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Most Senior Citizens Lack Assets to Pay for Even a
Year in Nursing Home
June 29, 2005 - A new issue paper by the Kaiser
Family Foundation finds that the majority of elderly people (65+) not
already in a care facility do not have assets, excluding their homes,
sufficient to finance a nursing home stay of even one year - a cost now
estimated at $70,000 per year.
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Two-thirds of elderly people living in the
community have resources equal to less than one year of the cost
of nursing home care ($70,000). The majority of elderly people
in this range have very low asset levels; 57% have assets below
$5,000, less than the cost of one month of nursing home care. A
considerably smaller share (19%) of elderly people living in the
community have assets equal to three or more years of the
average cost of nursing home care. |
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Relatively few of the 6.6 million elderly people
who do have assets equal to or greater than three years of nursing home
care are at high risk for using nursing homes. Rather, the one million
elderly at high risk-- because they have no spouse, are age 85 and
older, and have functional or cognitive limitations--tend to have few
assets, and 84% have asset levels that would be exhausted within one
year of nursing home care. These high-risk elderly are of the World War
II generation, most of whom have not accumulated substantial liquid
assets.
Among the few elderly who could cover three or more
years of nursing home care and so presumably could take full advantage
of Medicaid's asset transfer rules -- only 1 percent are at high risk of
needing nursing home care.
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These findings, the authors conclude, suggest that proposals that assume
significant reductions in Medicaid spending in the short-term by
lengthening the look-back period beyond three years or tightening asset
transfer rules may fall short of expectations.
The paper is noteworthy because it calls into
question the assertion that Medicaid spending will be significantly
reduced by lengthening Medicaid's look-back period for transfers beyond
three years or otherwise tightening transfer rules, according to
ElderLawAnswers.com. The Bush administration and many governors and
state legislators are calling for such restrictions on rules that permit
asset transfers by the elderly in order to qualify for Medicaid,
claiming that large savings would result.
Medicaid pays for nursing home care for eligible
elderly or disabled individuals. In many states, Medicaid also covers
home and community-based services for eligible individuals who are
determined to be at risk of nursing home care. In both cases,
individuals cannot qualify for Medicaid unless, among other things, they
meet the asset eligibility standards that apply in their state.
Generally these standards allow an individual no more than $2,000 in
countable assets (in the case of a couple, the standard is generally
$3,000.) Countable assets include savings accounts and investments but
do not include the home (of any value), one car if used for necessary
transportation, life insurance with a face value of less than $1,500,
and certain other items.
Under current federal Medicaid law, individuals who
transfer assets for less than fair market value prior to applying for
Medicaid are penalized by the denial of nursing home coverage for a
specified period of time. State and federal policymakers seeking to
reduce Medicaid spending have put forward proposals to increase the
penalties for transfers of assets in order to qualify for nursing home
care.
Several states have requested waivers that would
enable them to increase the number of transfers subject to penalties,
and the Bush Administration has proposed to effectively lengthen the
period during which nursing home coverage is denied. The Congressional
Budget Office estimates that the Administration proposal will reduce
federal Medicaid spending by $1.4 billion over the next five years
The degree to which Medicaid spending could be
reduced by delaying or eliminating Medicaid nursing home payments for
elderly people who have transferred assets hinges on the level of assets
held by elderly people who are likely to use nursing homes (OBrien,
2005). The risk of using a nursing home is not spread evenly among the
elderly; rather it is concentrated among those with certain
characteristics, most notably older age, no spouse, and increasing
levels of functional limitations and cognitive impairments (Miller and
Weissert, 2000). The profile of elderly nursing home residents
demonstrates this--the majority are age 85 and older, 75% are female,
83% are without a spouse, 96% receive help with ADLs, and nearly half
have cognitive impairments or other mental disorders
The analysis is based on interviews conducted
between October 2002 and January 2003 with respondents to the 2001
Survey of Income and Program Participation, a nationally representative
survey. Asset levels were determined for people age 65 and older and
inflated to 2005. In counting assets, the authors followed the Medicaid
rules.
To read or download the Kaiser issue paper, "The
Distribution of Assets in the Elderly Population Living in the
Community" by Barbara Lyons, Kaiser Commission on Medicaid and the
Uninsured, Andy Schneider, Medicaid Policy, LLC, and Katherine A.
Desmond, Consultant (June 2005),
Click Here.
An earlier report reached a similar conclusion
about the savings to be gained from further restrictions on asset
transfers. See
"Report Explodes Myth That Medicaid Transfers Are a Problem,"
ElderLawAnswers News, May 13, 2005).
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