GAO Study Fails to Find Significant Medicaid Asset Transfer Problem

A new report by the Government Accountability Office (GAO) reinforces claims that the level of assets being transferred by the elderly are relatively insignificant and that changes to Medicaid's asset-transfer rules would have a trivial effect on the program's budget.

The Bush administration's fiscal year 2006 budget proposes to save $1.5 billion over 5 years by tightening existing rules related to asset transfers. To evaluate this claim, three Democratic members of Congress asked the GAO to provide data on transfers of assets by elderly individuals. The GAO relied on data from a 2002 survey that looked only at cash transfers, not transfers of property and or other non-cash assets. However, the cash transfers identified in the survey could have been for any purpose, not just qualifying for Medicaid long-term care services.

The GAO found that about 22 percent of eldery houseolds made transfers. The median amount transferred was $3,000 and the average was $8,800. In general the higher the households' income, the more likely it was to have transferred assets. However, even in households in the highest income and resource bracket -- incomes greater than $24,000 and resources greater than $51,500 -- the average amount transferred was $12,010 and the median amount was $4,000. More than 80 percent of elderly households had annual incomes of $50,000 or less, the study found.

According to the study, households with a disabled elderly individual were less likely to transfer cash than households without a disabled elderly member, even though the disabled are more likely to need long-term care. Among households with a household member who was limited in three or more activities of daily living (ADL), approximately 13 percent transferred assets; among non-disabled households, approximately 23 percent transferred assets.

The GAO study also suggests that no better data on the extent of asset transfers is likely to come from the states any time soon. GAO researchers looked at the information-gathering practices of nine states and found that none of the states track data on how frequently assets are transferred or the extent to which asset-transfer penalties are applied. The study found that the states generally relied on the information applicants supplied during the application process -- including the application, supporting documentation, and interviews -- to identify whether the applicant transferred assets.

To see the full study, "Transfers of Assets by Elderly Individuals to Obtain Long-Term Care Coverage," click here.
(The study is in PDF format. If you do not have the free PDF reader installed on your computer, download it here.)