Medicaid’s Dark Secret
January 1, 2020 12:59 PM   Subscribe

“I can’t think of a single person who has come to me to avoid estate recovery,” Gregory Wilcox[, an elder-law attorney,] says, “because they’re usually not aware of it.” Instead, those who do find out [...] “come to me for estate planning. I tell them, ‘I’ve got good news for you: I can help you avoid probate, and if you avoid that you can also avoid Medicaid estate recovery.’ They’re not even aware of the need to do that.” (SLAtlantic)
Estate recovery was billed as a sensible reform: States would recoup costs for the largest category of Medicaid spending—long-term care, such as nursing homes—from the people most likely to incur them (those 55 and older) in order to replenish the program’s coffers and help others in need. (If there was no money to be had in an estate, then the debt simply went unpaid.) The goal was not to deter people from going on Medicaid, but to mitigate the cost of an already expensive program that the Baby Boomer generation was projected to bankrupt. [...]

As projected, aging Boomers were straining the system. States’ spending on Medicaid services soared from $137 billion in 1994 to $577 billion in 2017, when the oldest Boomers reached their 70s. Much of the cost comes from long-term care: Medicaid pays for about 50 percent of the nation’s 1.4 million nursing-home residents, coverage that’s often denied by private insurers and even by Medicare, the low-cost federal insurance available to anyone age 65 or over, regardless of income. Medicaid also bears the brunt of costs for patients with illnesses such as Alzheimer’s and Parkinson’s disease, whose needs often fall under “custodial” rather than “medical” care, and who therefore are largely denied coverage by Medicare as well. “It’s Medicaid, a low-income program, that has by default turned into our long-term-care system, and that is absolutely unsustainable,” Matt Salo, the executive director of the National Association of Medicaid Directors, told me. [...]

But the overwhelming majority of estates are not worth hundreds of thousands of dollars. In 2005, the Public Policy Institute of the AARP published a study of the first decade of mandatory estate recovery. Massachusetts, it found, recovered an average of $16,442 per estate in 2003, in total offsetting a little more than 1 percent of its long-term-care costs that year. That made its efforts among the most effective in the nation. In Kentucky, by contrast, the average amount collected from an estate was $93; the state recovered just 0.25 percent of its long-term-care costs. The total amount states recouped jumped from $72 million in 1996 to $347 million seven years later—but even so, estate recoveries accounted for less than 1 percent of Medicaid’s total nursing-home costs in 2003.

Opponents of estate recovery say that the harm of destabilizing low-income families does not justify the meager returns. “It’s a drop in the bucket given the amount of misery they cause people,” says Patricia McGinnis, the executive director of the California Advocates for Nursing Home Reform, which co-sponsored successful 2016 legislation to limit the assets Medicaid can recover in California. “It’s a terrible program, it’s a punitive program, and it doesn’t do anything to reimburse the billions of dollars spent,” she told me. “The purpose of recovery was to support Medicaid and bring money back, but how? By collecting anything from the poorest of the poor? It’s ridiculous.” By contrast, she says, “you could have a $100,000 heart operation on Medicare and there’s no recovery.” One lawyer in Tennessee recalled a case in which a woman went to her late mother’s Medicaid auction to buy back quilts that had been passed down for generations.
posted by katra (26 comments total) 65 users marked this as a favorite
From the article:

Homeownership is one of the greatest catalysts of class mobility in America. Home equity provides a lifeline during emergencies and helps ensure that your children won’t slip down the economic ladder. A typical homeowner’s net worth is $231,400—nearly 45 times that of the average renter’s net worth of $5,200, according to a 2016 Federal Reserve survey.


Ultimately for the people it impacts is absolutely life destroying. It's not just an exception that this hurts. Its a symptom of an or of control healthcare costs .

Just like the fact we give nursing home residence 30 dollars a month in incidentals, which includes things like clothes, snacks, hygiene products (want a mouthwash, or a shampoo, or polydenent or even the flavor of ensure ) I know someone started shoplifting winter clothes (gloves, scarfs etc) after moving into an assisted living facility because she just wanted to be able to go outside and the assisted living won't provide for that . We treat our seniors and or elderly awfully.
posted by AlexiaSky at 1:35 PM on January 1 [38 favorites]

Yeah Mom was shocked to learn that once Dad passes, the state is coming to her to recoup costs. She's not got much and will have less after. And then most likely have to use medicaid when she enters a home as well.
posted by 922257033c4a0f3cecdbd819a46d626999d1af4a at 2:58 PM on January 1 [1 favorite]

Yeah Mom was shocked to learn that once Dad passes, the state is coming to her to recoup costs.

