JANUARY 13, 1997 VOLUME 4, NUMBER 28
It is (as of January 1) a federal felony for those facing nursing home placement to make gifts for the purpose of becoming eligible for Medicaid (in Arizona, ALTCS) coverage. Much has been written about the ambiguity and unenforceability of the new law. For example, Elder Law Issues, November 25, 1996, and August 19, 1996, focused on the meaning, history and poor drafting of the new enactment.
Now Congress is considering repeal of the two-week old criminalization provision. Congressman Steven La Tourette, a second-term Republican from Ohio, has introduced House Resolution 216, which would strike the new section of Medicaid law before the first prosecution could be threatened. Powerful forces in Washington, including the AARP and other advocacy groups, have lobbied forcefully for the repeal. Indications are that the threat of jail for middle-class seniors will now fade away.
The legislative assumptions underlying the original enactment of this punitive law have remained unchallenged, however. According to some in Congress (and, more importantly, lobbyists for the long-term care insurance industry), the practice of making gifts to qualify for Medicaid is widespread and is costing state and federal governments millions of dollars. Sadly, Congress appears to have bought into this myth without question, and in spite of the actual evidence.
In a study prepared for publication in the periodical Generations, Washington researcher Joshua Wiener of the Urban Institute has analyzed the actual incidence of transfers by seniors. His conclusion: both the numbers of persons making transfers and the amount of money transferred to obtain Medicaid eligibility are much lower than commonly thought.
Wiener notes earlier research which shows that three quarters of nursing home admittees are already impoverished, with less than $50,000 in assets other than their homes. Over half had less than $10,000 of cash available. In other words, the typical nursing home admittee is able to pay for less than six months of nursing home care (and less than two months in many communities, with sharply higher nursing home costs) in any event. It is unrealistic to expect any substantial cost savings for the Medicaid program from further restrictions on transfer rules.
Furthermore, historical data indicates that seniors infrequently give away their assets to become eligible for nursing home assistance. Between 1988 and 1992, Congress substantially liberalized the rules for married couples to become eligible for Medicaid, while simultaneously clarifying the transfer rules. During that time, the portion of nursing home residents covered by Medicaid increased by only two percentage points. Wiener notes that the increase should be almost entirely attributable to the change in married couple rules, suggesting that the number of people making gifts to become eligible must be almost insignificant.
Finally, Wiener notes that the administrative costs attendant on any plan to reduce transfers must be considered. In the case of Congress’ ill-conceived plan to criminalize gifts, for example, the costs of administrative rule-making, prosecution and incarceration might exceed any reduction in Medicaid costs.
On a related issue, Wiener also assesses the effect of new, stronger federal rules on estate recovery. As a practical matter, estate recovery programs rely on Medicaid recipients retaining an interest in their homes throughout their nursing home stay; research suggests that only 14% of Medicaid recipients own their homes at the time of institutionalization, so the possibilities for recovery are not high. In Oregon, the state with the best record of estate recovery, about 2.5% of Medicaid costs are recovered.