Medicaid Nursing Home Spend Reduction Program: 5 Years Looking Back
Seventy-seven million (77,000,000) of the middle-class aging baby boomers are going to rely on Medicare as their default long-term care policy. The Cato Institute estimates that $60 billion of Medicare dollars is an unfunded and unaccounted obligation.*
The Medicare/Medicaid programs are government dual-eligible programs for the elderly, blind and disabled, and intensive users of long-term care for the poorest of the poorest. Medicaid is the largest liability in state budgets and has overtaken elementary and secondary education. For 2003, total Medicaid spending in most states was $267 billion. Of this, Medicaid-funded home care accounted for approximately $51 billion and home care $9.9 billion.*
The new Tax Abatement Act of 2005 mandated that seniors spend all of their combined assets before an ailing spouse can qualify for a nursing home. The law requires a 5-year review for any senior transfer designed to deprive the state of those resources available to pay for nursing home care.
WHAT IS THE DEPENDENCE OF THE NURSING HOME?
The expense reduction provision is that “you must pay for yourself” for your nursing home care with the sale of all your personal and real assets to the point of financial devastation of your life savings carrying it to financial indigence. Eligibility for a nursing home will be determined by your lack of available resources designed specifically to punish/impoverish your healthy spouse.
WHY IS MEDICAID ESTATE PLANNING IMPORTANT?
The problem with the 5-year retrospective provision is that the new Medicare regulations do not consider the healthy spouse. It is a social punishment of the marriage certificate. It is a new social discrimination based on health. Eventually, older people will be forced to choose divorce in the interest of preserving their financial dignity.
WHAT IS HAPPENING WITH THE MEDICAID HEALTH CARE SYSTEM?
Serious mismanagement of the social security system will force baby boomers to think seriously about their long-term health care. There will be no money by the time baby boomers reach retirement age. Health care has been escalating at an alarming rate. Government planners have found that they can save $10 billion over the next 5 years by increasing the retrospective provision from 3 years to 5 years.
WHAT IS THE LOOK BACK 5 YEARS FOR THE NURSING HOME PROGRAM?
Before you qualify for the government nursing home assistance program, there is a 60-month review to see if and when you transferred your assets for less than fair cash value or transferred your assets to a trust system or any transfer system of your wealth for the purpose of becoming eligible for the nursing home program depriving the state of all of its available resources for your long-term health care.**
SOCIAL CHANGE IN HAND OVER THE EQUITY OF THE HOUSE
According to the National Council on Aging, 81% of the 13.2 million American households age 62 and older own their own homes. Seventy-four (74%) of those seniors own their free and clean homes. In all, seniors own almost $2 trillion in home equity.* You have to give it to the government to help you decide how to spend it.
They want you to use your home equity to pay for your own long-term health care! They are going to make it very easy for you to borrow against it or “reverse mortgages” to create a new government sponsored reverse mortgage industry. Based on this perceived wealth, it won’t be long before the government requires 10-year retrospective provisions for most asset transfers to 20 years for real estate.
WHAT IS A REVERSE MORTGAGE?
A reverse mortgage (RM) is a special type of loan that can be obtained if you are at least 62 years old (if married, the minor must be at least 62) and own your own home, condominium or cooperative. A reverse mortgage (RM) converts a portion of the value (equity) of a home into instant cash. The main feature of this program is that you do not need to qualify for credit to obtain this loan.
The borrowed money can be in a lump sum, monthly payment, line of credit, or any combination. The Reverse Mortgage is a non-recourse loan. There is no personal liability to the borrower, his estate, or his heirs. The house is the only collateral and the borrower does not have to make any monthly payments; It’s the other way around, the bank pays you.
What’s wrong is that the interest charged on the loan has increased and is compounded by accelerating the amount of equity being withdrawn from the home, not to mention the extravagant forced fees charged when there is no other alternative. What’s wrong with Reverse Mortgage is that the senior’s financial dignity will quickly evaporate, right before his very eyes.
WHAT CAN YOU DO NOW TO AVOID GOVERNMENT ORDERED SEIZURE OF THE MEDICAID NURSING HOME DISTRIBUTION PROGRAM?
Good planning is done when the sea is calm; it is often too late when the sea is stormy. It has become obvious that the government has spent more than its income and has created more money with printing presses. As a boomer myself, I don’t like it when big brother has plans for my earnings and accumulated wealth.
The more money you throw at them, the more they want, it’s a black hole of the universe. If the government wants us to buy our own long-term health care, why not make it tax-deductible? Why on Form 1040 must health care costs exceed 7.5% of adjusted gross income? Why not make long-term care insurance deductions 100% tax deductible, or better yet, why not make it affordable?
*Source: Stephen A. Moses, Cato Institute, Policy Analysis, No. 549, Aging America’s Achilles’ Heel Medicaid Long-Term Care.
**Transferring assets for less than their fair cash value, i.e. transferring your home to your child for $100.00 is considered a taxable gift in excess of the $12,000 allowable annual exclusion or is considered a “fraudulent transfer” . See the 709 tax form for gift tax consequences, consult your attorney to learn how to avoid a fraudulent transfer, or call Rocco Beatrice at 888-93ULTRA (888-938-5872) for a free consultation.