Reserve Medicaid for poor

Personal Finance

May 15, 2007|By Eileen Ambrose | Eileen Ambrose,Sun Columnist

Jake of Dundalk is aware that Congress last year toughened the rules to qualify for long-term care through Medicaid. The idea was to make it harder for people to shift assets to relatives so they can make themselves eligible to get Medicaid - a program for the poor - to pick up the nursing home tab.

Given the changes, he asks in an e-mail: "How can an individual protect their certificates of deposits and IRA(s) from the nursing home costs?"

Jake is asking a technical question, but he raises an ethical one: Is it right for middle-income and upper-income households to shelter their money and have taxpayers foot their nursing home bills?

First, the technical answer.

Medicaid will take into account the assets of Jake and his wife - including their CDs and investment retirement accounts - if either applies for assistance. The house, car and prepaid funerals are excluded. So, if Jake were to apply for Medicaid assistance this year, his wife would be able to retain half of their assets, up to $101,640.

If Jake has assets to preserve, he should buy long-term-care insurance.

Of course, there are plenty of elder law attorneys who specialize in Medicaid planning, using legal strategies to preserve clients' assets while allowing them to qualify for Medicaid.

Lawyers defend Medicaid planning, arguing that it's no different from tax or estate planning. And they complain that long-term-care insurance is too pricey. Search online and you'll find fierce defenders of Medicaid planning, some maintaining that hard-earned dollars should be reserved for loved ones - not "strangers."

The strangers, in this case, would be taxpayers.

Others, including some who advocate for seniors, question the ethics of Medicaid planning. I have to agree with them.

Medicaid is a program for the poor.

It's under financial stress and the problem isn't going to get any better after baby boomers retire.

"Medicaid programs are already stretched," says Mary Kahn, a Medicaid spokeswoman. "Those programs are intended for the nation's most vulnerable," most of whom are children.

If Medicaid must pay the nursing home care for those who can afford it, that leaves less money for the truly poor, she says.

Arnold Eppel, director of the Baltimore County Department of Aging, also warns that Medicaid long-term-care benefits might not be what people expect. For instance, you're unlikely to get a private room in a nursing home under Medicaid.

Future benefits are not likely to get more generous, either.

One positive sign is most long-term-care recipients aren't gaming the system, according to a recently released study by the Government Accountability Office. The agency looked at 540 Medicaid applications in 2004 from three states, including Maryland.

One disturbing trend: The GAO said Medicaid - financed by state and federal governments - paid for nearly half of the $193 billion spent on long-term care in 2004. With the aging population, the federal share of long-term-care bills will nearly double in 10 years.

That's a huge tax burden on future generations. And they aren't strangers. They are your children and grandchildren.

Homeowners have less than one month to prepare for the start of the hurricane season.

If your home is susceptible to flooding and you don't have flood insurance, you'll need to act quickly. Your homeowner's policy does not cover flooding. You'll need a flood policy from the federal government. Policies take 30 days to kick in.

The Federal Emergency Management Agency says the season forecast calls for a 75 percent chance of a major hurricane striking the United States and up to 17 named storms, which would put us up to Rebekah.

Flood damages in Maryland topped $177 million in the past five years, according to the government. Despite the potential for flood damage, fewer than 64,100 of the 2 million households in the state own a flood insurance policy.

You can buy a federal flood policy from a property and casualty insurance agent. A typical policy covers up to $250,000 in structural damage to a home.

For an extra premium, you can buy up to $100,000 of coverage for damages to your home's contents.

Questions? Comments? Write personal.finance@baltsun.com.

MORE AMBROSE Find Eileen Ambrose's column archive at baltimoresun.com/ambrose

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