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Savings From the Medicaid Transfer Changes Will Be Minuscule, Report Predicts

  • April 25th, 2006

Due to concern that wealthy elderly Americans were transferring assets to gain Medicaid coverage for nursing home care, the Deficit Reduction Act of 2005 (DRA) drastically tightened Medicaid eligibility rules related to asset transfers.

But according to a new study by the Kaiser Commission on Medicaid and the Uninsured, if the federal government were able to recover all assets transferred by Medicaid nursing home residents for whatever purposes, the dollar amount recovered would total about 1 percent of total federal Medicaid spending for long-term care.

"It seems safe to infer that eliminating asset transfers for Medicaid nursing home coverage will not substantially alter the private market for long-term care and is not the panacea for controlling growth in Medicaid spending," the report concludes.

Using six years of data from a national study on health and retirement, Kaiser researchers examined asset transfers to determine the likelihood that they might have been utilized for the purpose of gaining Medicaid-covered nursing home care.

They found that for people becoming Medicaid eligible at the time of nursing home admission, 50 percent had made asset (cash and deed) transfers of less than $5,000. Among those qualifying for Medicaid following admission, the median transfer amount was $7,500. Asset transfers were most common among nursing home residents who did not receive Medicaid assistance, with more than 50 percent of this group making a transfer.

After reviewing more than 2.5 million nursing home admissions, investigators found that only 4 percent qualified for Medicaid after admission, the most likely Medicaid planning scenario. At the same time, 58 percent of admissions were still private pay residents after four years.

The authors estimate that, when applying the DRA asset transfer rules, federal savings to Medicaid could amount to $1.87 billion over six years. These potential savings do not include administrative costs of recovering transferred assets, which are "not likely to be trivial."

"Our findings indicate that few Medicaid nursing home residents become eligible after a long period of asset spend down," the report concludes.

The report, "Asset Transfer and Nursing Home Use: Empirical Evidence and Policy Significance," is one of five new Kaiser reports on long-term care issues addressed in the DRA. The other reports examine Medicaid long-term services reforms in the DRA, "cash and counseling" programs, and nursing home and home transition programs. For more on all five reports, go to: http://www.kff.org/medicaid/kcmu041706pkg.cfm

Local Elder Law Attorneys in Ashburn, VA

Evan Farr

The Law Firm of Evan H. Farr, P.C.
Fairfax, VA

Mindy Felinton

Felinton Elder Law & Estate Planning Centers
Rockville, MD

John Laster

Law Offices of John L. Laster
Falls Church, VA


Last Modified: 04/25/2006

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