Older and younger man in nursing home

For many older Americans, it’s widely accepted that your later years may include a search for nursing home care.

That nursing home care can be expensive. Many people pay for a nursing home with personal assets like savings, investments and retirement funds. But nursing home care can be covered by Medicaid, the joint state-federal program to aid low-income and disabled people and people with catastrophic medical expenses, if your income and assets are low.

“The majority of nursing home residents in the U.S. – more than 60% – depend on Medicaid to pay for their long-term care, according to the American Health Care Association,” U.S. News and World Report wrote recently. “Sound-alike Medicare does not cover long-term nursing home care.”

To qualify for Medicaid or Medicaid long-term care, people must meet several eligibility requirements, including having a need for care and having limited income and assets. The limits vary by state, by marital status (single or married) and, in many states, by program. In addition to loss of income, increased health costs related to age, and other factors, older Americans tend to fall easily into poverty, and thus seek to qualify for Medicaid. This often translates to “spending down” income and assets for eligibility.

Income and asset limits might be different for the “regular state Medicaid” compared to a Home and Community Based Services (HCBS) Medicaid waiver or “nursing home Medicaid.”

Eligibility requirements

But it can be a complicated series of transactions, and it is something that is poorly understood and documented. It can include asset spend-down and income spend-down, and involves questions about the size of your mortgage and the value of any second vehicles or motor homes, if applicable.

While this practice is not uncommon, not everyone thinks Medicaid dollars should be spent this way, or that the idea of spending down is fully in the public interest — considering that Medicaid’s overall goal is to take care of the poor and disadvantaged, not necessarily to encourage people to make themselves poor so they qualify for nursing-home residency.

There is a lot of enthusiasm for “aging in place” by staying in your own home as long as possible, though hiring people to make that easier is becoming harder and harder in with a national caregiver shortage that is bad and getting worse. And sometimes a nursing home is inevitable.

Long-term care insurance was once a popular option for covering nursing-home needs, but it has become increasingly expensive and difficult to obtain as Americans are living longer and requiring more care toward the end of life. Fewer and fewer insurers offer such policies, and often the cost is prohibitive.

“Over 30 per cent of the 70‐year‐old singles in the bottom third of the permanent income distribution are covered by Medicaid,” according to a 2018 study from the National Bureau of Economic Research. “Over 10 per cent of singles in the top third of the income distribution end up being covered by Medicaid if they survive into their 90s. … Single women with low income have a higher probability of receiving Medicaid than other people with low income.”

Criticism of spending down

Critics point to fraud in spending down to pay for nursing-home stays.

“Unfortunately, several studies show that many older people with significant real estate and financial asset holdings get long-term care from Medicaid for free or at subsidized rates,” Mark Warshawsky, an American Enterprise Institute fellow, wrote over at The Hill. “These” findings should not be surprising because, in many states, the rules and administration of the program are loose and porous, and little effort is made to recover assets from the estates of deceased Medicaid users, despite this being required by federal law. By my estimate every year almost $6 billion of Medicaid funds are inappropriately used for the long-term care of individuals with significant asset holdings. Breaking this amount down, almost $3 billion could be recuperated from enhanced estate recoveries and more than $3 billion from retirement assets.

“Why is that? Because many states do not count retirement assets in assessing whether the individual is impoverished and eligible for Medicaid. By my estimate, this exemption alone amounts to a more than $3 billion loss to the government annually. … Despite federal law requirements, most states make little or no effort to recover assets from the estates of deceased Medicaid beneficiaries, whether real and financial.”

But “despite concern that some older adults game the system by transferring wealth to their children to qualify for Medicaid, there is little evidence that this practice is widespread,
especially after the 2005 Deficit Reduction Act tightened Medicaid eligibility rules,” a Department of Health and Human Services report in 2021 found.

Also, as Medicaid’s automatic “continuous enrollment” ends with the Covid federal public health emergency, it is quite possible that people who are currently in Medicaid-paid nursing homes will suddenly be taken off of Medicaid.

‘Estate recovery programs’

These programs can be complicated. And in some cases, families will keep an older person at home to avoid the nursing home. But even that is not without its financial challenges. “Estate recovery programs” are allowed in some states to attempt to recover money from a dead former Medicaid person’s estate. This Iowa family could lose its home to Medicaid, as NPR writes, though they thought they had followed all the rules for Medicaid assistance.

“It seemed bogus, but it was real. Federal law requires all states to have ‘estate recovery programs,’ which seek reimbursements for spending under Medicaid, the joint federal and state health insurance program mainly for people with low incomes or disabilities,” NPR writes. “The recovery efforts collect more than $700 million a year, according to a 2021 report from the Medicaid and CHIP Payment and Access Commission, or MACPAC, an agency that advises Congress. …

“Iowa uses a private contractor to recoup money spent on Medicaid coverage for any participant who was 55 or older or was a resident of a long-term care facility when they died. Even if an Iowan used few health services, the government can bill their estate for what Medicaid spent on premiums for coverage from private insurers known as managed-care organizations.” The program is an attempt to keep people with significant assets from taking advantage of Medicaid.

Doug Aldeen, a Texas lawyer with deep health-care system knowledge, wrote on LinkedIn:

“1. Place wife of 60 plus years in a long term care facility in the state of Iowa;
“2. Fail to shield assets ( or even be cognizant that this is an option) and transfer title to home to children;
“3. Incur $226,000 in services before her passing;
“4. Have full authority from the state of Iowa to foreclose Medicaid liens on resident’s homes;
“5. Hire private company with the only contract on behalf of the state of Iowa to recoup funds spent on residents … and have a complete monopoly on this market;
“6. Generate spectacular returns that dwarf any other state’s efforts by recovering $26mm in the prior fiscal year. Hawaii, which is half the population of Iowa, recovered $19,000… .”

Texas also has a Medicare Estate Recovery Program.

What you can do

For a person who is facing this, there are a lot of questions. Here are some resources:

The American Council on Aging has a detailed page, with a spend-down calculator. It includes relevant questions like home ownership, marital status, the size of a mortgage, any IRA or similar assets, second homes, second vehicles and so on.

You may find information by contacting legal aid in the person’s state of residence. Here’s a Legal Aid finder from usa.gov.

Local care management organizations and some Area Agencies on Aging have referral lists for such providers, elder law, probate and estate planning attorneys — including those who do pro-bono work. Some nursing homes can initiate the ULTC 100.2 (that’s what it’s called in Colorado) and their billing offices can explain the process.

The National Academy of Elder Law Attorneys has a “find a lawyer” function.

Howard Gleckman, a fellow at the Urban Institute, writes about these topics on his blog. He has also written a book, “Caring for Our Parents.”

Dr. Leslie Kernisan, a geriatrician who writes over at Better Health While Aging, has a podcast about this topic. There are other resources on her site too.

Many law firms have explanations on their web sites, like this one, ElderLawFirm.com, and this one, PayingForSeniorCare.com. Check credentials carefully to make sure they are qualified to give you advice.

For more information, call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048.

Call your State Medical Assistance (Medicaid) office. Visit Medicare.gov/talk-to-someone for the phone number.

Call your State Health Insurance Assistance Program (SHIP). Visit shiphelp.org or call 1-800-MEDICARE for the phone number.

Jeanne Pinder

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...