A new issue paper by the Kaiser Family Foundation finds that most elderly people do not have assets sufficient to finance a nursing home stay of one year or more. Furthermore, the paper reports that 84 percent of the elderly most likely to need nursing home care would exhaust their assets within one year in a nursing home.
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. 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.
Under current Medicaid law, state Medicaid agencies may look only at transfers made during the three years preceding an application for Medicaid (or five years if the transfer was made to certain trusts). The Kaiser study finds that two-thirds of elderly people living in the community lack assets '“ excluding the equity in their homes -- that would cover even the cost of one year of nursing home care (currently $70,000). Moreover, elderly individuals most at risk of entering a nursing home '“ those who have no spouse and are older and have functional or cognitive limitations '“ are even less likely to be able to afford a year of nursing home care. 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.
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.
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).
To download the Kaiser issue paper, "The Distribution of Assets in the Elderly Population Living in the Community" by Barbara Lyons (June 2005), go to http://www.kff.org/medicaid/7335.cfm.