A surviving spouse is exempt from cost recovery for the remainder of their life.
posted by JackFlash at 3:16 PM on January 1 [28 favorites]

And how many of those folks also have family who is spending their discretionary income to help care for the elderly? My MIL is in some rather dire financial straits in her elder years. On paper, she and my FIL should have been set for life. However, it sure hasn't ended up that way. We spent the last year putting all our discretionary income toward her life circumstances (and have now been paid back) and are desperately trying to get her in a good financial place but given how much money the average family is supposed to be setting aside to self-fund their retirement, fund their children's college and is now expected to tie up the loose ends for their parents? We could have been putting money away for retirement this year but we put it all toward her. And while we have things stabilized for now...if she goes back into a retirement community or needs nursing care, what are we supposed to do? Because if we don't save for retirement, what is our kid going to be expected to do for us?
posted by amanda at 3:18 PM on January 1 [19 favorites]

After my father died, I was executor and received a bill from medicaid for $47k. The paperwork indicated my only options were to walk away and the estate would receive the difference between the auction proceeds and the bill or pay the bill. There was a clause that it would be forgiven if anyone would become homeless as a result of the transaction. The house had been neglected for 30 years and was worth at most 50K, but probably would be low balled at the auction. My life was in another state as was every other relative so forgiveness was not an option. Luckily I was able to flip the house after restoring it. I'm not wealthy, just lucky.
posted by shnarg at 3:24 PM on January 1 [2 favorites]

My wife’s grandmother fell victim to this. She was a widow of a WW2 vet, who worked as a janitor to make ends meet and raise her daughters. She managed to pay off a modest home and one of her daughters contributed significantly to paying for her care with the anticipation that she would just pay off her credit card debts used to hire in-home health care with the proceeds of the sale of grandma’s house once she passed away. Instead, she went into a nursing home where she languished long enough to spend more than the value of her house, therefore the state claimed the proceeds of the sale of the home and said that the payments made by her daughter were gifts and not subject to reimbursement.
posted by Lame_username at 3:47 PM on January 1 [7 favorites]

This system is going to break under the weight of the baby boom generation. The prevalence of ignorance about medicare vs medicaid and what is payed for and how little it pays is common place. It is very common for a middle class and up person to pay a lawyer to put there assets in trust ahead of the start of the look back period and thereby qualify for medicaid without having to be impoverished except on paper. This semi corruption of the system just shows the stupidity of means tested health benefits. An assisted living facility is going to expect you to spend down your assets with them and don't want you if you if you are a direct medicaid admission or don't have that much to spend down. This country is wealthy enough to not have so much fear and misery, people just don't want to know.
posted by Pembquist at 5:09 PM on January 1 [42 favorites]

Ummm, I'm in a situation right now with an elderly dad in a nursing/rehab home that is quickly going through his insurance benefits. His assets are tiny but his partner should get them rather than the state when he dies.

Is there a primer on setting something up to protect against this?
posted by plantbot at 5:20 PM on January 1 [4 favorites]

Is there a primer on setting something up to protect against this?

Get a lawyer (MeFi Wiki)

Specifically: Elder Law

For eligible individuals, free legal assistance may be available.
posted by katra at 5:25 PM on January 1 [10 favorites]

M4A now!
posted by nofundy at 5:57 PM on January 1 [8 favorites]

I think this is a large part of why my family has historically refused nursing homes. It has largely resulted in a lot of women's misery.

End this nonsense. Medical insurance should cover carers.
posted by corb at 6:07 PM on January 1 [17 favorites]

Wow, I'd never even heard of this before. Our health care system is obscene.
posted by grandiloquiet at 6:40 PM on January 1 [9 favorites]

I honestly wonder how much longer our society can continue robbing poor people in order to make rich people richer and survive.
posted by panglos at 7:07 PM on January 1 [20 favorites]

This grows in part out of the fiction that we have an arbitrarily determined set of dollars to spend on caring for old, sick and disabled people... We think about our potential spending on this in such a constrained way because there was a concerted and successful decades-long campaign to convince us that there's just only so much money for welfare programs and we're "running out" of that money.. meanwhile there is literally no ceiling on our military budget. We just don't discuss the annual federal highway budget the way we talk about the supposed impending bankruptcy of our welfare programs.

Setting aside whether one personally prefers the presentation of Sanders vs Warren or Biden, it is so fucking refreshing to hear a Democratic candidate put the lie to the myth that we "can't afford" to care for sick people. closing half of our foreign military bases alone would save 90 Billion dollars.
posted by latkes at 7:14 PM on January 1 [21 favorites]

Aside from the hardship clause's protection, which is rather ambiguous, heirs can still lose their inheritance in California, but the surefire way to avoid the estate recovery bill is to keep the house out of probate, and you can do that via a revocable transfer on death deed.

To have it done right one should get a RE lawyer, but if you get copies of previous deed(s) recorded on the property filling it out isn't too hard...
posted by Heywood Mogroot III at 8:19 PM on January 1 [1 favorite]

It took my mom about two years to chew through her savings, despite pensions and social security...I think she started with $150,000 in cash. She now is in a care facility, on medicaid, and she is allowed to have no more than $2,000 in assets. We were lucky she had just enough money to pay the one year full-boat (at $7,000 per month) that her current home required before they take medicaid.

