JLP’s Question of the Day

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By JLP | January 26, 2006

First I’ll pose the question and then I’ll give you a link to an article about the question.

Is it morally right for elders to spend down assets in order to qualify for Medicaid for nursing home care?

Okay, now here’s a link to an article on MarketWatch about the new Medicaid law changes that go in effect on February 1st. From the tone of the article it is clear that the author is lamenting the new changes. Perhaps the changes are a little tough, but let’s remember why the changes had to be made in the first place: too many people with the help of their lawyers made themselves poor in order to qualify for Medicaid. Granted, some people probably should have been on Medicaid but a lot them were simply being greedy.

Now it’s your turn to weigh in.

Topics: Long-Term Care, Question of the Day, Retirement Planning |

Comments to “JLP’s Question of the Day”

sam Says:
January 26th, 2006 at 3:56 pm

I’m not sure that I can judge whether it is moral or not. So much depends on the individual economic and health situation of the person(s) making the decision. However, I don’t think that is is a very smart move to give away all your assets and then depend on the government to house and feed you for the rest of your life. The persons involved may think that they are putting something over on Uncle Sam, but they could come to regret it later.

I think a better solution would be to use your assets to purchase long-term care insurance or something else along those lines. I know from personal experience with a relative that nursing homes that take Medicaid patients aren’t nearly as nice as the facilities that people pay for themselves. Do you want to spend the last years of your life in a facility that is housing the elderly to minimum Federal standards and collecting money for them from Medicaid? Or do you want to spend them in a place with nicer amenities? I know what I would choose.

Flexo Says:
January 26th, 2006 at 3:59 pm

Here’s my point of view, whipped up in a few minutes’ time.

I don’t think there’s a moral issue at all. If an elderly individual is on the verge of being able to adequately cover medical expenses but would be healthier by spending assets to qualify for Medicaid, then it is the better choice. The assets will either be pumped into the economy, given to charity, or given to children to pump into the economy or invest — the assets aren’t disappearing. Assuming Medicaid doesn’t change over time, or even if it does, I think the two options are net 0 looking at the economy as a whole, considering that Medicaid is sort of a wealth redistribution program, like Social Security.

People who spend down their income to qualify aren’t being greedy. They’re spending their income, which is by definition, not greedy. Instead of spending down their income on medical expenses, they’re spending down their income on other things mentioned above.

It’s a pretty wide view, and I’m sure someone will be by soon to refute it.

thc Says:
January 26th, 2006 at 8:56 pm

It is unconscionable to intentionally spend down savings so as to qualify to go on the public dole. Not only that, but it is illegal for attorneys and financial advisors to suggest that clients engage in such activity. Flexo, you need to watch your step!

jim Says:
January 27th, 2006 at 1:26 am

I’m going to have to agree with THC on this one, it’s immoral to intentionally spend down your assets so you can go on public assistance. I also disagree with how the US legally creates a financial support system for the elderly when in fact it should be the responsibility of the family, not the state, to provide support. And if you don’t have kids, you should’ve saved up all that money you didn’t spend on kids for your future.

I don’t think it matters if someone’s on the verge of being eligible for assistance, it’s still wrong to spend down the assets to get on the assistance. Now, it’s understandable that in supporting yourself you would spend it down and then be eligible, but that’s not what we’re talking about here.

And flexo, you’re confusing misery and greedy. Greedy refers to wanting more, so they are in effect wanting more by spending more to get more services/assets…

zelda Says:
January 27th, 2006 at 12:49 pm

Say Person A lives a frugal life, budgets, saves for retirement, and ends up
with substantial savings; Person B makes decent money but fritters it away
on material goods and an extravagant lifestyle. So Person B would qualify for
Medicaid yet Person A would be forced to spend their savings (instead of passing
it along to their family)? Somehow that seems to incentivize the wrong behavior.
Ideally, everyone would act like Person A but what incentive is there to save if
doing so just disqualifies them from public benefits?

JLP Says:
January 27th, 2006 at 12:57 pm

Zelda,

How is what you say any different from person A saving for retirement, foregoing expensive cars and houses while person B always has a Lincoln Navigator and a $500,000 house but never saves any money? Person A will reach retirement and live comfortably while person B will gripe and moan and most likely get some sort of aid from eht government.

You are right. The system is messed up. People SHOULD NOT be allowed to purposely impoverish themselves in order to qualify for aid.

One last thing, if you go on Medicaid, you don’t get to choose which home you want to go into. So, you do lose some freedom. It’s best to prepare for these things.

Gary Anderson Says:
January 27th, 2006 at 10:48 pm

It has nothing to do with morality. It is the law. The law requires that seniors give up their meager savingsin order to qualify for medicaid. Otherwise, they cannot afford the nursing home. You young people who are saying that this is immoral are ignorant and will most likely have less savings than these seniors. I used to be a welfare worker and you guys are wrong. Gary

Gary Anderson Says:
January 27th, 2006 at 10:54 pm

BTW, by the time you all are ready for nursing homes they should cost about 25,000 dollars per month. I suppose all of you have the savings to stay there for up to 10 years as some seniors do. You all are a crazy if you think you can save millions. Your savings of maybe $500,000 will do nothing. I suggest you look at the morality of a health system that will steal you blind when you get old. Gary

Bizinformer Says:
January 28th, 2006 at 6:01 am

Could This Apply to Your Loved One?

JLP at AllThingsFinancial asks a very provocative question the other day, “Is it morally right for elders to spend down assets in order to qualify for Medicaid for nursing home care?” The post has a link to a MarketWatch…

thc Says:
January 28th, 2006 at 10:50 am

Gary: It is you that is misinformed. Sure, one must be destitute to qualify for Medicaid (not Medicare, Gary), but it is against the law to advise someone to gift away or spend down personal assets to qualify. You sound bitter. I hope your life improves.

