(Legal-Ease - Photo Illustration - MetroCreativeConnection)

Despite repeated denials, the Department of Government Efficiency (DOGE) is going to try to cut Medicaid; the program is too big to ignore. The cost-cutters frequently blame the program’s financial problems on folks who, when faced with nursing home care, preserve some of their life savings by giving assets to other family members to the extent that the Medicaid law allows. The government wants to stop these gifts by tightening Medicaid’s belt to make it more difficult for people needing nursing home care to save any of their life savings.

This might make sense if the savings allowed under current law were a significant loss of money to Medicaid. A number of respected, impartial, and well-conducted studies conclude that tightening the Medicaid rules on asset preservation won’t save much money.

A study by the Henry J. Kaiser Family Foundation’s Commission on Medicaid and the Uninsured released a study found:

1. Most elderly people do not have assets that would enable them to pay for even one year of nursing home care. Two-thirds of elderly people have resources equal to less than one year of the cost of nursing home care (about $180,000). The majority of elderly people in this range have very low asset levels; 57% have assets below $5,000, less than a half-month’s cost of nursing home care. Only a considerably smaller share (19%) of elderly people have assets equal to three or more years of the average cost of nursing home care. Only this small segment of the elderly are likely to make gifts of assets.

2. Most of the elderly people who typically use a nursing home are among the poorest. Elderly people who have no spouse, are older, are female, and have functional or mental limitations are much less likely to have assets equal to three or more years of the average cost of nursing home care. The risk factors for needing nursing home care are closely related. For example, the likelihood of being without a spouse rises dramatically with age, particularly for older women. Nearly nine out of ten women age 85 and older do not have a spouse. The likelihood of having a functional limitation or mental impairment also rises with age, increasing from 14% for people age 65-74 to 34% for those age 85 and older.

3. The vast majority of elderly people at high risk for nursing home use do not have assets to cover even one year in a nursing home. Among the 1 million elderly people at high risk of nursing home use – no spouse, age 85 and older, and needing help with functional limitations or mental impairments – 84% have asset levels below one year of nursing home cost. For three quarters of elderly people in this range, asset levels are less than $50,000. Only a small share (7%) of elderly people at high-risk of nursing home care have assets sufficient to cover 3 years of nursing home costs.

4. Only a relatively small number of people with assets equal to three or more years of nursing home costs are at high risk of nursing home use. The number of elderly people who have high levels of assets declines rapidly when examining combined risk factors for nursing home use, including no spouse, age 85 or older and functional/mental limitations. As a result, only about 1% of elderly people with these asset levels are at high risk for nursing home care.

5. Most elderly people who are at high risk for nursing home care do not have enough assets to give much away.

6. Relatively few of the 6.6 million wealthy elderly people are at high risk of needing nursing home care as they can afford more appealing alternative care arrangements.

7. Any proposals to achieve significant reductions in Medicaid spending by making it harder for the elderly who are at high risk for nursing home care to preserve some of their assets will fall short of expectations.

In trying to tighten the Medicaid eligibility rules, the politicians are ignoring the real issues: Our governments are broke because politicians have given their rich friends tax breaks, exported American jobs, and already diverted billions of dollars from Medicaid for the benefit of wealthy individuals. Medicaid rip-offs by health care providers cost the system additional billions of dollars. Correcting these situations could save billions. Trying to stop mom and dad from protecting a little of their life-savings is barking up the wrong tree!

***

Gerald W. Townsend is a partner and Elder Lawyer in the law firm of Fluharty & Townsend, with offices in Parkersburg, W.Va. His practice focuses upon meeting the legal needs of Seniors in West Virginia, with special emphasis upon Medicaid planning. He can be reached at jtownsend@fntlawoffices.com.