$20 Billion of the $60 Billion Medicaid Spends Could Have Been Avoided
DALLAS (July 12, 2005) – Skyrocketing Medicaid costs for long-term care may lead states to more aggressively enforce laws to collect expenses for care of indigent parents from their adult children, according to a brief analysis published today by the National Center for Policy Analysis (NCPA).
Currently, 30 states have statutes establishing a duty, called filial responsibility, under which an adult child may be held responsible for the cost of caring for an indigent parent. Filial responsibility is becoming increasingly important because long-term care for elderly indigent patients costs states as much as $60 billion annually.
“Some middle-income Americans are essentially using Medicaid as an inheritance protection plan,” said Matthew Pakula, the study’s author. “They are gaming the Medicaid system at taxpayers’ expense.”
Medicaid is the major funder of long-term care in the U.S. When seniors in nursing homes exhaust limited Medicare benefits, those who have not purchased long-term care insurance must pay for their care. If they have consumed their financial assets and their incomes are low enough, they qualify for Medicaid coverage. Federal and state laws allow Medicaid to seek reimbursement from estates, but most recipients of Medicaid coverage have no estate when they die for several reasons:
- An increasing proportion of seniors who receive assistance for long-term care have sheltered financial assets so they will become eligible for Medicaid assistance.
- In anticipation of the need for long-term care, some middle class seniors transfer ownership of assets to their children through trusts without jeopardizing the children’s inheritance.
- In addition to transfers, seniors sometimes convert assets into items that are not included in Medicaid income and asset tests, such as a home, car, burial plot, etc.
- Some elderly spouses even divorce in order to split and protect assets.
Although many low income seniors have no assets to transfer, they may have adult children who can contribute toward their care, but do not do so. Filial responsibility statues in many cases limit children’s liability if they don’t have enough income to contribute, their financial circumstances change or they were abandoned or deserted by the indigent parent.
“Providing long-term care for indigent elderly patients is one thing, but if adult children want taxpayers to pay for their parents’ care, they should not be able to claim inheritance, gifts or other assets,” Pakula added.
The brief analysis is available at http://www.ncpathinktank.org/pub/ba521/