At least once a week, someone will post a question on this board that basically amounts to asking how to “protect” some parental asset or amount of money and still apply for/qualify for Medicaid. Inevitably, such a poster gets jumped on by numerous people replying that trying to protect assets is “cheating” and grossly unfair to other taxpayers.
I’m not so sure. I'm not advocating trying to circumvent the system -- but I would like to start a discussion about whether it's immoral. I’d like to explain why I’m not so sure, and then I’d like to know what other people think.
Imagine two identical families. We’ll call them Family A and Family B. In both families, Mom and Dad work. Both Parents A and Parents B have identical jobs and identical incomes, and both families have three kids.
That is where the similarities end.
In Family A, even before the kids are born, Dad and Mom scrimp and sacrifice to save money. This an old-fashioned phrase for an old-fashioned concept, but Dad and Mom are 100% dedicated to it, and their commitment does not change as the kids grow.
The family goes on vacation every third year instead of every year. These vacations are usually “road trips” and involve camping in tents and peeing in terrifying, spider-infested outhouses to save money on hotels. Getting to eat out once a month is a huge treat, and usually occurs only at low-end chain restaurants with a mid-week “kids eat free” night. For their entire public-school education, the kids dress primarily in clothes that their mother sews by hand instead of wearing clothes bought from the store ... and sure, maybe they get teased and made fun of at school, because they’re wearing polyester pants instead of blue jeans, but Mom and Dad decide it’s a worthwhile sacrifice because the money that is being put away will make a difference in the kids’ lives later, when it really “matters.”
The family drives a beat-up old car that Dad manages to keep running year after year because hey, maybe the upholstery is all split open and the windshield is cracked, but at least it’s paid for. Cable TV is out of the question, so if a show doesn’t come in over rabbit ears to the family’s one small TV in the living room, no one watches it.
The house, which is uncomfortably small for the family and not in the best neighborhood – and which certainly does not feature hardwood floors or a kitchen with granite counters or stainless steel appliances! – is one that can be managed on a mortgage that still leaves a fair amount of each month’s paycheck available to go into savings instead. The family COULD qualify financially for a “nicer” place, but Dad and Mom believe that it’s better to put the money away so that it will be there to make a difference for their kids down the line – maybe by buying a college education or by helping them to buy their own homes when the time comes. Everyone sacrifices, sacrifices, sacrifices. Eventually, even the modest mortgage is paid off. Gradually, the little nest egg grows.
In Family B, by contrast, just about every dime that ever comes in is spent immediately. The family motto is “Instantaneous Gratification Isn’t Soon Enough!” The family denies itself nothing, ever.
The whole family goes on vacation to Disney World every year, always staying at an official Disney resort (where the kids get their own room). At home, all the kids have their own TVs (which get every premium channel imaginable), laptops and iPads and get new iPhones every time Apple releases an “upgrade.” Eventually, the kids get driver’s licenses, and guess how the family celebrates this rite of passage? You got it! Mom and Dad buy them their own cars. The family eats out at nice restaurants three or four times a week. The family car is replaced at least every two years, and loaded with every option the family’s creaking credit score can support.
The kids get designer clothes and shoes and the latest video games and pretty much whatever else they want at every gift-giving holiday. The family lives in a huge house in a nice neighborhood, with a pool and a hot tub, and yes, they’re carrying a lot of debt on their credit cards, and yes, they’re quite a bit overextended on the mortgage and the car notes, but what the heck – isn’t that the American way? Sure, there’s no nest egg ... but what does that matter? Living life in the moment is what it’s all about.
Fast-forward. Dad is now 75. Tragically, Mom died 6 years ago from cancer, and Dad has now been diagnosed with a progressive dementia, and will likely soon need very expensive long-term memory care in a facility.
In Family B, there are next to no savings. After retiring, Mom and Dad B traveled a bit, and spent every dime that came in in pension and Social Security income. After Mom B died, the overextended mortgage on the house turned completely upside down, and Dad B abandoned the equity in the house and walked away ....
