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POLICY: Should Medicaid come after your inheritance to pay for grandpa’s LTC? by Eric Novack

THCB’s favorite surgeon is back with an interesting question on Medicaid “lookbacks”, and who should pay for long term care. Eric Novack writes:

In today’s Boston Globe, there is an article titled Medicaid proposal could hurt seniors. In it the Globe reporter makes the claim, along with help from representatives from the AARP, that “people who gave money to their church or helped a family member — are going to find themselves in trouble”.

This is ostensibly because of new rules that will be more stringent about examining a person’s assets when determining Medicaid eligibility. A 94 year old man in the article is quoted as saying, “[y]ou go into a nursing home and they take all the money”. In his case, he wanted to be able to pass on enough money to help care for his daughter.  This asks the question of who, then, is responsible for taking care of him?  Many on this site clamor for ‘universal coverage’ with ‘global budgets’.

I am interested in hearing who they think should be responsible? Is planning for the final years of life no longer the responsibility of the individual? Should retirement planning not have to include any provisions for illness or infirmity? Is it the responsibility of other citizens children and grandchildren to be taxed to provide care when people have assets in their homes and retirement accounts? The baby boom generation is booming, with hundreds of people reaching 60 years of age each day. This group has trillions in net worth. Even if housing prices do not continue to increase- or even decline slightly- many have hundreds of thousands of dollars of equity in their homes.  Most, hopefully, will live healthy, productive lives for 30 or 40 more years. Most will incur significant healthcare costs over that time.  Recent estimates are that people retiring today need to anticipate about $190,000 in healthcare expenses.  The article makes the claim that a recent KFF study reported that, on average, only $8200 was transferred. $8200 times the millions on medicaid is quite a lot of money (over $8 BILLION per million). Should we not expect that those who will utilize the services be expected to use their assets to pay for their care?

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  1. My 92 year old mother is in a nursing home, and my sister and I visit her everyday. Her dimentia is significant. She owns no property, but has some money saved. If she lives for another 5-6 years her money will run out. She and our father (now deceased) were very proud of their savings and particularly wanted the money to go to their 2 daughters and their grandchildren. Our number one concern is our mother level of care. The nursing home is good and we pay for sitters 3 hours every day. My sister’s name and my name are on all of her accounts – joint ownership. In order to protect her assets, friends have advised us to spend the money and then have our mom apply for Medicaid. Is this even a possibility?

