Middle-Class Transfers a Myth
"Under current policy, neither public nor private insurance protects people against the risk of long-term care," veteran health policy analyst Judith Feder told the U.S. Senate Finance Committee on June 29. Feder, dean of Georgetown University's Public Policy Institute in Washington, D.C., continued, "Despite Medicaid's important role as a safety net, the overall result for people who need care is catastrophic expenses, limited access to service and care needs going unmet."
In her testimony, Feder, who served as principal deputy assistant secretary for the Department of Health and Human Services in the Clinton administration, dispelled key myths about Medicaid. She noted that at present, 10 million people of all ages are estimated to need longterm care-almost 40% them under age 65. "Among the roughly 8 million at home or in the community, one in five report getting insufficient care, frequently resulting in significant consequences-falling, soiling oneself, or inability to bathe or eat," she said.
Only about 1.6 million elders are in nursing homes, about a million of whom are on Medicaid. "Over a lifetime, projections of people currently retiring indicate that about 30% are likely to die without ever needing long-term care, fewer than 17% are likely to need one year of care or less, and about 20% are likely to need care for more than five years," Feder said. Even though the need for longterm care is unpredictable and the consequences can be financially catastrophic, she added, "the nation lacks a policy that assures people of all ages access to quality long-term care when they need it, without risk of impoverishment."
Furthermore, Feder said, although private insurance "is expanding and will play a growing role in long-term care financing . . . , it does nothing for those currently in need, is not promoted as a means to serve the under-65 population, and in the future will be affordable and valuable for only a portion of the older population-most likely, the better off." Currently, about 6 million Americans hold long-term care policies, which are often inadequate to meet their needs.
Feder noted that the growing population of older adults in the United States will place increasing demand on the already stressed Medicaid program. She emphasized, though, that policy solutions focusing only on making Medicaid meaner-or limiting state or federal obligations for long-term care financing"do our nation a disservice." Calling for a "new federal policy and a significant investment of federal funds," she challenged some of the myths about Medicaid's role in serving middle-class elders. "Some have labeled impoverishment a fallacy, arguing that the bulk of Medicaid resources go to finance nursing home care for people who could afford to pay for it themselves, but who transfer their resources in order to qualify for Medicaid benefits. Such exaggeration relies on anecdote, not evidence."
Research at Georgetown and elsewhere has revealed that most older people lack the financial resources to pay for extended nursing home stays. For example, Feder said, "Among elderly women living alone (those who are most likely to become nursing home residents), median household income is less than $12,000. In 2000, the median net worth-excluding houses-of elderly households was $23,885." The average annual cost of a nursing home in 2005 is about $50,000.
ONLY 16% EXHAUST FUNDS
"The majority of nursing home residents pay in full or in part for their nursing home care," Feder stressed. In fact, 44% of elders who use a nursing home pay for their care using only private funds. Only 16% begin as private payers, exhaust their resources, then convert to Medicaid. "That 27% of elderly nursing home users qualify for Medicaid at admission reflects the limited resources of elderly in the community, not the transfer of assets," she explained.
Moreover, Feder said, disabled elders "have too little wealth to warrant hiring an attorney to arrange asset transfers" to their children or others as a way of spending down their wealth so they can qualify for Medicaid coverage. …