Iowa and the Medicaid Trap

Washington and Oregon have noted the "Medicaid Trap," which threatens sole proprietorships and family farms in states which have expanded Medicaid. I had hoped that Iowa, Arkansas, and Utah might dodge this bullet because those three states are trying to provide actual insurance for low income citizens rather than enroll them in Medicaid as such. I contacted the Iowa Department of Human Services to find out more.

Unfortunately, the news goes from bad to worse. First, Iowa's low-income citizen remain subject to Medicaid's estate recovery rule. Congress required every state to recover the costs of "long-term care and related Medicaid expenses" from the estates of Medicaid recipients who died after the age of 55, and Iowa's novel approach to providing coverage to low-income citizens does not get around that.

Unfortunately, Iowa recovers all medical expenses, not just "long term care" and expenses directly attributed to such care. According to a personal email I just received from DHS,

Estate recovery applies to those persons who receive assistance funded by Medicaid who are 55 years of age or older. Iowa law does not limit the recovery of Medicaid expenditures to long-term care and related Medicaid expenses, as Iowa applies this program equitably to all Medicaid members who meet the requirements of federal law.

What this means is that many family farms across Iowa are now threatened by any medical event. If Iowans had been given more time get ready, the new law might not affect them much, but federal law imposes a five-year "look back" rule to keep Medicaid recipients from hiding their assets. That means Grampa and Nana can't just deed the farm over to the next generation--they have to stay out of the hospital for five years if they want to keep the farm in the family.

Here's one silver lining for Iowa farmers. Iowa Senator Charles Grassley asked Senator Max Baucus to make sure that several well-established Christian healthcare sharing ministries could continue to operate, and 26 USC 5000A(d)(2)(b) expressly recognizes their right to exist. Samaritan Ministries, Christian Healthcare Ministries, and Medi-Share all help non-smoking, church-going Christians pay their bills by sharing medical costs among their members--and the cost of a monthly "share" is surprisingly low.

The next generation of Iowa farmers may choose to help Mom and Dad sign up for healthshare for the next five years. That way they may be able to pay their medical bills and keep the family farm!

If You Like Your House, You Can Keep Your House

President Obama recently help up a sign that said, "Get Covered: Because Nobody Should Go Broke Just Because They Get Sick." He wouldn't be smiling if he read DailyKos.

On October 17, Beverly Woods asked a disturbing question on the DailyKos.com website. What happens to the assets of people who now meet the expanded criteria for Medicaid?  Medicaid was designed to ensure healthcare for the truly destitute, and existing state and federal laws, regulations, policies, and procedures are based on the assumption that people on Medicaid have essentially no disposable assets. The Act Formerly Known as Obamacare changes that.

In "Medicaid Estate Recovery+ACA: Unintended Consequences," Ms. Woods explains the problem:

We haven't had lots of people younger than 65 on Medicaid, because in most states simply earning less than the Federal Poverty Level did not qualify one for Medicaid.

And we haven't had many people with lots of assets on Medicaid, because in most places you have to have less than around $2400 to your name before Medicaid will cover you. You can keep your house and your car, but Medicaid reserves the right to put liens on them and take them when you die.

But now we have the Affordable Care Act, and its expectation that everyone in the lower tier of income will end up in the Medicaid system. To accomplish this, they have dropped  the asset test. So now we will have lots of people ages 55-64, who have assets but not a lot of income right now, for whatever reason, on Medicaid.

The kicker of it is, if you make the right amount to qualify for a subsidized health insurance plan, your costs are going to be shared and subsidized by the government. But if you go on Medicaid, you owe the entire amount that Medicaid spends on you from the day you turn 55.

As she ended her October 17 entry, Ms. Woods noted, "The fact that practically no one is talking about this makes me uneasy." Four days later, she was back, with "Estate Recovery: It's Worse Than You Thought." The bottom line: Medicaid is not insurance, it's a loan.

If you buy insurance, you pay a certain amount each month to protect yourself from bills too big to pay. If you don't have insurance but wind up in the hospital, you are stuck with the bills. If you can't pay them off before you die, your heirs are stuck. The executor of your will (if you have one) must sell off your assets (if you have any) to pay off your bills before anybody gets anything from your estate. Medicaid does not insure Americans against medical expenses--it loans them the money to pay expenses, and takes it all back when they die.

You could call it a "death tax," if that term hadn't been taken. Next year, Americans who die with more than five million dollars in assets will pay 40% in taxes. Americans who die on Medicaid will pay 100% of their Medicaid expenses before their heirs get one penny.

Family farm? Gone. Mom and Pop shop? Gone. Nana's house, with her snow-white picket fence around her prize-winning garden? Gone, gone, gone.

Is there a way around this problem? There is not supposed to be, for long-term care expenses. The system is designed to loan money to people who have no assets, and to recover as much government money as possible from people who do have assets. Lots of people have tried to hide their assets from the government, with limited success. In particular, parents may not deed their houses over to their children to evade their debts--if they do, and incur medical expenses any time during the next 60 months, the children will be required to pay Medicaid back.

Federal law requires states to recover the costs of long-term care and related Medicaid expenses, but left it up the states to implement that recovery. No state legislation was written with today's situation in mind, and every state that has expanded Medicaid must now review its laws and policies to protect seniors from unintended consequences. Oregon has taken the first step to assure its citizens that it only intends to collect money for "long-term care" and not for ordinary medical expenses.

The problem with Oregon's response to date is that "long-term care" does not just mean "putting granny in the nursing home." Any Medicaid patient who is in a hospital for three days becomes eligible for "long term care" in a "skilled nursing facility," and "long term care" is any stay over 30 days. Thus, a bad case of pneumonia could send a 60-year-old into the hospital, on to "skilled nursing," and into "long-term care."

The Act Formerly Known as Obamacare has just turned into a full-employment act for attorneys who specialize in "elder law" in the states that have expanded Medicaid. Citizens of limited means who are over 49 should run, not walk, to an expert who can help them shield their homes from the unintended consequences of this law.