  2. One more article I wrote – Now I will await some responses.
    Basic Solutions to Affordable Healthcare
    The healthcare crisis has a solution that is the most fair to the majority of the society. In order to implement such a system it will now take very tough, near zero tolerance attitudes along with direct action by the people to force it into action. We have been complacently tolerating an almost hopelessly complex and greedy healthcare system as it has gradually eroded our pocketbooks and quality of life (For those fortunate enough to have access to the latest and greatest medical care, their quality of life may be improved.) over the last 25 years.
    It is not difficult to identify the anger people have as co-payments for office visits are exceeding the entire out of pocket costs of such a visit paid in full without insurance not that long ago, a bottle of pills costing approximately the same as a tank of gasoline at 89 cents a gallon that now goes for what it would cost me in gas to drive from Pennsylvania to California round trip at $2.40 a gallon, a family health insurance premium costing as much as a mortgage payment on a nice home in 1975, and three hours of surgery going for what one earns in a year. Due to medical inflation far outpacing the average rate for our wages we have lost considerable purchasing capacity, therefore lowering the standard of living for millions of workers in lower to modest income brackets. In addition employer’s profits have slid as insurance rates rise, fueling further economic decline except perhaps in the healthcare industry. A simple chart showing healthcare inflation at several times average inflation demonstrates, that if this continues, at some point in the future healthcare costs will literally consume the economy. Hopefully this last statement will swing some readers into action.
    So why aren’t people taking action which can assure results? First of all the knife of medical inflation has not cut deep enough to significantly affect the quality of life for the broad middle class, yet. The very poor are given healthcare at virtually no cost by the government and upper income people can pay for the best care and/or insurance regardless so these two groups have little incentive to revolt. It is the lower middle class who suffers the most since the majority of them are ineligible for government benefits, must sacrifice more deeply to afford insurance or risk going without it. Unfortunately complacency only encourages the knife to sink deeper like a ticking time bomb. I forecasted the present healthcare crisis twenty years ago and now wonder how drastic it will have to get before the humane side of us overtakes the greed. Greed is a natural consequence of capitalism but we must have a moral imperative that balances this off. Christ and philosophers of the ages have given us firm warnings in this regard for ages but will we listen and behave accordingly?
    The system we presently have is a mess of over a thousand insurance plans, government plans, doctor’s offices that accept some plans and not others, plans that accept some hospitals and not others often causing extreme inconvenience to patients, a countless variety of billing arrangements and co-payments, procedures that are paid by some insurance companies and not others including some that are life saving, common billing errors, an enormous difference in drug prices from pharmacy to pharmacy and domestic VS foreign prices for the identical pills, some doctor’s who will not even take a patient without insurance, and volunteer operations such as our local Centre Volunteers in Medicine who offer free care and medicine to “the working poor” but earn one more dollar over the eligibility threshold and one had better head for the door due to their limited resources, and enormous differences in doctor fees – In another state I paid $35.00 for a basic office visit but here it was over $70.00.
    The majority of people agree that we need change but what type of change? Do we have one plan for all in which people pay a modest co-payment indexed annually to inflation? Can our government manage such a plan efficiently? What would we do with people who abuse such a system – running to the doctor for every hang nail, sniffle and headache? What would we do with those who knowingly continue to engage in poor health habits that greatly increase their risks for expensive treatment? Could we break our deep tradition of capitalism and limit doctor fees, medical school fees, cut profits on those $500 medical textbooks, limit medical equipment and drug profits, severely limit malpractice awards and malpractice insurance profits, and give financial incentives to those who make an effort to stay healthy and limit their risk? How about charging more for insurance premiums for those who earn more? Certainly something is questionable about the person sweeping the CEO’s floor having to pay the same premium as the CEO. How about going back to paying a reasonable cash fee for most medical care and largely getting rid of insurance? Wouldn’t doing so force the system back to the ground since, as it is now, few can afford to pay cash? What about a sliding scale? Should the wealthy pay more? These questions can be debated in some heavily charged discussions and of course there is no perfect system.
    What we need is a system that works equitably and efficiently enough to satisfy the majority in all economic classes. This is not presently happening and, in fact, we are headed for deeper levels of discontent. In other words things will get worse before they get better. Sadly, I believe tragedy will have to occur (some already is) within the system in larger numbers before natural social and economic forces create change. Tragedy can take on various forms such as people who die due to lack of access to the system, people who loose everything they ever have worked for because they can’t not afford treatment or insurance, some who commit suicide rather than face loosing everything or if some become desperate or angry enough we may see criminal acts against the system. Let’s hope we take control before it gets this bad.
    Here are a few suggestions of how the average citizen can significantly lower healthcare costs nationally if we do it in large enough numbers:
    1. Stay Healthy – Do the stuff medical professionals have been saying for decades such as eating properly, regularly exercising, getting a decent sleep, staying a healthy weight, not smoking, not drinking excessively, avoiding other preventable risks. It is estimated that just engaging in these basics health habits could cut the cost of medical care by 60-75% nationally – saving our country literally hundreds of billions of dollars a year.
    2. Becoming Self Educated — Only make use of the medical system when you seriously believe you need professional advice and/or treatment. Recognize basic signs and symptoms of illness and injury. Self diagnosis is honestly not very hard much of the time with all the books and web sites readily available to the public for free.
    3. Know Your Family History – Serious illnesses and diseases unfortunately often run in families. By knowing such information one can take preventive action and seek treatment early on before it becomes life threatening and prohibitively expensive to treat.
    4. Get Check Ups – Depending on one’s age, family history, and gender, regular medical check ups may catch something that could become serious later on when it will be harder to treat.
    5. Don’t Loose Sleep with No Insurance — Fear tactics are largely what have led the public to often stress themselves financially way beyond what is necessary in purchasing health insurance. Insurance is the healthcare industry’s fuel for inflation. If you can’t easily afford it, before worrying about insurance, get your debt paid down, pad your retirement accounts and kids college funds and take the family on a couple of great vacations. If you don’t have assets just work out small monthly payments if you do run into a large medical bill. If you do have significant assets, see an attorney and get them properly protected from creditors and still just make the little payments. The healthcare system must get the message that more and more people can not and will not pay their outrageous fees at full price. Also ask your doctor if you can simply pay the fee that he or she would normally be reimbursed at. For example, an uninsured person should be able to pay perhaps $45.00 for an office visit instead of $75.00 which is about typical of what the doctor would receive as payment if one was insured. It is simply wrong to charge those without insurance more than those with it!
    6. Don’t Sue — Unless there truly is some grave incompetence on your doctor’s part don’t go suing his or her pants off. Doing so only increases malpractice costs and increases healthcare costs.
    7. Go Over The Boarder for Drugs — Buy drugs from Canada, Mexico and over the internet from reputable sources. Drug companies are directly taking advantage of Americans, generally charging two to three times as much through your local pharmacy.

