With all of the talk about health-care reform, not much attention has been focused on the escalating costs of Medicaid. But Medicaid will certainly require some examination soon because it is the largest payor of long-term care in the US at this point.

Since there will soon be a substantial increase in long-term care patients due to the aging baby boomer population, this means that Medicaid, as stretched thin as it is, will be unable to keep up with the financial demand in just a few years.

I have often written about this issue myself, but here is an excellent article that suggests some possible changes that could be made to Medicaid to keep it solvent:

“Although Medicaid is a means-tested program that was established to provide health care for the poor, it has become the program upon which middleclass and even wealthy people rely to pay for their long-term care.
People think, “When I retire, Medicare pays my medical bills; Social Security provides a monthly check; and, if
I need to go to a nursing home, that’s what Medicaid is for.”

There’s only one big problem with this from a reality-check point-of-view: Taxpayers pre-paid their Medicare and Social Security benefits for years through payroll taxes, but did not pre-pay for Medicaid. It’d supported by the general revenues of the federal government and each state (approximately 50/50).

That’s why we’re going to see reform. With tax revenues down, and a growing elderly population, states can’t afford to cover their share of the Medicaid bill.

But you asked whether the Medicaid benefits for LTC will change. I believe the benefits will probably stay about the same, but what will change are the qualifications and what are called the recovery provisions. In other words, some of the generous loopholes that allowed people who held certain types of assets to qualify for Medicaid will be closed, and states will look to recoup benefits they paid from the estate once the person dies.
What kind of loopholes exist? And what kind of assets will be sought out to repay the government?

Right now, if someone transfers assets of any amount and waits a little more than five years to apply for Medicaid, they can be eligible. It wasn’t too long ago that the government only looked back three years instead of five. If you agree that people shouldn’t be able to transfer money, then qualify for a government program, perhaps the better number is 10, or even 20 years.

Right now, if someone’s home equity is less than $500,000 ($750,000 in Massachusetts and some other states), he or she can qualify for Medicaid without having to sell the home or otherwise tap into their equity. Perhaps that number should be less than $100,000, as it is in other countries. “