Saturday, August 5, 2017

The Ethics of Adjusting Your Assets to Qualify for Medicaid

At any given moment, there is a large group of citizens who want nothing more than to make absolutely certain that they are impoverished enough to qualify for Medicaid sooner rather than later. Someday, you might be one of them.

Welcome to the (perfectly legal) world of Medicaid planning, the plain-vanilla term for the mini-industry of lawyers and others who help people arrange their financial lives so they don’t spend every last dime on a nursing home. Once properly impoverished under the law, then Medicaid, which gets funding both from your state and the federal government, picks up the tab.

Whatever twists and turns the health insurance debates in Washington take, Medicaid will be at the center, and the program will probably affect you and your family more than you know. After all, if you run out of money in retirement, it is Medicaid that pays for most of your nursing home or home-based care.

The bill that contains the caps that Republican senators have proposed, which would remake Medicaid, seems for now to have a low chance of passing. But even if no bill survives, politicians on both sides of the aisle fear what demographics will do to the program’s costs. Most Americans haven’t saved enough to pay for decades of post-retirement living expenses and years of expensive end-of-life care, so it stands to reason that Medicaid will come under increasing strain.

In my first Medicaid column on June 30, I asked for your questions about the program, aging and long-term care, and you sent me more notes about the ethics of Medicaid planning than on nearly any other topic. About half of you were outraged by the ethical implications, and the rest wanted to know where you could sign up for it.

The debate is not new, though it happens to be the rare topic on which the editorial boards of The New York Times (“Pretending to Be Poor”) and The Wall Street Journal (“Medicaid for Millionaires”) have agreed over the decades.

What are we talking about when we talk about Medicaid planning? First, you have to qualify. So let’s begin by putting a fat “generally” in front of every statement below, along with a warning that you should not try this at home alone. A lawyer experienced in the field is a necessity.

Medicaid eligibility for long-term care can differ by state and also by marital status. Generally, you can’t have income higher than $2,205 per month per person, including Social Security. Asset restrictions of just a few thousand dollars also apply, unless you’re a spouse who is not receiving care, in which case you can have up to $120,900 while your husband or wife qualifies for Medicaid. Homes don’t count in the asset calculation, though there is a cap on home equity if you’re single that is either $560,000 or up to $840,000, depending on the state. The Medicaid officials in your state can also tap your estate for repayment under certain circumstances.

To get within those limits, lawyers may encourage gifts to family members (though if they are within five years of a Medicaid application, there can be penalties), annuity purchases, trusts of various sorts and a certain type of long-term care insurance that can shield some assets from the Medicaid calculation once you’ve made a claim.

There are dozens of other nuances, maybe hundreds. Did I mention the need for a qualified lawyer? If you want to do some homework first, the book “How to Protect Your Family’s Assets From Devastating Nursing Home Costs” will give you a sense of what questions you need to ask.

However, you may want nothing to do with this. It would not surprise K. Gabriel Heiser, the lawyer who wrote the book. He’s heard from colleagues over the years who wanted no part of this work. This confused him, he said in an interview this week, given that many of them handled estate planning for wealthier clients. There, they helped people avoid paying millions to the government, whereas Mr. Heiser’s work merely helps clients get the government to pay a few hundred thousand for care on their behalf.

That bit of relativism, however, does not erase a basic fact: Anyone who engages in legal Medicaid planning is attempting to qualify for a government program for the indigent when they do have at least some assets that could pay for their care.

by Ron Lieber, NY Times |  Read more:
Image: Robert Neubecker