It’s time I explain why I have no problem helping out all but the wealthy with Medicaid long term care planning. Bear with me, because at the end I am once again seeking your input.
I recently wrote that the Medicaid-based system of financing long term care (nursing home care) is a mess. The end of the article offered a survey of readers as to their opinions, and I was gratified to see many of you took advantage of it.
I was a bit surprised by some of the findings. Almost a quarter (23.2%) of the respondents believed using Medicaid should be reserved for the truly needy.
Another 27.9% believed that using Medicaid should be OK if someone had privately paid for a period; 23.2% felt it was OK if someone had under a base level of assets. I believe there was plenty of overlap between persons answering the last two, but in any event I think it is clear that 50% or so of you believe that there ought to be some restriction on who actually accesses Medicaid.
I was also very interested to see that an overwhelming majority of you believe the current system is broken in any event and that the idea I offered might have some merit. One person even believed I should run for Insurance Commissioner (thank you . . . but NO!).
Here Are My Thoughts
Until something happens, this is the system we have and, as an attorney, my job is to use the rules available to my clients’ best advantage. In some sense, it is not much different than a tax lawyer using the tax code to minimize taxes. I realize the difference . . . with tax planning you’re working to hang on to YOUR dollars, and with Medicaid planning you’re trying to access government dollars.
I appreciate that. But here are a number of specific reasons it nevertheless does not bother me.
Times Have Changed Since Medicaid Was Created
Fifty years ago, when Medicaid and Medicare were created, people were dying at greater rates from medical “events” such as heart attack, stroke, cancer, and trauma . . . and at lesser rates from chronic diseases such as Parkinson’s, Alzheimers, and the long term after-effects of medical events (because folks were already dead).
Medicine has gotten much better in fifty years. People are surviving longer . . . and are sticking around to develop the chronic diseases that lead to nursing home confinement.
At the time of Medicaid’s and Medicare’s creation, long term care benefits were tacked on to Medicaid as an after-thought because they simply weren’t that big an issue.
So here we are fifty years later with . . .
The Medicaid/Medicare Disease Lottery
Twenty-three years ago my father developed a virulent form of brain cancer (the same type that claimed Ted Kennedy). He went through surgery, chemotherapy, and other extensive treatments before succumbing seven months later.
The seven-month course of treatment had to have cost hundreds of thousands of dollars. And that was 23 years ago!
Fortunately, Mom and Dad had Medicare Part A and Part B. They also had a Medicare Supplemental policy through AARP. Their out-of-pocket expense was perhaps a few hundred dollars in copayments and deductibles.
However, if my Dad had ended up with Alzheimer’s disease and in a nursing home, as opposed to brain cancer and dying under hospice care, there would have been an entirely different outcome. My mother (who is still alive, very healthy, and nearing 100) would have been devastated.
The situation remains: Develop the “right” disease or have a catastrophic medical event and you’re likely covered; develop a chronic type disease and, well, you better do some planning . . . .
How About Better Planning?
One of my favorite expressions is “coulda, woulda, shoulda.” Early planning is always preferable. If so, then what about long term care (nursing home) insurance?
By time many folks reach my conference room, insurance is not an option due to age or health.
Why didn’t they think of that earlier? Perhaps they didn’t know any better. But just as likely other factors were in play.
The long term care insurance industry has been a mess for years. Big players have gotten completely out. Premiums have sky-rocketed and have seriously stretched budgets. Anyone wanting to do some historical research will find the chaos in the markets.
Fortunately, some creative companies and sellers are coming to the rescue with hybrid life insurance/LTC policies. Hopefully these have some promise there.
In any event, I have to deal with the factual situations I am confronted with.
Punishing Folks Who Did Everything “Right”
Take the person who lived hand-to-mouth his or her entire life. Money in; money out. When a chronic disease strikes and the nursing home looms . . . no problem! Simply go down to the Department of Social Services and apply for Medicaid. Not much to lose.
Now take the couple who worked hard for years, lived carefully, paid the bills, drove modest autos and took even more modest vacations. They aren’t multi-millionaires, but they have amassed a fortune of several hundred thousand dollars and paid off the mortgage years ago.
In short, they have “done everything right.” They are the middle class the politicians are always appealing to.
Unfortunately, if long term care looms for them . . . they have some serious problems.
And those, my friends, are the folks I don’t mind a bit helping out.
Please. I’m Curious.
Take the survey (again, if you took the first one). This survey is very similar to the last one. To be honest, I want to see if I changed any minds.
And if you have read this far . . . thanks for your attention.
Bob is now stepping off the soap box!
TAKE THE SURVEY!
GO TO THE SURVEY
When I get clients that want to do “Medicaid Planning” or “Asset Protection Planning” its usually because they’ve just come from a seminar that another local attorney has given and he has succeeded in scaring them into believing “the nursing home will take your home.”
For those people, I first explain to them that no one is going to take their home, unless they don’t pay their bill. I go through a quick review of what happens with secured creditors: what happens if you don’t pay your mortgage? foreclosure. What happens if you don’t pay your car payment? re-po man. Then I ask them what happens if you don’t pay your credit card bill — an unsecured creditor? Usually, they never thought about that. I explain that nursing homes are a lot like that. They have to SUE you and get a judgment to collect the debt. Then they have to execute on the judgment. All of which takes time and money etc. Then I ask them if they have ever visited a nursing home with Medicaid certified beds. And I suggest they do so if they haven’t and I can give them the names/addresses and contacts.
Then I explain that Medicaid is NOT long term care insurance and was never intended to be. It is public assistance. The real question for CLIENTS is not how to preserve assets for Medicaid, the real question is — or rightly should be — how do you plan to pay for your long term care?
That is a very different question from what Long Term Care and health policy should be. I agree it is broken. Helping people evade the rules is not the fix. It is not “government dollars” — it is OUR dollars.
Doris, I agree that no nursing home will “take a home” unless a bill has remained unpaid, the nursing home sues, secures a judgment and then enforces a judgment through a collection process. However, if a Medicaid recipient dies and the home is/was titled in the recipient’s name, the state certainly will seek recovery against the residence.
A small handful of nursing homes in the Triad do not accept Medicaid and charge above usual market rates for exceedingly nice accommodations. The folks who reside in these facilities either have the means to privately pay or perhaps have long term care insurance that, combined with other resources, covers the tab.
The vast majority of nursing homes do accept Medicaid. They have to in order to keep the lights burning. Under federal law a nursing home cannot differentiate between “Medicaid beds” and “private pay” beds in the level of care rendered (I am not saying that in practice some don’t do that, however . . . and I tell my clients that if it happens I want to know about it).
Ideally, the appropriate planning question IS “how am I going to pay for long term care” and it is asked years in advance. Often it involves careful planning with savings combined with LTC insurance. In reality, the question often comes up too late to do any meaningful planning and then question is not “how to preserve assets for Medicaid” but rather “from Medicaid.”
For those who have planned in advance and have purchased long term care insurance, often the premium increases over the years have been blistering and made the insurance cost prohibitive. Other companies have withdrawn from the market.
The point of my post is that some sensible alternatives need to be devised.