Planning for Life

Should You Have to Spend Down for MassHealth Coverage?

Posted by Jamie Marshall on April 25, 2011

nursing home couple

By Harry S. Margolis

We recently received this question from one of our readers:

Since when does a nursing home require that all assets be given to them, including life insurance policies before going on MassHealth? Why should they get every penny while the person is alive and after they die too?

This question, while misstating how MassHealth works, rasies some interesting philosophical and public policy questions.

Nursing Homes Don't Take Your Assets

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, MassHealth picks up the cost of care. MassHealth (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 MassHealth 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 $120,000 in savings and investments. Assets may be transferred into trust for children or others with disabilities. Other assets may be protected through careful planning.

Should Government Pay for Your Care?

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. Our current system expects people to pay for their own care unless they can't, in which case MassHealth will step in to help out. But it turns out that determining who can pay and who is too poor to pay becomes complicated, especially with elder law attorneys like us helping seniors qualify as "poor" under MassHealth's increasingly complex rules.

The result is more of a cost-sharing arrangement with citizens and government both paying some of the cost of care depending on where the care is provided and the financial status of the person receiving care.

And, If So, How?

MassHealth may the be fastest growing sector of government expenditures in Massachusetts. On the one hand, citizens want help paying for long-term care. On the other, they don't want to pay higher taxes. The options for squaring the circle seem to be: (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, in part because they're based on the MassHealth (Medicaid) system which no one would have chosen as the main payer of long-term care costs if they were starting from scratch.  I'd suggest that a better approach would be to require everyone to pay into a national long-term care insurance program. But that's similar to the approach of the Affordable Care Act with the results that we've seen. 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.

Topics: MassHealth planning, long-term care planning, MassHealth

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