NCPA - National Center for Policy Analysis


October 19, 2005

In 2003, Medicaid expenditures reached $267 billion, and they currently exceed those of Medicare, says Stephen A. Moses of the Cato Institute. Furthermore, one-third to one-half of total expenditures is spent on long-term care (LTC) in most states.

While some aspects of Medicaid have strict eligibility requirements, LTC benefits have become a free-for-all. Wealthy, elderly individuals who need nursing home care are able to sock away assets in order to qualify for Medicaid, which was originally meant for the poor, says Moses:

  • Many assets are exempt from determining Medicaid eligibility, such as a home and all contiguous property, as long as the beneficiary intends to return, even if he/she is medically unable.
  • Beneficiaries can also exempt home furnishings (regardless of value), a car, a business, burial plots and term life insurance.

Furthermore, seniors aren't exactly impoverished, though most of their assets are illiquid. According to the National Council on Aging, seniors own about $2 trillion in home equity, and 74 percent of them own their home free and clear. Therefore, Medicaid reform should include eliminating the open-ended home equity exemption; instead, give families a choice: rent the home, sell it, or obtain a reverse mortgage to tap into its equity, says Moses.

Additional reforms should include:

  • Passing a resolution reiterating that Medicaid should be a safety net for the poor only, and not welfare for the wealthy.
  • Placing limits on assets that can be sheltered while qualifying for LTC benefits.
  • Extending the "look back" period from the current three to five years, to 10 years for most property and 20 years for real (publicly recorded) property.

Source: , "Aging America's Achilles' heel: Medicaid Long-Term Care," Policy Analysis, Cato Institute, September 1, 2005.

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