NCPA - National Center for Policy Analysis


February 21, 2006

The Deficit Reduction Act that passed Congress Feb. 1, 2006, tightened the rules for qualifying for Medicaid's long-term care coverage. Medicaid has become the primary payer for nursing home care in the United States:

  • Six in 10 nursing home residents eventually deplete their assets, impoverish themselves and qualify for Medicaid.
  • Medicaid paid $86.3 billion for long-term care in 2003 and accounted for almost half of all spending for such services, says the Kaiser Commission on Medicaid and the Uninsured.

The Congressional Budget Office estimates that the new rules on asset transfers will affect 120,000 nursing home residents annually and save Medicaid $2.4 billion over five years.

A private room in a nursing home averages $192 per day, or $70,080 annually, according to the Center for Retirement Research at Boston College. By contrast, home health care for three hours a day, five days a week, cost an average of $14,000 a year in 2004, according to the Center for Retirement Research.

Stephen Moses, president of the Center for Long-Term Care Reform says Medicaid's standards have been so loose that an affluent senior can protect hundreds of thousands of dollars through annuities, family gifts and trusts and still get Medicaid. He touts greater use of private long-term care insurance.

  • Long-term care insurance pays for about 3 percent of nursing home costs and 8 percent of home health care costs, says the Center for Retirement Research.
  • Four states give residents incentives to buy private policies -- after exhausting their private insurance benefits, policyholders in California, Connecticut, Indiana and New York may qualify for Medicaid without depleting their savings.
  • As another incentive, lawmakers have proposed giving a federal income tax deduction to all long-term care policyholders, not just those with high medical bills.

Source: Bob Moos, "Tighter Medicaid rules 'wake-up call' to seniors," Dallas Morning News, February 21, 2006.


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