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)
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On Medicaid, I think there should be a 3rd family listed. There's a girl that gets pregnant in high school. She has her kid, gets a job at the mall, or a fast food place, maybe if she's lucky in an office somewhere. She gets minimal if any help from the yutz that got her pregnant. She struggles to put food on the table and shelter over their heads. At some point, she ends up with another kid or 3. Maybe she even gets married and divorced a couple times and gets more than minimum wage. Maybe she gets up to $30K a year with 3 or 4 kids. I used to see it all the time. She can't put any money in savings. She can't go on any vacations at all. God forbid one of the kids gets sick because she can't afford health care. Retirement? She's just trying to survive. That is who Medicaid is for, really - the poor, struggling people.
When dad developed Alzheimer's Disease, mom found out about an Elder Law Attorney the Alzheimer's Aids Society recommended. She went to see him. He set up a living trust for the house, and when dad was diagnosed as mentally incapacitated, he and mom went to court. Everything was put in mom's name so that medicare could not come after her for repayment when dad passed away. So basically it was hidden. The reason the attorney did this was so mom had money to live on and still have a life even though dad was now in a nursing home that medicare was paying for.Dad passed in 2003, from 2003 to 2012, mom had only spent $50,000 of the hidden money for her needs and living expenses because she was budgeting on getting by on her SS which amounted to $1,300 a month!! In answer to your question, I see nothing wrong with this because it allowed my mom to live as she was accustomed to living frugally. Medicare did try to come after her for about 3 years after dad passed, but my daughter sent an email to our Congressman about the situation and he stopped Medicare from harassing my mom on a yearly basis for records regarding dads care,etc. Without my mom's attorney doing things this way, my mom would have lost everything, and she would have had to rely even more on social services ( the tax payers) for her livelihood. I believe it is right and just. My mom is now 84 years old, is mentally incapacitated due to Alzheimer's Disease.and is living in a memory care unit. Mom had the foresight to take out a Long Term Health Care Policy because 3 of her siblings developed Alzheimer's. This policy is currently paying for her care and will continue to pay for 4 years. Because of drugs like Namenda and Aricept used together, mom will most likely live longer than dad did once he was placed in a NH, when the LTC policy runs out, she will have the money from my dad's employer that was invested with Merrill Lynch to continue to pay for her care. Is it fair, YES...she is footing the majority of the costs not social services but if the money was not hidden, social services would be footing all of it. Not all will agree with me but really, family B got more services from social services than my mom did or will in the end.
... Dad B lives in a small apartment, and covers the rent with his small pension and Social Security income, but these are nowhere near sufficient to cover the monthly costs of the care he now needs, and may require for years. Since he and Mom B has never sacrificed to save anything, Dad B has very little to show in assets for his years of earning.
Family B applies for Medicaid and sets up a Miller Trust to satisfy Medicaid that whatever income Dad B DOES have will go to his care, and presto! The bulk of the cost of Dad B’s care is immediately and hereafter funded by taxpayers. Who do not, on the whole, call Family B “cheaters” for applying for public assistance to pay the outrageous cost of memory care, since, after all, Dad B is “needy,” and Family B didn’t try to “stick it to the taxpayers” by shielding any money that could have gone to Dad’s care (at least, not within the last 5 years ... and I guess we’ll all just agree to turn a blind eye to the previous 50).
In Family A, on the other hand, there ARE savings – not savings that have somehow magically rained down on the family as lottery winnings, or capital gains from a lucky investment, but that have been painfully built through literally DECADES of sweat, scrimping, self-denial, and significant sacrifice. To Family A -- which has postponed or entirely given up nearly every one of the everyday luxuries that Family B consumed with mindless joy for the past 50 YEARS – Medicaid now demands that the family spend every dime Mom and Dad ever saved before it will offer even the first penny in help.
What’s more, if anyone in Family A even dares to ask if there’s any way to hold onto a little of what Mom and Dad gave up so much to build, many people now say, “How dare you ask that! It is evil and immoral for you to try to ‘protect’ any of your parent’s nest egg before asking us for help! Our help is only for people who really need it! Like that nice man over there from Family B! Anything you try to do to shield even a tiny bit of what you’ve saved so that it goes to the family you saved it FOR is CHEATING, you evil, cheating CHEATER!”
This may sound like an exaggerated scenario, but I have seen it personally – and it is why I don’t find the question of whether shielding assets is “moral” or not to be as cut-and-dry as others seem to. I’ve painted an unpleasant picture of Family B here ... but did they really do anything wrong? Don’t we all have the right to spend and enjoy what we earn? But if so, given all that Family A gave up to hold onto that money, do we really have a moral right to demand that they sign over to a nursing home everything they sacrificed to save for their children before we will give them the same assistance we immediately give to Family B, which never sacrificed anything (and is not now being called upon to make up even a little of what they spent over the years before we agree to step in and carry the burden for them)?
Remember, both families are also taxpayers, and have poured an enormous amount of tax money into the system over their lives. Remember, too, that Medicaid does not provide for a particularly luxurious life style or high level of care or comfort ... if you can afford to pay for better care, it is nice to be able to do so.
Wonderful Aging.com poster JeanneGibbs (we miss you, Jeanne!) once posted on a similar thread that “fair” and “unfair” had little to do with health care issues. She was absolutely right. But I’m starting this thread because I’m curious to know how other people see this ... and if anyone else agrees that the question of whether it’s right or wrong for people to try to protect assets maybe isn’t as black and white as it might seem on first glance?
I think we have a tendency in this country to resent other people’s “wealth” (which I use here simply to mean whatever someone has that is more than we have). It’s human nature to tend to assume that someone who has more than we do must have just been luckier rather than to consider that they might have worked just as hard as we do, and then denied themselves in order to save the money for later ...
Anyway, thanks in advance for your responses. I'm interested to hear what other people think.