In his most recent personal finance column, New York Times reporter Ron Lieber addresses "The Ethics of Adjusting Your Assets to Qualify for Medicaid." As Lieber explains in this and prior articles, Medicaid has become the primary source of payment for long-term care services in the United States. But it is essentially a health care program for the poor and has set asset, and sometimes income, limits for determining if someone is poor enough to qualify for benefits.
For most people who enter nursing homes or receive care at home or assisted living, if they pay for their care out-of-pocket, they'll run out of money eventually and qualify for Medicaid coverage. But individuals can artificially impoverish themselves by giving away their money or other assets to their children (or anyone else they choose, except a spouse) at least five years before applying for benefits. The question is whether this practice is ethical.
What Readers Say
Lieber quotes responses to this question from a number of people, including elder law attorneys and children of seniors who received long-term care. Their responses include the following:
- It's no different from tax planning for wealthy clients; both save money for taxpayers at the government's expense.
- But only those who go to elder law attorneys know enough to plan, so this practice only helps those who are savvy enough or have enough funds to get the right advice.
- I paid into this system as a taxpayer and now that I need care, it should be provided to me.
- The fact that I worked hard and saved while my neighbor spent profligately, shouldn't mean that I lose everything if I become ill.
- The system is unfair in that Medicare will pay for acute needs, such as cancer care or heart surgery, but not chronic care for dementia or a long-term debilitating illness such as Parkinson's. The luck of the draw as to what illness you get shouldn't have such drastic implications on your wallet and the inheritance of your children.
- Forcing seniors to sell property or a small business to pay for their care takes away their dignity. They worked hard to create a legacy to pass on to their children and grandchildren. It shouldn't be lost at the end.
- Is protecting money for children and grandchildren ethical if it means a lower quality of care or fewer options for their parents or grandparents?
What I Think
Lieber ended his column by requesting comments from readers. Here's my response:
Dear Mr. Lieber:
I have been practicing elder law for more than 30 years. During that time, I have helped thousands of seniors and their families save money by qualifying for Medicaid to cover long-term care costs. While sometimes this involves transferring assets in advance to artificially impoverish oneself to qualify for benefits when needed, more often it consists of assisting spouses and families of ill seniors navigate the increasingly complicated Medicaid rules.
As you mention more than once, the Medicaid rules are complex and people need expert advice. This is a full-employment system for elder law attorneys and it is wrong. I doubt that anyone would have designed our current system for paying for long-term care if they had started from scratch. Expanding Medicare to cover long-term care costs would be a much better solution.
But since Congress has failed to take on this issue over the past three decades and longer, what should Americans do? Should they leave themselves and their families to the vagaries of their health or take steps to protect their assets? Doing so can achieve important results, including:
- Protecting the financial health of spouses who may outlive the ill spouse by many years or decades.
- Get seniors partial assistance for home and assisted living care, permitting them to stretch their dollars further.
- Save family homes and businesses.
- Permit the transfer of assets into trust for disabled family members to enhance their lives.
- Save money for children and grandchildren to assist them in these increasingly financially insecure times.
While it's true that those who go to elder law attorneys are usually more sophisticated and on average more affluent than those who do not, they are rarely wealthy. The steps one must take to qualify for Medicaid are a double-edged sword, often coming with disadvantages that are not worth it for the wealthy.
While it's also true that Medicaid planning raises the costs for taxpayers, I believe that that is a form of spreading the risk. Medicaid can help pay for the cost for those unfortunate enough to need care, and we can all help pay part of the cost. I'd prefer a more straightforward insurance pool, but this is all we've got. There's nothing wrong with using it, of course, always following the law.
What Do You Think?
That's what I think. What do you think? Please write your comments below.