I remember having a conversation with her a few years ago about where she wanted her money to go when she passed. I didn't say anything, but knew that unless you are very fortunate (ie, wealthy or randomly get squished one day on the way to the shops) in this country, you're not leaving anything.

Every day I leave the house I am essentially gambling on whether today is the day I go bankrupt when I slip or someone hits me with their car.
posted by maxwelton at 11:34 PM on January 1 [10 favorites]

Ugh I really wish the figures cited reported the median instead of the average. I bet the figures would be alot lower since we're essentially looking at a distribution with 0 as the floor and no ceiling (in theory), and I suspect that the distribution is also clustered near 0.
posted by LizBoBiz at 2:53 AM on January 2 [3 favorites]

M4A now!

I don't disagree with you, but read the fine print: Medicare doesn't cover long-term custodial care. Medicare subscribers who end up in long-term assisted-living facilities pay out of pocket, until their assets are drained and they become eligible for Medicaid, which was originally intended to cover impoverished people, and is wholly unequipped to handle the demands of an entire generation of retirees who can no longer care for themselves.

The fact that not even the most progressive politicians running today are advocating for Medicare to cover custodial care is frankly terrifying.
posted by Mayor West at 8:34 AM on January 2 [7 favorites]

Like here’s the other realtalk. Supposedly Medicare doesn’t cover it because it’s not medical and you can do it at home? But also, you can get indicted for elder abuse if you do it wrong. Even if you’re not trying to and you just don’t happen to know the right way to do things, because caring for the aged is really, really hard.
posted by corb at 10:11 AM on January 2 [5 favorites]

If Medicare For All or a single payer system was in effect, you'd eliminate one part of our system of Russian roulette which is unexpected medical bills which bankrupt you. I mean, that's the dream, right? There's two things which I have virtually no control over: an unexpected medical bill/healthcare emergency in my family and losing my job. People like to think they have control over those things but for the vast, vast majority of us, we don't. Stagnant wages, high costs of homes, high costs of education, unknown job security means that if you are managing to put your life together, you're doing pretty great. But it's a lot of any one person or family to take on and it doesn't take much to topple. If healthcare costs/risks were mitigated in our nation, you'd see the easing of massive tensions across the board. You'd have healthier people.
posted by amanda at 10:24 AM on January 2 [5 favorites]

This is all good info. I'm going to call an elder care attorney next week because I suspect we are in for just more insane fuckery with my MIL and the family dynamics are hard enough to deal with without the bureaucracy.
posted by amanda at 10:30 AM on January 2 [2 favorites]

Gotta punish the poor so as to encourage them to get rich. Of course we set it up so that they can't, but that idea might encourage them to leave twice as much to take away!

So we have a have a few poor who get rich. Every now and then. Then we can say, "See what you can do if you really try? That's the way you do it!
Get your money for nothin', get your chicks for free."
posted by Twang at 10:44 AM on January 2

Medicare doesn't cover long-term custodial care.

Sanders' current Medicare for All proposal does include long term care coverage, which is awesome!
posted by latkes at 12:55 PM on January 2 [10 favorites]

Mrs. Thief once worked in eldercare and is well aware of this. We've been encouraging my elderly father (70s) to transfer assets elsewhere now to avoid the five year look back that the State does to ascertain whether or not they can grab it. It's a shitty way to fund a program.
posted by BobtheThief at 5:16 PM on January 2

Yeah, I learned aaaall about this when my FIL needed long-term care.

Fun wrinkle: if a person needing long-term care has a healthy spouse, in order for them to qualify for Medicaid, the spouse can keep at most (IIRC) something like $75k in assets, and can earn at most something like $24k/year. This varies considerably by state and can be lower. Definitely great when the healthy spouse isn’t even 65 yet and needs retirement savings for their own future. When I tell people this, they say “But that can’t be right! The state wouldn’t want to drive her to become dependent on assistance too!” Hahahaha. It is to laugh.

I tried to talk my MIL into getting a lawyer to structure their finances to qualify FIL for Medicaid, even taking her to an information session, but the potential cost of a lawyer scared her so much that she flatly refused. (We also were never able to convince her that asset recovery wouldn’t kick in while she was alive. She was afraid of losing the house.)

So, qualifying for Medicaid wasn’t a realistic option, and getting a lawyer was rejected. The result was that the whole family ran themselves into the ground for four years, patching together DIY 24/7 care on top of full-time jobs.

This system is beyond broken. If you have to navigate it, please, please get a lawyer specializing in elder law. At least talk to one. They do free consultations.
posted by snowmentality at 5:41 AM on January 3 [4 favorites]

As much of a nightmare as this whole system is, the really scary part is, if we stay on the current path, how it is only going to get far, far worse.
posted by MorgansAmoebas at 6:38 AM on January 3 [2 favorites]

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