  3. More Opinion:
    A response to my local newspaper:
    With thousands of people around this area (central PA) earning in the $5.50-7.50 an hour range including many well educated adults I don’t think nurses are suffering in the slightest as they earn in the $15-30 an hour range depending on experience and overtime. The nursing shortage is largely due to the job simply being very demanding, having too many patients per nurse, and around the clock shifts being required. And only so many people are cut out to be a nurse dealing with the most personal care of other human bodies. I also challenge the doctor to explain to me how people working – often 2-3 jobs- in the above wage category can afford insurance or significant medical care? And what about my proposal for those who earn more within a company to pay more for their insurance?
    And yes, I do believe that medical providers would be highly pleased if insurance were required for everyone because the 40 million people without it would now be able to pay at least a percentage of the billed amount rather than close to nothing. As for the malpractice problem, this is a mess and completely unnecessary. Tort reform does not have to be all that difficult to accomplish. The right people just have to want to do it. As for greed I rarely point the finger directly at individual doctors. It is the system as a whole and particular areas such as drug and medical equipment manufacturers, having over 1,500 separate health insurance companies, hospital administration, government bureaucracy. I know something is wrong when a friend of mine can buy the same heart medication in Mexico for five cents a pill that retails for $5 each here.
    In response to the article on the number of uninsured people increasing, the healthcare crisis is becoming ever more critical exactly as I forecasted nearly 20 years ago when I could see all this coming with the rate of medical inflation being far higher than inflation in general. Back then it was my opinion that insurance was much of the root cause of this problem and I am of the same opinion now. It does not take more than common sense to realize that the insurance card has been the major conduit for greed throughout the healthcare system. After all, isn’t it largely human nature to charge $1000 for a night’s sleep, $12 for an aspirin pill, $500 a month for a medication regimen or $7,000 a month to lay in bed in a nursing home if checks will keeping rolling in from some third party? Insurance is also a disincentive for many to take control of their own health. I often have heard those who knowingly allow themselves to remain in a high risk category, whether it be smoking, excessive drinking, poor diet, obesity, etc. say, “I’m covered” when I have hinted that they could change some of their destructive habits.
    For many people in this country, having a payroll deduction for health insurance would bring their pay well below the minimum wage so they simply opt out. For others they choose to be uninsured, practice good preventive care, protect their assets from creditors such as medical providers, live well and will simply make little monthly payments if they ever encounter a bill they can’t pay in cash.
    If we as a country continue with insurance, employers should charge more for those in the company for their premiums who earn more. Something is wrong when the CEO is paying the same rate as his/her employee sweeping the floor. But ultimately reducing or even eliminating most insurance may be the only answer to reducing costs since, without that third party, the whole system would simply have to settle for less since most people do not have enough cash to pay major medical costs. And having more people incented to engage in preventive care could reduce the whole healthcare budget by over 70%. Given proper nutrition, sleep, exercise and appropriate emotional, social and intellectual stimulation the human body will recover from the vast majority of diseases and minor traumas on its own through its self limiting abilities without medical intervention, something many of us need to realize before reaching for our insurance card, calling the doctor or running to the pharmacy.
    Until we reduce greed in the healthcare system (medical and pharmaceutical providers would throw a party if insurance is mandated for everyone as this article referred to.) and take far more responsibility for our own health we are going to continue to face enormous medical economic and ethical issues.
    In response to your article by Alexandria Robbins titled, “Bridge Temporary Insurance Gaps”, my wife and I make the choice to not purchase health insurance and have for nearly twenty years since we left college. And here is exactly why.
    First of all we have not found work that pays well enough to afford it comfortably whether or not employers have offered to share in the cost. Had we spent the average of around $300 a month for family coverage that it would have cost over this time period we would have departed with $75,600 (20 years at $3,600 a year). Instead we placed all this cash into growing investments that more than quadrupled in value which bought us a nice home in cash and loaded up our retirement savings. All combined our out of pocket medical expenses since our teens and most medical costs of our child who is now thirteen, not including the pregnancy and birth which was covered by an employer insurance plan that was provided to my wife at no cost at this time has not even reached $700. Yes this is for three people.
    Yes, I know we are fortunate and could get in some terrible accident or come down with cancer tomorrow. But when we have worked hard, acquired college degrees but all we have found are lower wage hourly type jobs over the years yet have the expectations to own a nice home, have adequate transportation, raise a family, and travel, insurance is something we choose to skip.
    Also we firmly believe that it is having insurance that is continuing to keep medical inflation way out of control since if nobody had it the outrageous costs would have to drop like a rock and the thousand dollar a day beds, ten dollar aspirin pills and $500 a month drug regimens would practically vanish. And what about common sense preventive care? When people criticize me for having my assets protected against creditors such as medical providers while having no insurance and taking my family on a grand trip abroad with funds that could be in the hands of an insurance company, I say take your criticism out on those who knowingly continue to engage in risky health practices such as smoking, heavy drinking, risky sexual practices, poor diet and weight control, little or no exercise. It is not the responsibility of health insurance companies to make premiums affordable but of us citizens to take more responsibility for our own health and personal finances.

