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by Your governors, through The National Association of Governors (www.nga.org), have taken a giant step to make sure that every middle class senior – and their spouses -- becomes destitute should one or both require long-term care. These recommendations will surely be followed by Congress and the current Administration which are looking to cut the Medicaid budget so they can help fund further deficits that will be caused by Congress repealing or substantially reducing the estate tax. Because less than one percent of those who died in 2004 paid any estate tax, repeal of the estate tax will benefit the heirs of only the wealthiest one percent of all Americans By these tactics, Congress will benefit the wealthy, deepen federal budget deficits, axe more from Medicaid, and cause greater financial problems for Medicare, Social Security, and Veteran’s benefits. (See Center on Budget Polity Priorities at www.cbpp.org). The National Association of Governors, in lock step with the current administration, not only plans to take all of a middle class senior’s assets -- including their homes -- but also suggests that adult children may be required to help pay for their parents’ long term care before Medicaid would be available. This is called “family responsibility” and means that if you have a chronically ill parent who has run out of money, you and your siblings would be required to fund their care to an extent determined by law before they could qualify for Medicaid benefits. Think about it: If you have children to educate and you’re your retirement plan in place, it would all be disrupted if one or both of your parents became ill and destitute. While continuing to provide planning opportunities to the wealthiest one percent to help them avoid estate tax, your governors and Congress plan to disallow transfers of assets by seniors to qualify for Medicaid. The governors suggest that 1) the look-back period be increased from 3 to 5 years; 2) penalty periods should begin at the time of application, not at the time of the transfer; and 3) the sheltering of excess resources in annuities, trusts or promissory notes must be prevented. This means that if, at any time during the five year look-back period, a Medicaid applicant, the applicant’s spouse, or a fiduciary acting for the applicant transfers resources or the right to receive resources, income, or both, from any source that diminishes funds available to pay for medical assistance, the applicant will be ineligible for Medicaid assistance. The disqualification period will begin on the date a new applicant seeks Medicaid for long term care services. Here is an example of how the proposed law would work: If a senior gives $10,000 to each of his five children on November 1, 2005 and applies for Medicaid within five years, he would be disqualified for a period of months equal to the $50,000 given away five years before divided by the average monthly nursing home private pay rate. At $5,000 per month, this would mean a ten month disqualification from the date of application. What’s even worse is that transfers between spouses, now exempt, could cause disqualification if the transfer results in a spouse receiving more income or assets than the maximum community spouse resource and income allowance, a devastating blow to healthy spouses in the community who will also find themselves destitute. What’s more, the home can be taken after the surviving spouse dies. And your governors are also picking on dependent disabled children who live in their parent’s home when the parent applies for Medicaid. Although the disabled child can stay in the home, at the child’s death, the state will have the right to take the house and sell it to recover its expenditures. Although current law does not allow the state to include the home as a “countable” resource, your governors want to make the equity in the home a countable asset so that seniors will be required to use their home equity to pay long-term and other medical expenses that would otherwise be paid by Medicaid. Your governors quote the U.S. Census Bureau in saying that “. . . 81 percent of seniors own their homes and 73 percent own them free and clear. This represents $1.9 trillion in untapped home equity that is currently exempted from Medicaid’s eligibility calculations. According to the National Council on Aging, 48 percent of America’s 13.2 million households age 62 and older could get $72,128 on average from reverse mortgages, and “in total, an estimated $953 billion could be available from reverse mortgages for immediate long term care needs and to promote aging in place.” Therefore, according to your governors, if you are over age 62, you should be required to use reverse mortgage loans to convert your home equity into cash and allow you, at the end, to retain the lesser of ten percent (10%) of the value or your home or $50,000. We believe you should ask your governors and your legislators in Washington why the hyperwealthy have the right to make an asset transfer to reduce a tax bite, but middle class Americans who worked hard to pay their bills and raise their children can not? It may be that your governors and legislators are too wealthy to understand. Or they may not have worked outside government and don't mind saddling the obligations of the nation on the backs of the middle class. If what you have read concerns you, we suggest you call your governor, United States Senator, and Member of Congress to express your concern. If what you have read does not concern you and this legislation passes, please bookmark this page and refer back to it when the reality of this crisis hits your family. To read the June 2005 National Governors Association paper that kicked off the assault on our working/middle class seniors and their families, click here Again note: this is a pdf file and will open in another window. To read the NGA August 2005 Addendum to the June 2005 white paper, click here. NOTE: this is a pdf file and will open in another window. Send your comments to readers@nextstepscomments.com or suggest a column on our homepage. << return home Email to a Friend
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