The Bill introduced by Representative Jan Shakowski, would repeal Medicaid Estate Recovery (MER). This is the part of the law that says the government must take – collect against – any property a Medicaid recipient of long term care services (e.g. nursing home) has at death. This means the family home and all possessions. MER conflicts with our need to be competitive in the global economy.
This is the digital age, and we are not the leaders. Remember the chip shortage of 2021-2022? Car companies could not make new cars because they could not get computer chips from Taiwan. Those are Not made here. We don’t have the factories or the workforce to make them. Everyday we hear that the American workforce must learn to be adaptable and learn new skills for the 21st Century Global economy. We must recognize the Existential Threat to the American economy that global economic competition presents. Our workforce must adapt to the realities of the 21st Century or we face becoming one of the “also-rans” to the new leaders of the global economy.
Medicaid Estate Recovery (MER) is antithetical to our need. MER is an outdated concept based on a 20th Century economy. Medicaid began in 1965 when America was the world’s pre-eminent economy. Innovations happened here. Everything was made here. Now a half century later America finds itself in a global economy competing with super power economic centers as China, Southeast Asia and India. Competition is fierce. Each country is calling on their best and brightest to achieve supremacy. But we are not.
Good and Buford, members of the Better Employment and Training Strategies (BETS) task force wrote, wrote in The Hill 9/29/21. “As the futurist Alvin Toffler rightly predicted, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” In other words employees must learn to seek off the job education to learn new skills to remain competitive in the new economy.
The 21st Century has brought enormous changes and challenges to our economy. In 1965 we were the global leader in innovation and production. Now we are in a global economy. We went from king of the industrial revolution to a contender in the digital revolution. Digital has digital has remade production replacing labor with robots. Digital has remade communication. An old telephone and a cellphone have very little in common, even voice is a secondary form of communication. Even money is becoming digital crypto currency. We are phasing out of the 20th century energy production by fossil fuels to “clean” solar, wind and other technologies. We need to rebuild our entire energy generation, distribution and use sectors. We must rebuild our economy and country to stay competitive in the 21st Century. Who will do this work? Workers today must gain new knowledge and skills to keep up with rapidly changing technologies, industries, and careers.
In a 2011 report the US Chamber of Commerce found “The results of a series of recent surveys indicate that education is clearly an important aspect of life in the 21st century workforce.” Life in the 21st Century Workforce: A National Perspective 2011. The report concluded Education is critical to ensuring workers have the skills necessary to advance. How can the employees gain this education? Employees in the Chamber of Commerce paper reported that time to attend and money to afford the tuition were their first needs. Education and training supports were part of President Biden’s Build Back Better agenda. But since that program has to date failed, how may employees gain the skills? Through individual effort.
It takes time and money for an employee to get education. Time and money are an employee’s “capital.” MER denies low income and middle class families the capital to gain education.
The arguments made to increase the federal estate tax deduction apply more forcefully to Elimination of MRE
The arguments against the federal estate tax concluded that the estate tax generates costs to taxpayers, the economy that far exceeded any potential benefits that it might arguably produced. The same is true of MER.
In 2003 Congress was reviewing the federal estate tax and as a result “repealed” it for many people. In 2003 the federal estate tax was $1,000,000 per person. Instead of repealing it entirely Congress raised the exemption and by 2010 it was $5 million per person. It now stands at $12.06 million per person or $24.12 million per married couple before they will pay any estate tax.
The rationale of Congress is expressed in a paper published by the Joint Economic Committee, “The Economics of the Estate Tax: An Update.” The paper made the following points: the tax discouraged savings and investment; the tax penalized work, savings and thrift. In addition to the aggregate effect on capital accumulation and economic efficiency, the estate tax was a negative influence on entrepreneurial activity. The paper concluded that entrepreneurship infuses the economy with risk-takers willing to exploit new technologies and enables families to achieve upward income mobility. By hindering entry into self-employment and by breaking up family-run businesses, the estate tax inhibited economic efficiency and stifled innovation. It also observed that the tax created obstacles to passing on family capital to the next generation is “especially significant for minority groups.” (Pages 7-8).
