January 2023 update. Rep Jan Schakowsky will reintroduce the bill. It is not expected to see any action unless citizens start asking their representative where to they stand on terminating the taking of peoples’ homes just because they needed nursing home long term care.
Medicaid Estate Recovery (MER) is an outdated 20th Century concept that has failed its
purpose, conflicts other national priorities and harms our economic competitiveness in
the 21st Century. The fundamental flaw of MER is that it is based on conditions of a half
century ago. America was the unchallenged world’s preeminent economy. Families
needed only one wage earner and spouses could provide long term care to aging parents.
The alternative to family care was the nursing home.
MER is operating harmfully in the 21st Century. It should be repealed. HB 6698, Stop
Unfair Medicaid Recoveries Act, introduced by Rep. Jan Schakowsky does just that.
The bill has 15 cosponsors.
The Two Failed Purposes of Medicaid Estate Recovery
MER was supposed to help fund the long term care component of the program. Money
paid out would return by MER in the same way as loan repayments. It has not worked.
Studies have shown that on the average only about a half of a percent, .5%, of the
budget is recovered.1
The second failed purpose of mandatory MER was that it would cause people to “plan
responsibly” and buy long term care insurance.2 That has not borne out. The insurance
sales peaked in 2003. In 2002, there were 102 companies selling policies, by 2013 there
were only 15. LTCi could no longer be sold because of rapidly rising premiums.3
MER Conflicts with Other Major Policies
MER conflicts with major national priorities: it maintains the racial wealth gap and
perpetuates poverty;4 It strongly impacts the disabled community;5 and perversely
eliminates affordable housing. On a local level MER provides families with no incentive
to maintain the home, no incentive to maintain insurance or to even pay taxes on it.
MER encourages community deterioration. These consequences have been widely
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1 Medicaid and CHIP Payment and Access Commission (MACPAC)
https://www.macpac.gov/publication/medicaid-estate-recovery-improving-policy-andpromotingequity/
2 Stephen Moses quoted in Debt After Death: The Painful Blow of Medicaid Estate
Recovery by Sarah True, US News & World Report, Oct. 14, 2021.
3 Exiting the Market: Understanding the Factors behind Carriers’ Decision to Leave the
Long-Term Care Insurance Market,
https://aspe.hhs.gov/reports/exiting-market-understanding-factors-behind-carriers-decision-leavelong-
term-care-insurance-market-1
4 See for example Debt After Death, supra
5 Issue Brief: Medicaid Estate Claims: Perpetuating Poverty & Inequality for a Minimal
Return April 2021,
https://justiceinaging.org/wp-content/uploads/2021/04/Medicaid-Estate-Claims.pdf
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reported.6
MER No Longer Reflects Reality of Medicaid LTC
When Medicaid was enacted in 1965 it was conceived as a “poverty” program. The
purpose of such programs was to help people gain employment and escape poverty. In
this conception Medicaid’s Long Term Care (LTC) benefits were considered as a loan.
The poverty description no longer fits the LTC program. It is available to the “middle
class” medically needy. Applicants can have a home worth $636,000 plus contents that
can be very valuable. They can have a new vehicle of any type. While applicants may
have only $2,000 in liquid assets, spouses are allowed up to $137,400. If we consider
that the average long term care nursing home resident is in their mid-eighties, then
these applicants have been taxpayers for some 70 years. Many are veterans. They have
contributed more than enough in taxes and service to have paid for Medicaid. The
benefits are payback, not a loan.
By comparison Medicare may pay out a greater amount and will not seek payback. The
Kaiser Family Foundation estimated that the average inpatient cost for cardiac surgery,
not including post-hospitals care, ranged from $75,688 to $117,000 in 2018.7 A person
can buy into Medicare even if they did not pay FICA tax by employment.
