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The Myth Of The Medicaid Millionaire

A recent article by Ron Lieber in the New York Times questioned “The Ethics of Adjusting Your Assets to Qualify for Medicaid.”  I thought about this issue at length when I began working for Lamson & Cutner over three years ago.  Seeing the many clients who have passed through our offices since then, I have come to a firm conclusion.  Taking steps to qualify for Medicaid is essential to many of our clients’ long-term well-being, and helping our clients qualify for Medicaid is, in fact, the most ethical action we can take.

I disagree with numerous of the author’s statements and want to address several of them here.

First, the Mr. Lieber states “Anyone who engages in legal Medicaid planning is attempting to qualify for a government program for the indigent when they do have at least some assets that could pay for their care.”  This statement mischaracterizes how Medicaid works today.  When Medicaid was enacted in 1965, perhaps many people viewed it as a poverty program, but long ago it evolved to function in an entirely different way.  Medicaid now provides insurance and/or long-term care for about 19% of the U.S. population.

The reality is that today’s long-term care costs are truly daunting.  Many of our new clients are close to panic by the time they first come in.  Their life’s savings are suddenly gushing out of their bank accounts, and they are staring financial ruin in the face.

These clients are very likely to end up on Medicaid whether or not they do Elder Law planning.  If they don’t plan, the probability is very high that they will use up all their money, and end up completely dependent on Medicaid, possibly for many years.  They will have no buffer – no money left to supplement what Medicaid provides, all while they are getting older and sicker.  No wonder they’re afraid.

They may even end up in a nursing home prematurely because they don’t have enough money left either to stay in their homes or to move into an assisted living facility.  This really happens.  The government sometimes ends up spending taxpayer dollars for people to live in nursing homes when they don’t really need to be there.

Our laws permit people to take action to save some of their money and maintain their quality of life far longer than if they do nothing.  Implying that it is somehow “more ethical” for them to do no planning and allow themselves to become impoverished when the law allows them to protect themselves, is just plain wrong.

Medicaid planning at its most basic involves protecting your assets so they can be used to maintain your normal lifestyle, while Medicaid pays for your long-term care.  The goal of Elder Law planning is to make sure your money can be used for you, during your lifetime, and to help make your money last as long as possible.  The goal is not to hide it from the government or to enrich your heirs.

The second situation the author criticizes is that of the taxpayer who says “[I] paid into this system.  I was thrifty, and my neighbors were not… and now my heirs should get nothing?  To accuse me of gaming the system is absurd; I just don’t want to be taken by it.”  The author states, “If this sounds a bit like a sense of entitlement, that may not be far-off.”

I find this contention offensive, especially because my parents were those thrifty taxpayers.  They lived modestly and were extremely philanthropic, and still managed to save money.  I can tell you they do not consider themselves “entitled.”

My parents have done Elder Law planning but will end up having paid for most of the costs of their care.  How can someone say they are unethical because they want to keep some of the money they worked very hard to save, in order to make their own lives more comfortable?  Our laws specifically allow them to do so.  If the author has a problem with that, he should address the people who make the laws, not those who follow the law.

The last problematic passage I’ll discuss is from a woman who the author said “offered the most stinging rebuke:  People who engage in such planning are privileged enough to be aware of it and can afford the legal fees.  Shouldn’t tax dollars go only toward the care of people who lack such access?”

There are numerous inaccuracies in this statement.  First, the people who are “privileged enough to be aware of” Elder Law strategies are mostly not privileged, except that they found out that there was something they could do to protect themselves.   It is absurd to suggest that they should not be allowed to make legal and proper use of the information they learned.

Second, the implication that, if they can afford the legal fees, they must have a lot of money, is highly inaccurate.  Legal fees for these types of services might seem “high” in absolute dollars, but in relative terms, they are typically extremely cost-effective.   For example, would you spend $15,000 in legal fees to save $200,000 in savings, and your home?  Of course you would.

Third, it is unclear what exactly is intended by the suggestion that tax dollars should only go to people who “lack such access.”  Does the writer mean access to information about Medicaid planning?  Access to an Elder Law attorney?  Access to the money they would need to do planning?  None of those make sense, even as a policy matter.

If the writer is suggesting that we should pay the health care costs only of those who remain ignorant of the law, then at the same time we would be penalizing those who are aware of, and want to follow, the law.

Access to information about Medicaid planning should not be a problem for anyone who makes a modest effort to find out.  And people who don’t have the money to pay an Elder Law attorney to do planning are probably already eligible for Medicaid, or they can seek legal aid from a public service organization.

You can be resentful of people who learned about Elder Law planning and took advantage of it when you didn’t, but that doesn’t make what they did either wrong or unethical.  If I pay full price for an item and you found a 50% coupon for it, is it wrong or unethical for you to use it?

The health care system is full of inefficiencies, and the issues are complex.  But the vast majority of people who do Elder Law planning are far from millionaires.  They just want to stay in their homes and have the best quality of life possible, for as long as possible, and not end up destitute if they can avoid it.  That is logical, completely permissible under our laws, and the farthest thing from unethical.


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