Report: Strict asset transfer rules are not an answer to controlling Medicaid spending

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A Kaiser Commission on Medicaid and the Uninsured has issued a report, Asset Transfer and Nursing Home Use: Empirical Evidence and Policy Significance, which concludes that, “Eliminating asset transfers for Medicaid nursing home coverage will not substantially alter the private market for long-term care and is not the answer for controlling growth in Medicaid spending.”

The University of Michigan’s Health and Retirement Study produced data for the study to determine the extent to which individuals needing nursing home care make asset transfers. Four categories of individuals were screened: (1)those eligible for Medicaid in the community prior to entering a nursing home; (2)those who became Medicaid eligible within a year of admission; (3)those who became eligible more than a year after admission; and (4)those who never received Medicaid coverage and resided in a nursing home for more than a year.

Forty-three percent of the approximately 2.6 million individuals entering nursing homes between 1998 and 2002 received Medicaid assistance at some point during their stay. Nearly half of these were eligible prior to entering the facility, and only 5 percent of this group transferred more than $50,000 in cash in the six years preceding their admission to the facility. When including transfers involving deeds for this group, only 20 percent made gifts of more than $50,000. For the rest of the Medicaid population, the vast majority made transfers of less than $50,000 within the same time period (including transfers involving deeds).

By contrast, individuals who never received Medicaid assistance for their nursing home care made transfers with greater frequency and higher value. Half of these individuals made gifts in the six years leading up to their institutionalization, and two-thirds of the transfers were cash transfers exceeding $5,000.

All told, the report notes that $6.6 billion in liquid assets were transferred by the Medicaid population within the six years leading up to their qualification for Medicaid. Medicaid spent $100 billion in fiscal year 2004, so Medicaid would recover only six percent of its costs if it blocked all of these transfers. However, the report reviewed activity dating back six years (one year longer than the five-year- look-back period of federal law), so some of these transfers could not be blocked by Medicaid. Also, potentially inflating the amount that Medicaid could save is the evidence that individuals who never attained Medicaid eligibility after lengthy stays in institutions made the most frequent and highest value transfers. This evidence suggests that transfers made prior to entry are frequently not made for the purpose of attaining Medicaid eligibility. Federal law does not allow a penalty for a transfer not made for the purpose of establishing Medicaid eligibility, so other transfers netted in the analysis could not be restricted by Medicaid.

Source: Washington Weekly, Volume XXXII, Issue No. 16, April 28, 2006.

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