  4. Health Insurance Opinions
    Subject: This is not Right!
    We all can quickly think of many problems with the health care system but in most cases, as individuals, there seems to be little we can do to stop the giant ball of endless bureaucracy and greed from continuing to tumble down the mountain, other than to stay healthy and not use the system, to a presently unknown, though likely disastrous conclusion. However, I have one way that many people can fight back by doing what is right.
    It has come more and more to my attention that those who pay for medical services in cash, usually those without insurance, are being billed at a considerably higher rate than what insurance companies rebate medical offices for exactly the same services. I recently saw a bill for a couple of minutes of doctor services. This local establishment billed for $120.00 though accepted a payment from the insurance company at a rate of $65.00 which obviously was more reasonable. Another doctor’s office in the area bills $60.00 for a basic eye exam though also accepts a variety of insurance payments for less. But for one who has no insurance and pays cash, therefore costing the office less effort in processing, is still being charged the same $60.00. Clearly something is very wrong with this picture! For those who are not insured, and therefore less able to pay, they should be paying less or obviously not more. An uninsured person would be a fool to pay the $120.00 for that first example and the medical office is being abusive to bill that much for someone willing to pay in cash on the spot. And for the poor to be offered completely free care is not necessary in most circumstances either. Almost nobody is so poor that they can’t pay $5, $10 or $20 for a doctor fee.
    For those who are not insured first check out various medical clinics over the phone. Us consumers must learn to shop for medical care just as we do for clothing, food and building materials. We must find the best price or become very assertive at negotiating a reasonable price. One good form of leverage in engaging in this strategy is to know what the standard rate of insurance reimbursement is for your services or ask to be billed and then pay that amount. After all, this is what they normally expect to receive when they accept payment through an insurance plan so why should an individual without insurance pay a dime more? Medical providers can stomp their feet and send along letters threatening legal action, etc. Consumers can put their feet down just as hard and protect their assets from such creditors. In large enough numbers we can make a difference. With regard to the health care system consumers need to take just as tough a position as George Bush is toward terrorists, though only with their checkbook. The healthcare system and insurance has been ruthlessly exploiting consumers for many years. It is now time for uninsured consumers to become far more educated and aggressive to take action on simply what is reasonable and fair and for the insured to look hard and close at how their insurance cards are feeding the medical industry and draining their pockets and/or their employer’s pockets.

