NCPA - National Center for Policy Analysis


February 24, 2005

Middle class and even wealthy seniors are sheltering their assets in order to qualify for Medicaid-funded nursing home care. Through Medicaid, the federal-state program for the poor, taxpayers are funding 70 percent of nursing home care.

An excellent way to keep seniors off Medicaid would be to encourage more to buy their own long-term care insurance, says the Wall Street Journal. The U.S. Department of Health and Human Services was experimenting with a "Partnership" program to do just that in the early 1990s, only to be shut down by Rep. Henry Waxman (D., Calif.).

Under the Partnership program:

  • A consumer who purchases, say, $100,000 in long-term care insurance can exempt that sum from the assets he or she must draw down -- if necessary -- in order to go on Medicaid.
  • The insurance payouts give him the freedom to purchase the long-term care of his choice, rather than being limited to Medicaid nursing homes.
  • If he wishes to use the money for home care, he can do so.

The four states that had already implemented Partnerships before Waxman imposed a ban -- New York, Connecticut, Indiana and California -- were permitted to proceed and 13 years later their experience suggests that incentives work. According to Michael O'Grady, an assistant secretary at HHS, 180,000 insurance policies have been sold (a faster rate than in non-Partnership states), and 2,000 policyholders have received insurance payments, but only 86 people have gone on Medicaid.

When seniors receiving Medicaid-funded nursing home care die, states try to recover their assets. Ohio is considering a proposal under which the state would claim title to a senior's assets, giving him a zero-interest loan against Medicaid benefits until he is deceased. The assets would then be used to offset the costs incurred by the state for his care. Seniors who choose cheaper care options would get to keep more of their assets. This is "the most aggressive effort to control long-term care costs anywhere in the nation," says John Goodman of the National Center for Policy Analysis.

Source: Editorial, "Medicaid for Millionaires," Wall Street Journal, February 24, 2005.

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