NCPA - National Center for Policy Analysis

States Fight Shedding of Assets to Qualify for Medicaid

February 25, 2003

For years, thousands of elderly people have been scamming Medicaid by passing out their assets to relatives in order to become poor enough to qualify for nursing home care. Now cash-strapped states and counties are cracking down on the practice, even though it is not technically illegal.

  • To qualify for Medicaid nursing home subsidies, retirees generally must have no more than $2,000 in assets -- excluding their house and car.
  • In some cases, spouses sign over all assets in excess of the limit to their spouses, who then refuse to take care of them -- leaving the government with the responsibility for their care.
  • Technically, a person can have a multimillion-dollar mansion and still qualify for Medicaid assistance -- though many states will try to recoup some of the money when he or she dies.
  • By some estimates, as much as 22 percent of the $47 billion Medicaid paid for nursing-home care in 2001 went to families that could afford to pay for months and even years of care.

Children often attend to the asset transfers with the help of attorneys, who use trusts and other estate planning techniques on the larger transfers to avoid gift taxes.

Under current Medicaid rules, if assets are transferred during the three years prior to when someone applies for assistance, the applicant can be forced to wait for payment for a certain period of time. The waiting period is determined by dividing the amount of money transferred by the average monthly cost of nursing home care in the state.

Connecticut has proposed a regulation that would make it harder for its residents to shelter assets. If Connecticut receives federal approval, Kansas and other state say they are likely to propose similar regulations.

Source: Michelle Higgins, "Getting Poor on Purpose," Wall Street Journal, February 25, 2003.

 

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