In a point directly comparable to MER The paper concluded that as much as the estate taxes reduce or limit intergenerational transfers, they also reduce the amount of financing available for investment in small or family-run enterprises. Inheritances play an important role in alleviating the liquidity constraints that impede the formation and success of small businesses.” (Pages 8- 9)
These findings apply with equal force in the case middle class employees who are “job entrepreneurs,” the self-starters who seek to improve their performance. They need time and money (capital) to pursue the education of the 21st Century workforce. The passing on of intergenerational wealth is just such a vehicle to provide these families with the “capital.”
If responding to the 21st Century Global economy is an “all hands on deck” urgency, we need ALL of our best and brightest to be fully enabled. We need to bend every effort so that all working families have the chance to do their best to help us compete. MER stands in the way. We need to unshackle our working families so our best and brightest can afford the education to learn, unlearn and relearn. They must have the capital that MER steals from them.
This post is the second in a series on Medicaid estate recovery, or “the government gets your house law.” Here we question why Medicaid has estate recovery but Medicare does not. Both are “medical insurance” for sick elders and both spend large sums of money for sick elders.
The Medicaid program we are considering is not a “poverty” program. It is one for the “medically needy” aged 65 and over. These folk can have a home worth $636,000. The figure does not include the value of contents. They can have a new or used vehicle of any type. The applicant may have only $2,000. If there is a spouse he or she is allowed up to $137,400 in cash and the spouse may also have an investment annuity in payment status to the spouse. Note, very few Michigan recipients meet these maximums.
Medicaid does not pay for many, many years in a nursing home. The population is largely made up of women in their upper 80’s. They are in for “long term care” because of such conditions as Alzheimer’s, strokes or immobility after serious falls. They can no longer live independently in a home or apartment.
While receiving Medicaid assistance the recipient’s income goes to the nursing home – minus a $60 a month “personal needs allowance.” No money is allowed for maintenance or expenses of the home or car. No allowance is made for taxes on the home. As an aside, how can a recipient afford to keep a home?
So, let’s put some numbers together. Suppose a recipient is a widow and her total income per month is $2,060 per month. Her copay is $2,000 a month. In 2022 the average retail cost of a Michigan nursing home is $9,880 per month. But Medicaid pays “wholesale” which is significantly less than “retail.” Figures are not published but let’s assume that Medicaid’s rate is $7,500 a month. So the widow pays $2,000 and Medicaid pays $5,500. That comes out to $66,000 per year.
As we noted earlier Medicare does not demand payback, even of Medicaid recipients. So if our widow suffer a fall in the nursing home that results in a broken hip, Medicare will pay for it. How much? That is difficult to know. One estimate, from hospital cost care reports, the national average cost of $52,000. (See https://www.hospitalcostcompare.com/hospitals/100007/inpatient )
But it can be more. In Florida where hospitals are required to make average procedure costs available to the public, Lee Health published $107,122 for hip replacement surgery. (See https://www.hospitalcostcompare.com/hospitals/100007/inpatient )
So there it is. Medicare would pay $52,000 to $107,000 for one hip surgery but Medicaid can’t afford $66,000 for a Year of care?
Yes we pay for Medicare out of taxes and we pay for Medicaid out of taxes. But some may say “Isn’t there a Medicare payroll tax?” Yes there is, but one can buy Medicare without ever paying a penny in payroll tax. For a senior with no work history the Part A premium (hospital care) for 2022 will be $499 per month. There will be no demand for payback.
There is disease discrimination built into the Medicare/Medicaid regime. For example, Medicare will pay for all medical treatment for cardiac or cancer conditions. But it will not pay for all medical treatment for Alzheimer’s or Parkinson’s disease. It takes Medicaid to pay for care in a fully licensed medical facility i.e. a nursing home. Why the difference? All are debilitating medical conditions. Is the distinction rooted in the difference between “hospital” — typically a male territory of doctors — and “nursing home” — typically female territory of nurses? The answer is unknown being rooted in distant history. Whatever the reason for the disease discrimination Medically needy seniors with long term care conditions need medical care. Why is it not covered by Medicare?
