Is Medicaid Planning Ethical? - Medicaid for Alzheimer'...

Is Medicaid Planning Ethical?

Is Medicaid Planning Ethical?

Last Updated: 12/10/2002

Medicaid is a welfare program originally created to provide health care to our nation's poor. Due to the lack of any other program, Medicaid has by default become the long-term care insurance of the middle class. With the help of elder law attorneys, those needing long-term care artificially impoverish themselves in order to qualify and preserve their savings either for their healthy spouse or their children. Is this practice ethical?

Stacey L. Bradford of SmartMoney.com says it's not: “For starters, it''s highly unethical to transfer funds to family members simply so that the government will pick up the tab.? (Read the whole article, which mostly accurately describes the pros and cons of an assisted living facility resident transferring assets, at http://smartmoney.com/ask/index.cfm?story=20021118.)

Randy Cohen, on the other hand, the ethics columnist for The New York Times Sunday Magazine, believes that Medicaid planning is ethical if you play within the rules. Speaking to a woman considering divorcing her second husband who has Alzheimer's disease, he says:

"What you are contemplating is not the exploitation of a legal loophole but adherence to the regulations governing Medicaid. But you should seek legal and financial advice: besides divorce, there are other options to consider, including, for instance, transferring some assets to your children (if you have any) or protecting your assets through annuities or trusts. Done with respect for the law and compassion for your husband, such actions, divorce included, are prudent and ethical courses of action."

(Mr. Cohen''s entire comment can be read at http://www.nytimes.com/2002/07/28/magazine/28ETHICIST.html.)

It will be no surprise that we at ElderLawAnswers.com agree with Mr. Cohen and not Ms. Bradford. Unfortunately, neither Congress nor the state legislatures have resolved the public policy question of how we as a society should pay for the long-term care of our seniors. The result is a confusing, makeshift system of Medicare, private insurance, out-of-pocket payments, family caregivers, and Medicaid as a last resort.

Medicaid has become recognized as the long-term care insurance of the middle class. Congress implicitly accepts this result through rules that protect spouses of nursing home residents and permit others to qualify after spending down and transferring some of their savings. To plan ahead and accelerate qualification for Medicaid is no more unethical than planning to avoid taxes. It's just different populations doing the planning.

Some argue that Medicaid planning is unfair because Medicaid is a zero-sum game. More money spent on long-term care for middle-class seniors means less for poor children who need medical care. There's some truth to that argument at the state level, but not at the federal level. The federal and state governments share Medicaid expenses. At the federal level, anyone who qualifies for Medicaid gets covered. At the state level, the same is true, but the states have discretion on how far they expand Medicaid to serve underinsured populations. Lack of resources could mean narrower coverage on a state-by-state basis.

There is some indication that the Bush administration may try to make this a true zero-sum situation by changing Medicaid to a block grant program. Under that approach, the states would receive a specific amount of money from the federal government to spend on health care programs each year. Having more qualified beneficiaries will not mean more funding from the federal government as it does now. This would definitely play off the various categories of beneficiaries against one another ?seniors, children, disabled adults, the working poor. But even if that occurs, Medicaid would only be a zero sum game because President Bush and Congress limit the amounts of the block grants.

This leads us to the final point in Mr. Cohen's article with which we agree wholeheartedly: “Both major parties must make changes, embracing measures to protect the assets of middle-class seniors and taxing the assets of the rich (including through the estate tax) to provide all Americans with catastrophic medical care."