MER Conflicts with Our Urgent Need for a Workforce That Is Competitive in
the World Economy
The adverse economic impact MER has on our ability to be competitive in the 21st
Century global economy is not widely known. The 21st Century workforce must actively
participate in continuous post-secondary education to remain viable. “The illiterate of
the 21st century will not be those who cannot read and write, but those who cannot
learn, unlearn, and relearn.”8 In 2011 the US Chamber of Commerce Foundation
released a study of employers and employees. It concluded that post-secondary
education of employees is necessary to remain competitive in the 21st century
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6 See for example Issue Brief: Medicaid Estate Claims: Perpetuating Poverty & Inequality
for a Minimal Return April 2021,
https://justiceinaging.org/wp-content/uploads/2021/04/Medicaid-Estate-Claims.pdf.; Debt After Death, supra; https://www.usnews.com/news/health-news/articles/2021-10-14/debt-after-death-the-painful-blow-of-medicaid-estate-recovery; Rachel Corbett, Medicaid’s Dark Secret, The Atlantic (Oct.2019)
7 The figure does not include post-hospital care.
https://www.retireguide.com/medicare/coverage/conditions-and-treatments/open-heart-surgery/
8 Quoting futurist Alvin Toffler, US Workforce Development must Catch up to 21st
Century Needs, Larry Good and Earl Buford, The Hill, 9/29/21. Good and Buford, are members
of the Better Employment and Training Strategies (BETS) task force of George Washington
University.
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workforce. Employees reported they need time and money to pursue the necessary
education.”9 This time and money is an employee’s “capital.”
We Must Treat Working Families the Same as Millionaire Families
Perhaps it is no surprise that Millionaires are treated better than working families.
Congress Protects inheritances for Millionaires, but it shames inheritances for working
families. Here are the facts, read on.
In 2003 Congress raised the exemption from the federal estate tax. It went from one
million dollars per person to $5 million by 2010. It now stands at $12.06 million per
person or $24.12 million per married couple before they will pay any estate tax.
The rationale of Congress is expressed in the Joint Economic Committee paper “The
Economics of the Estate Tax: An Update.” It made the following points. The tax:
- discouraged savings and investment;
- penalized work, savings and thrift;
- inhibited economic efficiency;
- stifled innovation;
- discouraged risk-takers willing to exploit new technologies;
- created obstacles to passing on family capital to the next generation.
The paper noted inheritances play an important role in alleviating the liquidity
constraints that impede the formation and success of small businesses.” These impacts
were especially significant for minority groups.(Pages 7-9).
Every point itemized above applies with equal, if not greater, force to working families.
Medicaid Estate Recovery:
- discourages savings and investment;
- penalizes work, savings and thrift;
- inhibits economic motivation to improve oneself;
- stifles motivation to maintain, improve and pay taxes on the family home;
- discourages job risk-takers willing to exploit education to learn new technologies;
- creates obstacles to passing on family capital to the next generation.
America is in a 21st Century economic crisis. China and other countries threaten to
make America a second rate economic power. We need the best workforce in the world!
We need employees who are “job entrepreneurs,” the risk takers who undertake postsecondary
education of the 21st Century workforce. They need capital – time and money
– to pursue the education. The passing on of intergenerational wealth is just such a
vehicle to provide these families with the necessary financial liquidity.
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9 Life in the 21st Century Workforce: A National Perspective US Chamber Foundation,
2011.
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Medicaid Could Save Much More If it Paid for Custodial Care in an Assisted
Living Facility.
In 1965 when Medicaid was enacted many long term care diseases such as “senile
dementia” were simply regarded as aging. Aging parents were often cared for in a
daughter’s home, whose husband was the sole wage earner..
Now dementing diseases are recognized medical conditions that require “custodial
care” for which Medicare will not pay but Medicaid will. According to the Alzheimer’s
Association 2022 Alzheimer’s Disease Facts and Figures report, 48% percent of nursing
home residents are living with Alzheimer’s or other dementias. This custodial care is
also provided in “assisted living facilities.” Many nursing home residents were in
assisted living facilities before they ran out of money and moved to a nursing home so
Medicaid would pay for the care.
According to the Genworth Report in 2021 the average cost of a semi-private nursing
home care is $94,900. The cost of assisted living is only 57% as much at $54,000.. If
48% of Medicaid’s nursing home population could be treated for 57% of the cost, the
savings would dwarf the .5% recovered by MER.
How much could Medicaid save if it paid for custodial care in assisted living facilities at
a savings of 43%? Whatever the final answer is, there is no question that it would be
many, many times more.
Jim Schuster CELA, Ret’d
Southfield, MI
May 2022