WASHINGTON -- When it became painfully evident that my mother would soon be unable to manage her own home, her three surviving children discussed where she would spend her remaining years when the time came. Someone suggested that time already had arrived for her to divest herself of her estate so that her long-term care would be paid by the government under Medicaid.
The person remarked that he already had taken such steps in his own mother's case, making certain that the divestiture took place three years in advance of her moving to a nursing home. That's the required look-back time to be eligible for the program. Applicants can have only $2,000 in cash to qualify.
We thanked him for his advice, but explained that our mother, while not wealthy, certainly had enough money to last her and would regard such a devious idea for putting the load on her fellow taxpayers as not only deplorable but dishonest. We, as her sole heirs, were in complete agreement, and barely three years later, with her mind beginning to fail, we followed her wishes when we moved her to the nursing home. By the time she passed away, she pretty much had made her life and her money come out even, leaving us very little.
Boomers are next
At the risk of sounding sanctimonious, it is a position that more Americans should be taking as the Medicaid program faces the looming eventuality of 78 million baby boomers, many of whom will end up their lives in a long-term-care facility at government expense. In fact, the number of nursing-home residents will triple in the next 40 years or so, it is estimated. The costs of keeping those currently living in these facilities was $111 billion in 2003, with half of it being paid by Medicaid and the rest by private means and insurance. In the Washington area, nursing-home charges are often well over $60,000 annually and in New York they are above $100,000.
Understandably, efforts are and should be under way to curtail cheating the system. States, which pay nearly half of Medicaid costs, are closing loopholes that permit survivors to preserve the estates of parents through trusts and other means. Lawmakers are looking at extending the look-back period to five years and tapping the more than nearly $2 trillion in real estate equity owned by older Americans, three-fourths of whom actually own homes whose mortgages have been paid.
One of the advantages of the aging process is that, with any luck, one has the ability to put things into perspective, to measure the current against the past. When Medicare and Medicaid came into being in 1965, the estimates for the latter were about $10 billion annually at its zenith. Medicaid actually was an afterthought, devised as a political means to win over the powerful medical lobby that had successfully blocked Medicare for years by promising to take charity off the backs of doctors and hospitals and nursing homes. From now on, the government would pay the freight for the nation's indigent. It would not cost much, right?
Wrong. It took only a very few years to realize that Medicaid would soon match Medicare in its costs and that both programs would go to heights never imagined. One of the clues was just how wealthy doctors were suddenly becoming from Medicaid premiums. Reports showed that some physicians who had been earning less than $17,000 annually had incomes in excess of $250,000 on Medicaid billings alone within two years of its passage.
Now with Medicaid costs well over $328 billion a year and Medicare's annual bills even higher, the need for relief is becoming more urgent. In fact, the need for reform far exceeds that for Social Security, President Bush's key domestic initiative. If he doesn't focus on some way to stem the tsunami of medical costs, the flood of government red ink is going to be completely unmanageable.
Increasing the number of years one must divest of an estate before becoming eligible for Medicaid-paid nursing-home care probably is more symbolic than effective, but it is a badly needed symbol. Reverse mortgages and other devices for tapping into the real estate equity are probably even more important. It is a fine mess we have gotten ourselves into.
X Dan K. Thomasson is former editor of the Scripps Howard News Service.