News Release

September 1, 2005

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Medicaid Long-Term Care Abuse Is Rampant
Study urges Congress to eliminate loopholes for long-term care recipients

WASHINGTON -- Medicaid is a fiscal crisis waiting to happen, warns a study released today by the Cato Institute. In "Aging America's Achilles' Heel: Medicaid Long-Term Care," Stephen Moses, president of the Center for Long-Term-Care Reform, exposes how Medicaid is exploited to finance nursing home care for many seniors who could have financed such care themselves.

Moses explains that while Medicaid's financial eligibility rules are relatively tight for poor women and children, "for people over the age of 65 who have medical need for nursing-home-level care, Medicaid's eligibility rules -- contrary to conventional wisdom -- are very loose."

Long-term care (LTC) accounts for one-third to one-half of total Medicaid expenditures in most states. A relatively small number of Medicaid LTC recipients -- including middle and upper class seniors -- consume a disproportionate share of total program expenditures.

Moses argues that the highly technical and varied strategies for Medicaid planning enable and encourage LTC abuse. They allow seniors to shield unlimited resources in their home or business when applying for long-term care benefits and include divorce as a means to hide assets from eligibility screeners. Writes Moses, "There is no limit to how much wealth people can stash in exempt assets or jettison by means of a calculated divorce settlement to become eligible for Medicaid LTC subsidies."

The author calls on Congress to eliminate loopholes that force taxpayers to finance LTC for seniors who could finance their own care. This entails reducing Medicaid's open-ended home exemption for LTC recipients and placing reasonable limits on the amounts of other assets people can shelter while applying for Medicaid LTC benefits as well as curtailing Medicaid estate planning abuses.

Policy Analysis no. 549

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