  5. We as a society have permitted the healthcare system to get completely out of control. I am many others only take home a bit over $1,000 a month – I very deliberately choose to not accept employer provided health insurance and instead build my retirement. Thanks to me and my wife making this choice over 24 years (I estimate this amount would equal about $300,000 including what such money would be worth invested in a stock mutual fund at 10% a year) we now have a nice home paid for, have raised a child for 17 years, have almost $300K in our IRAs, take nice vacations and hope to retire early. My wife also does not earn much either but we have lived carefully and simply and make taking care of our own health a high priority. Less than $1,000 has been spent on all of my medical care in my 48 years (more on dental as a kid for ortho). I firmly belive that we need to abolish insurance completely to force the system to its knees instead of now paying more for a copayment than what the entire doctor’s fee was not so long ago.

  6. I don’t agree. This situation exists with lawyers, do they compete through price for your business. Who can really afford a lawyer for a “catastophic” legal requirement. Ever try to price negotiate with a lawyer? Lawyers and doctors have industry pricing guide lines and do not want to compete on “price”.

  7. Here is an easy solution to the healthcare crisis in our country. Pass a law that makes it illegal for people to have any kind of health insurance except for hospital, surgery, long term physical therapy, and long term care. In this way real competetion from, doctors, clinics, specialtists would come into play.
    All accounts would then go into a cash basis. Which means doctors would be vying for your attention. Competetion for your dollar would be stiff, and that drastically bring down the cost of any visit to the doctor. The same thing would happen to prescription costs. Drug companies would see their profits plummit
    because only the rich would be able to afford prescriptions. But that wouldn’t keep their companies afloat. So they would be forced to bring their prices in line with what most people could afford.
    In addition to these benefits, people would become more health conscious because the money would be coming out of their pocket, so they would put more effort into being healthy.

  8. I think the first thing we should ask ourselves is are we willing, as a society, to put old sick people on the street for the inability to afford humane care. If your answer is yes then there is no futher discussion. If your answer is no then we do need some ground rules. My 86 year old mother living in Canada, who recently died, was looked after in a nursing home for the last 5 years. Her government pension and Old Age Security were her only income. Both of these checks were turned over to the nursing home to pay for her care, which included accomodation and healthcare. As well, the nursing home was subsidized by the taxpayer. For my mother’s entire life she was financially incompetent.She was a single parent(me) and never had a clue how to earn a decent living or save. She died with no assets or none being transfered to me, but was looked after in the nursing home very well dispite this. I don’t think if she had assets that she should have been able to transfer those assets to me given that the taxpayer was subsidizing her end of life care. I also don’t think we should have put her on the street or directly forced me to use my income to pay for her care as her life decisions were not in my control. If I had been forced to pay for her care direcly then my financial position would also have been in jeopardy. People owe their financial success or failure to more factors than they control and to try to analyze who fairly deserves support and who does not would be impossible to determine and extremely inefficient. I don’t think children have any right over the taxpayer for a claim on their parents assets if the taxpayer is footing the bill. Disqualification from Medicaid for gifts may be an attempt to prevent the hiding of assets from the government but I doubt the government will be able to trace unreported gifts. I also don’t think contributions to registered charities should count against you for Medicaid. Money to charity from individuals usually means less need overall for government spending on social programs. The real problem is the uncontrolled cost of care, not many people can afford to pay it and also look after themselves. So far our government has viewed military spending as having a priority over health and elder care. These are choices that the society makes. Your taxes going into military spending are less taxes going into healthcare and elder care and your own future needs.