Gary Anderson Says:
January 28th, 2006 at 11:03 am

THC, medicaid is how you qualify for a nursing home. Not medicare. You say I am bitter, however I am more than that. I am angry at those who are so willing to disc the elderly. You haven’t been there so you can’t know what it is about. It is not against the law for a medicaid worker to tell someone to spend down to qualify. It is against the law to try to hide assets. Again, you aren’t a senior so you can’t really judge them. You are young and arrogant. Simple as that. Gary

thc Says:
January 28th, 2006 at 11:07 am

Gary: I’m a Certified Financial Planner(TM), I advise elders for a living and I’m very good at what I do. I know what I’m talking about. But thanks for thinking that I’m young!

Gary Anderson Says:
January 28th, 2006 at 11:37 am

Well, THC you have the arrogance of the young! I am surprised that you didn’t know that medicaid workers, (medical in California) can advise seniors on spend down. I don’t quite understand why you don’t know that unless I am missing something. I think it is great that you are a financial planner. If you can help people in this country avoid poverty in old age, good for you. Of course other developed nations have plans in place to stop this poverty with better health care systems. And while we waste money in Iraq and in a spending frenzy orchestrated by Alan Greenspan, their stock markets are exploding. Funny isn’t it. Gary

JLP Says:
January 28th, 2006 at 12:26 pm

I never in my life thought I would have to say this on my blog, but: GUYS CALM DOWN! Can’t we discuss these issues without calling each other arrogant?

Please (sniff, sniff), can’t we all just get along?

You guys are cracking me up.

thc Says:
January 28th, 2006 at 12:48 pm

Sorry, JLP. I think Gary is confusing Medicaid “spend-down”, a legitimate practice, with what we were discussing, which is gifting assets or reducing personal wealth to qualify for Medicaid. “Medicaid spend-down” comes into play when an individual has excess INCOME but is allowed to use medical expenses to to reduce this “excess” so as to qualify for Title 19 benefits. The process of subtracting those medical bills from the individual’s income over a six month period is called a Medicaid “spend-down.”

Gary Anderson Says:
January 28th, 2006 at 5:49 pm

But THC, JLP’s article is about medicaid spendown. I don’t know why anyone is talking about Medicare! And JLP, you saw that I complemented THC for his financial planning and trying to help people with finances.

Gary Anderson Says:
January 28th, 2006 at 8:35 pm

Actually, I have read this article more carefully. The essense is the typical Republican response as it has always been to this program, have your kids take care of you until the property requirements are met. That is what the Republicans want, that kids should have to take care of their elders. Of course this is one more nail into the coffin of the middle class. Again, this country wants wealth transfer to the rich. That is the motivation of the Republicans, to see how far they can stretch the middle class without breaking them.

Darrick Says:
January 18th, 2007 at 4:49 pm

I personally feel that it is moral and there are not too many options. Medicaid is designed for people who truely need it and if a person had money in their savings it should be spent first before the Gov will kick in. There are plenty of people who do need it so the funds need to be set aside for those people. Long Term Care Insurance has helped my Mom greatly. A good site to research LTC insurance is: http://www.wilkinsfs.com/ltctree.htm

Froglegs Says:
November 17th, 2007 at 9:51 pm

What is the moral response to a situation in which a chronic disability can only result, at last, in bankruptcy? Gary makes an important point in referring to the political. Long-term care is a dilemma for all but the very poor or the very rich and is the result of political decisions. Since politics has been brought up, I’d like to point out what a complicated mess this means. Gary refers to Republicans wanting more money for the rich. While this may be the general attitude of our current president, the honorable Alfred E. Newman, the Republican Party is actually made of several groups, the largest of those being the Traditionalists, the Libertarians and the Global Capitalists. These groups have very different world views and are actually distrustful of each other. Similarly, Democrats are largely made up of competing groups, the largest of those being the American Liberals and the International Socialists. Each group mentioned has a definite attitude when it comes issues that affect the society at large. We all orient ourselves with regard to moral relativism, even if our moral compass is the Bible. There is no right or wrong answer, but many possible responses to a moral dilemma. Do we spend down assets, forcing our care on society at large but benefiting ourselves and our families or do we sacrifice for some perceived greater good? Do you perceive the good?

C.C. Says:
February 16th, 2008 at 8:44 pm

One thing not mentioned above is that these people have paid into the pot for this. The pot called social security. How can using it be thievery when they helped create it? Forget that the government already spent it, that was the big lie. haven’t they earned it?

WRF Says:
February 29th, 2008 at 6:22 pm

Only in America… I’m 50 totally disabiled. Was raised to go out and work and to better myself. Well, I did so. Worked my whole life. Only to find out that Im being pentalized for doing so. My only income is SSD. Due to working those yrs I have a 527.00 a month spend down on my Medicaid. Recently I found out Im entitled to a pension of 537.00 a month. So guess what? My spend down is going up to $1060.00 a month. $740.00 a month is considered poverty. To figure out ones spend down. They take the $740.00 minus 20 equals 720. Then subtract the 720 from someone total income. That is there spend down. No one plans on becoming disabled. I was in a car accident, not my fault. Coma 18 days 6 and a half months in the hospital. Back surgery, 2 open heart surgeries and surgery in both eyes. Yes, the spend down brings me down to the poverty however I would of been better off working a couple yrs. Your spend down isnt factored in when it comes to qualifying for housing, food stamps, energy assistance and even if I was to be arrested. They say you have the right to an attorney if you cant afford one, one will be appointed to you. Well, guess what. I make to much money for to quality for anything. Only in America….

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JLP’s Question of the Day