NCPA - National Center for Policy Analysis

Medicaid Cheats Drive Up the Cost of Nursing Home Care

July 7, 2003

Targeting Medicaid makes sense for cash-strapped states trying to drain their budgets of red ink as their new fiscal year begins this month. The program eats up 20 percent of state spending, second only to education, and its cost is rising rapidly. From 1994 through 2002, state Medicaid spending shot up more than 80 percent to $110 billion.

Yet many states are cutting aid only to the poor while sparing a huge -- and unintended -- Medicaid benefit enjoyed by middle- and upper-income families: nursing-home stays. These households are taking advantage of loopholes in the law to hide elderly relatives' wealth so the seniors can qualify for costly long-term care at public expense.

A fairer way to limit Medicaid costs would be to curb services for those best able to afford them.

  • States, however, have been reluctant to tighten eligibility rules exploited by middle-class voters.
  • As a result, taxpayers are being forced to pay higher nursing-home bills, which top $40,000 a year per patient and consume one in five Medicaid dollars.
  • While the rules require a patient to have no more than $2,000 in assets, the value of cars, a business and a home -- even a mansion -- are exempt.
  • And clever lawyers have found ways around state Medicaid eligibility boards, such as by transferring assets to other family members.

According to a recent Connecticut survey, more than a third of seniors in the state shifted assets to qualify for Medicaid, instead of dipping into their personal savings to cover nursing-home bills.

Source: Editorial, "Loopholes let well-off seniors skirt Medicaid rules," USA Today, July 7, 2003.

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