There are two schools of thought in Medicaid planning. One holds that only the indigent or near indigent should be allowed to qualify for Medicaid assistance. Planners from this school teach that the client should plan for their old age medical needs by setting aside savings for that purpose, purchasing long term care insurance and if that is not financially possible, at least making sure than any asset transfers to children, etc. take place several years before the need for Medicaid arises.
The other school of thought holds that Medicaid should be available to anyone with the savvy to obtain it, even people with substantial assets that could afford to pay for part or all of their own care for a significant period of time. This is often called the “poor on paper” strategy. This school of thought is very attractive to people with considerable assets because it promises to allow them to retain or at least pass along much of their wealth while sticking the taxpayers with the bill for the considerable medical care expenses of their final years. In effect, it transmogrifies the needs based Medicaid program intended for the poor into a socialized medicine scheme for the middle class and wealthy.
Prof. Julia Belian of The University of Missouri Kansas City School of Law has published an article in the Creighton Law Review which asks some very probing questions about this second school of thought. It is her contention that the continued battle between congress and Medicaid planning attorneys over such Medicaid planning strategies is eroding the common law basis for basic property rights. Excerpts from Professor Belian’s article follow below:
MEDICAID, ELECTIVE SHARES, AND THE
GHOSTS OF TENURES PAST
38 Creighton L. Rev. 1111-1152 (2005)
JULIA BELIAN†
INTRODUCTION
…. Legislators and administrators have struggled for forty years to ensure that Medicaid benefits are paid only to those who meet the criteria for financial need. If an applicant is not already “financially needy” at the time of application—or financially needy enough—then Medicaid benefits will be denied until the applicant has spent down all “available resources.”3 The definition of “available resources” has expanded over the years as Medicaid administrators try to thwart applicants’ efforts to voluntarily impoverish themselves through gratuitous transfers.4 The primary method for doing so is the use of two major categories for classifying assets: those actually owned, and those not owned but subject to an enforceable claim.5 These categories then are coupled with an “applicable look-back period” to take account of assets (or claims) that the applicant transferred in the recent past.6 Disclaimer of inheritances, failure to enforce judgments, establishment of trusts by third parties, and refusal to elect the statutory spousal share all will result in the counting of assets never owned by the applicant.7 These rules were expanded several times, so much so that today, administrators may disregard certain traditional concepts of “property,” even when there is no evidence that the transfer of resources was done with the intent to qualify for Medicaid.8 ….
This assault upon our most fundamental common law ideas, even if required by contemporary circumstances, is disturbing and hard to understand, but there is more going on here than a bad job of legal analysis. Voluntary impoverishment to qualify for Medicaid benefits is a singular phenomenon in this country. The people who engage in the practice are not just the extremely wealthy, nor are they the villainous schemers that some would try to paint them to be.14 They are the exact same citizens who would never consider falsifying income tax filings, or hiding assets from their spouses, or lying in order to qualify for housing assistance, or even stealing office supplies.15 They are the exact same citizens who find such practices scandalous and immoral. And yet there seems to exist a widely accepted belief that if a person can qualify for Medicaid without first depleting everything he has saved through a lifetime of labor, then not only may he do so, he may even owe a duty to his heirs to do so.16 There seems no apparent explanation for this unusual willingness to defraud the government, especially among people who would never even consider such tactics in any other context.
This article will attempt to understand this phenomenon in light of the common law’s evolving conceptions of “property,” particularly as these are reflected in the history of the elective share and its ancestor, dower.17 The tensions between competing demands for resources that operated to flatten and then bury the feudal hierarchy of William the Conqueror seem to have resurfaced in the problem of “Medicaid planning.” Although strange to contemporary concepts of ownership and trade in a free market, these ancient ideas of “property” help us understand the current antagonism between legislative policy and popular resistance to that policy.18 Like the original image on a canvas that an artist decides to paint over, the passage of time and the pressures created by unimagined high costs of such care may have called forth something very ancient—the sense that “property” may not be a thing at all, and that “property rights” may not be natural rights that we possess as individuals in some pre-social context, but that both point instead to a complex system of mutual and reciprocal obligations that develops as the State and its citizens struggle to allocate scarce resources among them ….
The balance of the article is available for download at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=845810
