything down before they can expect help from government to pay their long term care expenses, and what planning techniques should be permitted. Life insurance, after all, is simply an asset, but one that is worth more after the insured passes away.
The political question is how government should come up with the money to pay those costs. If the life insurance policy is not liquidated, its owner will qualify for Medicaid sooner and federal and state governments will have to begin paying sooner. The question is how should they raise the money to pay these costs. Options available include (1) lowering the reimbursement rate to nursing homes (which almost has to have a harmful effect on the quality of care), (2) raising taxes, (3) borrowing -- in other words, let future generations pay, or (4) cutting government expenses for other programs.
None of these options is very appealing. It would be terrific, however, if we could have a straightforward national conversation on long-term care policy – what government should pay for and how it should come up with the funds to do so.
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Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.