As I start to see more and more clients who are trying to qualify for Medicaid or help their loved ones do so, I start to hear comments from people (who, incidentally, are not clients) about the reorganizing of assets being “cheating the system.” Somehow or another they think they are defrauding the government by working within the rules to preserve as much of their life savings as possible. That’s when I encourage them to think about Medicaid differently.
First, Medicaid is not welfare. Medicaid is an insurance program that you have been paying into for your whole life through deductions in payroll taxes or, for business owners, paying self-employment taxes. The only difference between this healthcare program and other health insurance is that you can only have certain kinds of assets and the rest must be used as a kind of “variable deductible” before Medicaid starts paying for the care.
Second, this insurance is not the primary payer for the nursing home services. All of the patient’s income and social security (with some spousal exemptions) goes towards the bill first. Next, Medicaid pays first for any health insurance premiums so that private companies pay the next chunk of the bill. And finally, after all of that, Medicaid pays for the balance.
The real tragedy of Medicaid is not that some people who do understand the rules, or are smart enough to work with professionals who do, are not going broke to get Medicaid. The real tragedy is that more people aren’t working within the rules the government made in order to make a proper claim on the Medicaid insurance they have been paying for their whole lives. And in making my point to these same people, I have asked the following questions:
- If you and a co-worker made exactly the same amount of money but they did their own taxes and you hired an accountant for $1,000 to do your taxes and you ended up paying $5,000 less in income taxes than your co-worker because your accountant found more deductions, is that fair?
- If you and your neighbor had identical houses on the same amount of land and the county tax office appraised both of your properties at the same value but you appealed the tax office’s findings by hiring an appraiser for $1,000 and ended up paying $2,000 a year less in property taxes than your neighbor, is that fair?
- If you and a friend both worked 40 hours a week, 50 weeks a year for 30 years but you earned a lot more at your job than your friend did. Now that both you and your friend are retiring you start to take a look at your finances. Between your pension and retirement accounts, you have more than enough money to live on, but you still receive a social security check. On the other hand, your friend does not have anywhere near the same pension and retirement fund you have and your friend needs social security just to get by. Shouldn’t you refuse to take your social security check?
In all of these cases, the same people who thought reorganizing assets to qualify for Medicaid was somehow unethical had no problem paying less in income taxes or property taxes by working within the rules, and they had no problem taking social security money even though they didn’t need it. Medicaid is no different, and as long as people want to work within the rules, we will help them.