Last August, my 91-year-old mother took a bad spill in her apartment and broke her ankle. That touched off a six month chain reaction of frequent hospitalizations, declining health, a temporary move to assisted living and finally placement in a long-term nursing facility in suburban Detroit.
While Medicare and supplemental health insurance covered much of the cost of her hospitalization and rehab, my mother is now facing staggering monthly costs of $10,000 or more to live in a very fine but very expensive skilled nursing home.
My mother is more fortunate than a lot of other elderly Americans in similar straits. She and my late-father wisely socked away enough in savings, investments and equity in their home to get Mom through the twilight of her life in reasonable comfort – or so we all thought.
But simple math reveals that even with her modest monthly Social Security and annuity benefits, my mother is on track to exhaust her savings and assets in little more than three years from now -- essentially spending her way into poverty. That’s the only way she will be eligible for Medicaid coverage of her long-term nursing care.
This concept of forcing seniors over the age of 65 and the disabled to “spend down” their life savings to the last $2,000 for individuals and $4,000 for couples to qualify for Medicaid – or having to resort to devious methods of hiding or sheltering some of those savings from the government’s eye -- always seemed a bit harsh and degrading to me. And for many, including myself, there was a stigma attached to having one of my parents turn to a federal program originally created in 1965 to assist the poor.
Still, the dreaded “spend down” rule seemed essentially fair to me. After all, why should middle-income or even wealthy seniors sitting on piles of savings and investments but receiving little in outside income be allowed to tap into a social safety net designed to assist poor children, pregnant women, disabled adults, and low-income seniors?
But that was until last week, when the Obama administration launched a nationwide Medicaid expansion under the Affordable Care Act. Now the logic and fairness of the spend-down provision for the elderly eludes me. As the Washington Post reported on New Year’s Day, Medicaid has embarked on a massive transformation from a safety-net program for the most vulnerable in society to a broad based one that will now reach out to the middle-class and beyond.
About 3.9 million Americans have signed up for the expanded Medicaid program during the past three months in 25 states and the District of Columbia which have opted to take part in the program. In many of those states, coverage will be available for the first time to anyone whose income is below 138 percent of the poverty level – meaning individuals making less than $15,856 a year and families of four earning under $32,499 in 2013 dollars.
Those newly eligible people include not only the homeless and retirees who have not yet qualified for Medicare -- the government health insurance program for the elderly --but also recent college graduates, former inmates and even people of ample means who recently lost good-paying jobs and health insurance.
Even in the other states that rejected the expansion, there are some significant changes in the Medicaid program, including new eligibility standards. For people who are not in long-term care or disabled, Medicaid will no longer take into consideration how much participants have in assets, such as savings or retirement benefits.
Instead, the newly revamped Medicaid will use an applicant’s so-called Modified Adjusted Gross Income (MAGI) – which closely mirrors the Adjusted Gross Income used by the IRS on income tax forms -- to determine eligibility.
In other words, even an upper income person who is temporarily between jobs but has hundreds of thousands of dollars in holdings or equity in his home may now qualify for Medicaid coverage without having to spend down those savings on health care costs – provided his or her MAGI meets the income requirement.
So why did Congress and the Obama administration decide that my mother and many of her contemporaries still must spend down before they can qualify for Medicaid while others benefitting from the expansion of the program will not?
The decision -- not surprisingly -- largely came down to cost, according to Judith Solomon, vice president for health policy at the Center for Budget and Policy Priorities. “States want to limit their exposure to seniors using Medicaid” for long term nursing care, she said.
Medicaid already covers about 16 percent of the U.S. population, which is more people than are covered by Medicare. And more than 60 percent of those living in nursing homes already are covered by Medicaid. Eliminating the asset test for seniors in nursing homes would blow a huge hole in the budget – especially with a big wave of Baby Boomers headed that way.
As it stands, federal Medicaid spending would increase by $952 billion and state spending would increase by $76 billion between 2013 and 2022 if all the states participated in the expansion, according to the Kaiser Family Foundation. Eliminating the spend-down requirement would surely invite countless more seniors into the program and send overall costs soaring.
Solomon doesn’t see any inequity in excusing the new, younger and more middle class Medicaid beneficiaries from the asset spend-down requirement while continuing it for the disabled and seniors over 65 years of age.
“They are really two different things,” she said. “What we’re talking about now is providing health insurance to a new group of people” to help them get on with their lives and accumulate enough savings and assets to care for themselves in their old age, contrasted with elderly people who already benefit from Medicare hospitalization coverage and should be willing to spend down their assets to qualify for Medicaid coverage for long-term care.
Besides, she said, many of the newly eligible Medicaid recipients don’t have a lot of money in the bank. It would hardly be worth the government’s effort to try to document their assets. There are gross inequities in the Medicaid program, she agreed, but the change in the spend-down rule is not one of them.
For example, the 2012 Supreme Court ruling upholding Obamacare but allowing the states to decide whether to participate in the Medicaid expansion undermined the administration’s goal of making health care coverage universal -- and in the process created winners and losers.
In the two dozen states that refused to expand the program, people living just above the federal poverty level are eligible for federal subsidies to buy private insurance on the government exchanges, while those below it are not and therefore get absolutely no benefit from the Affordable Care Act.
That means that tens of millions of poor or disabled people living on the Eastern Seaboard or in parts of the Midwest or along the Pacific Coast were able to obtain Medicaid health care coverage for the first time this year. Yet millions more – living primarily in the South and Southwest and portions of the Midwest – will be denied coverage because of political and budgetary calculations by their state political leaders and lawmakers.
“It’s ironic that the people who need health coverage the most and can least afford it are the ones who will be totally left out in the cold,” Ron Pollack, the executive director of Families USA, the national organization for health care consumers, told The Fiscal Times last fall.
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