  9. The problem is the cost of nursing home care and seniors not being aware that any “gifts” they give to their children, grandchildren or charities will disqualify them for nursing home care when they really need it.
    Example: Retired minister, age 86 falls and breaks his hip, then has a heart attack, and requires nursing home care. Has felt it his duty to give to charities and to tythe to his church, all count as “gifts”, but he can’t get them back. He had a caregiver for the past three years, and paid her $1,000 a month but didn’t give her a 1099 each year. Because of this her salary Will also count as “gifts”, and disqualify him for care. He can’t care for himself, is almost blind, and bedridden. His only asset is his Condo which is worth only $140,000. With Nursing home care costing over $7,000 per month, he’ll run out in two years. Then Medicaid will disqualify him for all the “gifts” he gave. We think he’ll be disqualified for 5 or 6 months. Who will pay for his care? Will the nursing home be able to kick him out? We can’t afford to pay for his care, with kids of our own to support and our own retirement coming up we don’t have an extra $30,000 laying around. What will happen to him?
    It’s fine to say, people should pay for their own care, but what happens to the people who will be cut off? There is no available money to pay for the period he’ll be disqualified for. The new law doesn’t make any provision for this cruel situation.

  10. Mother had to be placed in Nursing home. She lived on her Social Security and she did own her home…Also she does not even have enough of life insurance for a decent burial….Is there any way her home can be sold and money saved for burial, keep her ins. paid and things she needs till she dies………I’m asking for information….Can anyone help………….She was living in poverty as for what she received & had……. Yes she was placed on Medicaid to go in Nursing home… Thanks, Lin from Georgia

  11. So what you are saying is “yes, we should have a national healthcare plan, but, if people have homes to live in they should get rid of those first?” Where exactly do you expect these “baby boomers” to live while they are using their shelter to pay for their health care?
    Healthcare expenses are too high. The first thing that should be done is to reform all the waste generated from hospital and physician financial gain incentives. The more tests or procedures that are done the more money each makes. Even if mistakes are made. There are too many duplicate tests that are taken.
    Exactly how much money needs to be spent on a hospital lobbies and landscaping? How many nuclear medicine machines need to populate one area? I observed a nuclear medicine unit for several hours during regular business hours, it was over staffed, had too many of the same machines and only a couple of patients came through. Two of the techs were sitting in the waiting room watching televsion.
    How many bonuses does a CEO need on top of his salary? Why should a hospital attempt to make a profit?
    Why should insurance companies cut peoples benefits, then pay their high level staff lucrative bonuses for saving the company money?
    So,there are plenty of places to start, get rid of the waste first.

  12. I think Eric’s point is that, while most people have nowhere near that much in cash or liquid assets, a lot of people have that much in home equity. And while all of us want to leave as much as we can for our children, we should first take care of our own expenses. I’m a strong believer in national health care, but it’s not fair or efficient for people to preserve their assets & enrich their heirs by dumping their long-term care costs onto the Medicaid program, where the costs of that care inevitably squeeze out basic coverage for low-income kids and adults who really need it.
    I think that long-term care should be carved out of the Medicaid program, and covered through a non-means-tested addition to Medicare. Most of the funding would come from an increase in the Medicare payroll tax; some would come from asset recoveries like those that states try to do for Medicaid today, but uniformly applied nationwide; and you’d have the option to pay annual premiums, out of your pre-tax income, for long-term care insurance that would allow you to protect your assets from recovery up to the limit of the coverage you buy.
    Of course we’ll have to fix the damn drug benefit program first – and then get the current crowd out of CMS & replace them with some people who are at least semi-competent & know the meaning of the word “responsibility.”

  13. “Recent estimates are that people retiring today need to anticipate about $190,000 in healthcare expenses.”
    I think the question is not so much “who is responsible?”, as “who has that kind of money?” It’s difficult to plan for medical expenses when illness is so random. The only way we can reasonably address the issue is through shared risk. Shared risk means insurance, either private or public.
    The root problem is that health care costs are out of control.

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