Rep. John Dingell was going full tilt. “If this bill passes,” the Michigan Democrat recently thundered on the House floor, “destitute elderly will be denied needed nursing home care right when they need it the most.” Many seniors would be forced out of homes “that they may have lived in for decades” and would be penalized for helping their families pay medical bills.
AARP added fuel to Dingell’s fire by running incendiary full-page ads in Capitol Hill publications such as Roll Call alleging that the bill in question “defies basic American values” and would prevent “a stroke victim from entering a nursing home, even if there were no other alternatives, simply because she has helped a grandson with college tuition costs.”
Wow. What sort of Scrooge-like legislation would force kind-hearted widows out of their homes and into the ranks of the homeless?
Dingell was blaspheming an eminently reasonable proposal adopted by the House to place modest limits on the growing number of well-to-do seniors who hire sophisticated estate planners to, as the Washington Post described it, “transfer their assets to relatives, then plead poverty to get Medicaid to pay for them to stay in nursing homes.” Embraced by a bipartisan phalanx of the nation’s governors, this package of Medicaid reforms (currently one of the most contentious items in the House-Senate budget reconciliation conference) would instill some long overdue personal responsibility into the program.
According to the Congressional Budget Office, these reforms would save taxpayers $2.5 billion over the next five years in a program expected to consume a mind-boggling $2.8 trillion. Seniors who transfer assets for less than their fair market value in order to qualify for subsidized nursing home care would have to ante up for a portion of that care.
Seniors with more than $750,000 in home equity, moreover, would no longer be allowed to shift all of their nursing home costs to the taxpayer.
Believe it or not, the “destitute” seniors Dingell refers to include those with lavish, mortgage-free homes worth millions. The fireworks this proposal has set off, and the shameless class warfare rhetoric it has inspired, illustrate once again how difficult it will be for lawmakers to rein in entitlement programs that benefit the well-to-do.
How has this come about?
Quietly, Medicaid has become the nation’s largest financier of nursing home services, funding approximately half of all spending on long-term care and offering subsidies to fully two-thirds of nursing home residents. And little wonder. The average annual stay in a nursing home now costs $56,000. That, and an open-ended commitment from Uncle Sam and all 50 state governments to jointly cover these costs, has created a cottage industry of experts who advise their clients on how to become “poor” and thereby qualify for the welfare benefits offered via Medicaid.
Rep. Nathan Deal (R.-Ga.), who chairs the House subcommittee that oversees Medicaid and drafted these provisions, exposed some of the techniques these so-called “elder lawyers” use. Seniors are coached to:
l Shift financial assets such as stocks, bonds and bank accounts into larger homes, because the additional home equity is entirely exempt from Medicaid’s asset test.
l Hang some nice (and expensive) paintings on the wall and adorn a primary residence with the finest furnishings, because these too are exempt.
l Spend exempt assets while in the nursing home or dispense them to relatives by covering a grandchild’s college tuition or helping an adult child pay for that vacation home. This guarantees that the Medicaid authorities recoup nothing when the client dies or leaves the nursing home.
Financially strapped governors, for whom Medicaid has become an unmitigated fiscal nightmare, have tasked the National Governors Association (NGA) to garner support in the Senate for the House-approved reforms. “Eighty-one percent of seniors own their homes and 73% own them free and clear,” they note in a June report. “This represents $1.9 trillion in untapped home equity that is currently exempted from Medicaid’s eligibility calculations.” The NGA estimates that seniors could tap $935 billion of currently exempt assets by using reverse mortgages and other financial planning tools to cover the full range of long term care needs.
Rep. Bob Beauprez (R.-Colo.) summed up the situation best in a recent floor speech: “If you want to get in the nursing home and you happen to have three quarters of a million dollars of equity in your house, maybe you ought to take care of yourself for a little while.”