• Reasons to reform Medicaid

    John Goodman highlights 4 reasons to reform Medicaid. Number 3 caught my eye:

    3.  An entire consulting industry now teaches how to do financial planning around Medicaid’s long-term care offerings, and not surprisingly, taxpayers now finance 40 percent of long-term care services in America through Medicaid. (Sources: The Center for Long-Term Care Reform: Medicaid Planning Quotes and Kaiser Commission on Medicaid and the Uninsured: Medicaid and Long-Term Care Services and Supports. March 2011)

    This strongly implies that purposeful spend down to Medicaid is a major reason that Medicaid spends so much on LTC. This is the opposite message provided in a post I wrote a couple of weeks ago based on purposeful spend down to Medicaid: the evidence suggests it is uncommon. My post was based on a peer reviewed paper that reported on a community-based representative sample of the elderly in the mid-1990s and found:

    • Around 4 in 10 were spent down in the community and eligible for Medicaid financing of NH care. There are far more poor elderly than there are rich elderly.
    • Around 2 in 10 could never qualify for Medicaid due to their income being above their state’s Medicaid income test.
    • Around 4 in 10 respondents had enough assets that they could have plausibly benefited from purposeful spend down. Of these, only 1 in 10 of them had a trust of any type (respondents were asked about trusts generally, and not in relation to spend down). Most had assets equal to several months of NH costs, and not massive wealth.

    So, 4% of this sample had a potential spend down motive and a trust of any type, the most common way to accomplish purposeful spend down. I don’t doubt that there are people who fraudulently obtain Medicaid financing for a nursing home. I explicitly doubted that this is very common, and that is why I did the study written about above. Based on the results of that paper, I really doubt that purposeful spend down is a large problem, and I believe that focus on this red herring detracts our attention from figuring out how to improve our long term care system.

    A serious question:

    • Is there a peer review study that documents the prevalence of persons using such techniques to qualify themselves for Medicaid?

    A serious offer:

    • If you are sure that I am wrong and that the key to fixing Medicaid and long term care is ending such shenanigans, write me and lets develop a way to study this and prove it with data that can lead to a peer reviewed paper.
    • Not a research proposal – but it’s interesting to ponder what effect making Medicaid assistance contingent upon making medicaid the senior creditor on one’s estate would be.

      Do you think that turning Medicaid assistance into the rough equivalent of a loan against 100% your assets that will be settled upon one’s death would have any effect on LTC utilization, costs, etc?

      • @JayB
        To the extent that this happens (qualify a person by hiding their money) I assume the motivation is so the adult children get the estate. That could have some effect, but the prevalence of the initial behavior still important to figuring out how important this would be. States now have estate recovery abilities, but I think they differ quite a bit in terms of aggressiveness. I will see if I can document how states differ in terms of estate recovery. I think in N.C. the ranking of creditors is: IRS, state tax liability, funeral home, then Medicaid. Not sure if making Medicaid #1 would make much difference. I will link this week to a study I did in which we took a community based sample of folks that died and linked to probate court records. Something like 15% of the estates were negative (died with more liabilities than assets) and the median was fairly low; 1 estate our of several hundred that owed federal estate tax.