The Ethics of Medicaid Planning

Though it originated as a program to help America’s poor, Medicaid has since become one of the main long-term care providers for millions in the middle class. Generally, as most people reach the age of retirement, they realize one of two things: they’re in dire need of immediate medical coverage for which they may qualify, or their estate is too large to qualify for affordable coverage through Medicaid. While the first is common among a majority of Medicaid recipients, the latter brings up an issue long debated by public officials regarding the ethics of Medicaid planning, a legal practice used to prepare individuals for qualification for Medicaid.

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The Criticism of Medicaid Planning

Although the argument stems from several related ideas, one of the main points of Medicaid planning critics is that using legal services to artificially meet the criteria of Medicaid eligibility is in essence “gaming the system,” and that a program created for the sole purpose of helping the “poor”, or, since 2014, anyone making below 138% of the federal poverty level, should not be made accessible for individuals whose incomes exceed this income ceiling, especially those who can afford to use an experienced elder law attorney. This argument is rooted in the idea that since most people who engage in Medicaid planning hire an attorney to minimize their assets as to become eligible for Medicaid coverage, the practice will result in bankruptcy for Medicaid, and worse yet, substandard care for the elders who need it most.

One of the more radical arguments proposed by detractors of Medicaid planning asserts that the practice itself comprises an “abuse” toward elders. Proponents of this point of view claim that because elders living in nursing homes often lack the mental capacity to engage in Medicaid planning, their children, who have the most to gain from the saved costs of living in a nursing home, make the decision for them. As a result, instead of the elder’s assets being used to fund good, long-term care, their assets end up in their children’s possession, and the elder, counterproductively, ends up with substandard medical coverage.

Some also argue that Medicaid planning is unfair because Medicaid is a “zero-sum” game. With more elders from the middle class adding to the pool of Medicaid recipients, less money and resources are left available for children and elders in poverty, who arguably are the people for whom the program was originally created. Though this notion is false at the federal level, since any citizen who qualifies is entitled to Medicaid coverage and the program budget expands to accommodate them, there is some truth to it at the state level since states decide, individually and absent of the federal government, the extent to which they expand the public service. However, since the passage of the Affordable Care Act (ACA), the federal government has paid 100 percent of the cost of new Medicaid enrollees, indicating that states that have expanded Medicaid are able to cover all eligible individuals. Although 10 percent of the cost is now gradually shifting to the states, the fact remains that all enrollees in states that have expanded the program will receive quality coverage. In addition, while it is true that Medicaid funding is directly limited by state law, health care law has expanded funding toward Community Health Centers. These health institutions have historically provided many of the same services offered by private physicians to millions of low-income individuals who lack quality insurance, especially in the thirty-three states in which the budget for Medicaid has remained stagnant.

High Living Costs Leave Elders With Few Options

As Medicaid has largely become recognized as the health care provider for millions of elders in the middle class, the argument in favor of Medicaid planning has become increasingly focused on personal finance and affordability. Since regulations bar individuals with monthly incomes over $2,000 from being qualified for Medicaid, many people find themselves scrambling to artificially decrease their net worth so that they both qualify for the program, and avoid spending the majority of their life savings on expensive nursing home fees, which often exceed several thousands of dollars a month. At the end of the day, people would rather pass on their estate to their children than spend the bulk of it on long-term care, making the case for Medicaid planning. This especially goes for individuals with dire health needs who would have to minimize their assets to qualify for Medicaid; the alternative is paying thousands for private healthcare and leaving very little (to nothing) for other basic necessities such as food and affordable housing.

Another argument in favor of Medicaid planning takes an approach from a purely economic perspective. Some proponents liken the practice to tax planning, claiming that in a market where health care is treated as a commodity that is bought and sold, buyers (in this case, most individuals) cannot be at fault for acquiring care at a lower price, even if he or she could afford to pay more. In a sense, this perspective directly relates to the former since the high costs of long-term care pressure many people to engage in Medicaid planning to attain lower costs of living in their later years.

While the ethical nature of Medicaid planning remains a highly debated issue, one aspect remains constant: Medicaid planning allows individuals to retire in a financially stable condition. As mentioned, the main premise of the debate emphasizes the fact that high nursing home costs, as well as expensive private insurance not only incentivize people to engage in Medicaid planning but significantly limit their financial options if they go without it. For many people, the only way they can enjoy an adequate standard of living post-retirement is to decrease the size of their estate to qualify for Medicaid and spend the remainder of their assets on other necessities. If you have concerns regarding your eligibility for Medicaid, consulting with a professional Medicaid planning attorney will not only save you plenty of headache but will help ensure that you can retire in a financially stable situation.