(Continued in Part B, first post)
Isn't it better if people of one or more generations can afford private pay rather than having to use the taxpayer's money in the form of Medicaid? (My widowed grandfather was also private pay in a nursing home the last year of his life.) Along these lines, is the government "better" at using your money than you are?
If the law is immoral, this does not make the action of the citizen immoral.
Laws are created in order to influence desired behavior, so legally shielding assets is simply acting in a manner that our lawmakers desire.
or we see cuts in State run Medicaid programs because the State cannot budget for such programs because the Feds are cutting what each State will receive in funds.
It's the old saying "taking from Peter to pay Paul".
My parents, as they got older, suffered from mental and physical illnesses which made them make bad financial decisions until we took over their finances and helped them through bankruptcy which enabled them to keep their home. These same disabilities prevented them from being able to save because so much of their income was used for professional caregivers, but these services delayed their admittance to a nursing home by years.
The other variable is the huge cost of LTC. Now that they are both in a nursing home, the sale of their home will allow them to private pay for only a year, at which time Medicaid will kick in. My parents two healthy pensions, including Social Security will not cover the cost of their nursing home.
No, I would not think of withholding assets from Medicaid, and I am glad Medicaid didn’t require my parents to prove that they had been frugal and good stewards of their money throughout their life.
They've been on SSDI all these years and now looking at a nursing home. You can't have anything over the allotted amount. There's no place to hide savings even if you had managed to save anything over the years - they haven't been able to go over the asset allotment all those years. They worked hard, but the system made them spend down before qualifying. So the question isn't about the two families used as an example. It's about a double standard. And I'm betting that if a poor person simply had not done the paperwork, but had a million squirreled away somewhere, people would be outraged, but they're not if someone does the paperwork?
I have no qualms about taking advantage of the laws, systems, programs in place because as a taxpayer I too have paid into the system a very long time, as has my spouse.
That said, yes I do want to plan, have LTC insurance in place, save the best I can, etc, and hopefully never have to use Medicaid, but I will also plan years in advance using the correct legal channels in order to hopefully leave behind some of what we have worked hard for to our children also in case I do.
I have myriad thoughts, which I won't burden anyone with (and can't be bothered), on the rights of states to help themselves to their richer citizens' wealth; and to set up social security systems under the fig leaf of "national insurance" - creating a concept of a contract - and then jiggle the claims criteria around; and then treat the benefits as a grant, rather than a right; and then on top of that claim to be helping the lower paid when actually they're just keeping their thieving mitts off those people's wages to a higher threshold - "tax credits" my eye!
i don't disapprove of them, exactly, because there is heartbreak involved and they often have worked hard all their lives and it is sad for them that their children may not inherit from it; but the people who do make me roll my eyes are the little old ladies (often from Birmingham, I've noticed, not sure why...) who keen and wail about having their houses stolen from them because they can't afford to pay for care. In vain can one explain "but your house equals two hundred and fifty thousand pounds, dearest Mrs Whaley, and that is really quite a lot of money, now isn't it?"
They've paid tax and insurance all their lives. They want to leave their property to their children, enjoy a pension, free health care and free social services, never have to worry about bills or local taxes, and be let alone to stay in their homes forever.
Which would be simply, childishly absurd and selfish of them, if it weren't the veiled promise that successive governments of all colours have been making to them for seventy years.
I still have no qualms with utilizing Medicaid if I do happen to meet the qualifications and need the assistance under those circumstances. I have paid into the system for years like most. Therefore, I see no problem with taking advantage of the legal avenues available to me, as long as I am following the law as it currently stands. No different than corporations and individuals that utilize tax advantages. If it is allowed by law, why not? If it is deemed unethical, change the law.
As CM said, our government makes veiled promises about our 'social security' and continually moves the goalposts. If social security runs out before I reach retirement age, will they then refund all of the money I have paid into it over the years? I think not.