Medicaid in the spotlight

Stories are mounting about people who are unhappy to learn that they're required to buy expensive insurance that they may not be able to afford without subsidies, and that at a low enough income they can't even ask for subsidies:  they're relegated to Medicaid whether they like it or not.  It's an uncomfortable position for people who've never intended to take a government handout.  It's especially jarring for someone with considerable life savings who simply doesn't have a great deal of current income.  As best I can understand, the recent Medicaid expansion doesn't require the new recipients to spend down their savings before qualifying.

Most of us probably are unaware that there is a complicated system, varying from state to state, for recovering some of the expenses of the Medicaid program from the estate of someone who received benefits after the age of 55.  I suspect this program is going to get more attention now that millions of people with savings but low income may be more or less forced into Medicaid.


Grim said...

Wow. Mandate that the poor go on a program that will seize their estate when they die! Talk about a great way to ensure generational dependency on government.

raven said...

Is there some type of trust that can be set up to isolate assets from creditors?

Texan99 said...

Funny you should mention that, because it's on my list of things to investigate. I've always heard of such things but never tried to set one up. When I've run across something similar professionally, it usually was a trust used to transfer family wealth before death, perhaps in the form of a "spendthrift trust." But my vague recollection is that the idea was to protect one's assets from business losses and gambling/heroin sprees, by giving a trustee sole discretion to dispense money to pay personal expenses such as housing and medical bills. Maybe it's possible to set up a self-funded spendthrift trust that ensures you'll always have money for basic non-medical living expenses.

It's certainly possible to transfer one's assets as gifts before death (via a trust or an outright gift, to heirs or anyone else), though there is a unified gift and estate tax that treats the whole mass of assets as one taxable entity and causes the testator to use up his estate tax exemption whenever he makes pre-death gifts. A certain amount of gifts can be made each year under an exemption; those won't count against the lifetime gift/estate tax exemption. (I forget the amount, but it's quite a lot.) As long as the donor is solvent when he makes the gifts and not engaged in a fraud, the property transfers to the recipient free and clear of all of his future creditors' claims. I guess that would include future claims of the Medicaid administration.