In this post we have compared Medicaid to Medicare and found no good reason to treat medically needy seniors differently just because of the disease. But, there is another question. Why will Medicaid only pay for care in a expensive, licensed and regulated medical facility? Nursing homes are expensive because they are fully licensed and regulated as a medical facility. However many long term care disease do not require 24 hour medical care but rather the patients need safe custodial care as a result of their disease. That can be provided in much lower cost senior care/assisted living facilities.
Medicaid could save millions or billions of dollars by paying for long term care in much less expensive facilities.
The differences between Medicare and Medicaid don’t make any sense today. I think the best answer is that the programs were established in the 1960’s and reflect that time. For example many families had husband wage earners and wives stayed at home and took care of grandparents if needed. Things changed long since then. The middle class requires a two income household and there is no time to take care of parents or grandparents.
Whatever may be the reason(s) we need change now. Our economic success depends on it. Middle class families need all the capital they can muster for us as a nation to to successfully compete in the “Global Economy.” That is the subject of post three, next.
If you enter the nursing home for long term care, you will likely need Medicaid to pay the bill. After you die Medicaid will want every dollar, dime, nickel and penny paid back. Blame Medicaid Estate Recovery. It doesn’t matter if you served our country, paid all your taxes and committed no crime – unless getting old is a crime – you will lose your home and everything you own. It’s the law and it’s called Medicaid estate recovery, but you can do something to change it. There is a bill in Congress to repeal the government grab. It’s called “Stop Unfair Medicaid Recoveries Act of 2022″ enrolled as H.R.6698.
Let’s first understand that Medicaid is a medical insurance program. It does not put any money into a recipient’s pocket. Secondly, Medicaid estate recovery only refers to benefits received by those aged 55 and up. Third, Medicaid estate recovery is not needed for the program to function. On the average states collect, after administrative expenses, only .55% of their budget. (See https://www.macpac.gov/publication/march-2021-report-to-congress-on-medicaid-and-chip/ )
How could you lose your home, and everything you own, to the government? For the sake of privacy let’s use a story that is typical of so many working families. No confidential personal details are revealed. Jack Stone died this year, he was 82 years old. Jack was a hard-working average guy. He served his country in Vietnam. He married his high school sweetheart Jane and they raised three children in their comfortable suburban home in Redford, Michigan. He began working at age 17 and except for his service in Vietnam, he worked and paid taxes until he retired at age 65. Seven years ago he was diagnosed with Alzheimer’s Disease. After taking care of Jack at home Jane, of frail health herself, could no longer handle him and had to place Jack in a nursing home, where three years later he died. Just weeks after his funeral Jane was shocked to learn that the state of Michigan wanted pay back in the amount of $244,000 in “Medicaid estate recovery.” They would allow her to live in their home until she died. If she tried to sell it they would collect out of the proceeds.
Why? Do you know of any other government program that wants money back? You don’t pay back for schools, roads, police or fire protection. You don’t have to pay back Medicare either. What’s going on?
Medicaid recovery has been part of the program since its inception in 1965. It was optional for the states. Most did not want it. The basic political idea was that people should not live off welfare and buy things like houses, or maybe “Cadillacs.” But things changed. As time went on families could no longer care for grandparents in their home. A two income household became a necessity. And in 1988 Congress changed the law to allow an at home spouse to retain a home and some savings for her/his needs.
Then the law changed again. In 1993 Congress then required all states to have Medicaid payback. The reason? The insurance industry wanted people to live “responsibly” and buy long term care insurance. ( See the US News article referenced below.) Have you seen the Ads by lawyers who have to fight the insurance industry for their injured clients?
There is a cruel irony in the “live responsibly” admonition. If people drink alcohol to excess and ruin their liver, Medicare will pay for treatment. If a person ignores diabetes and ultimately has to have amputations, Medicare will pay. No payback required by Medicare. But seniors who develop Alzheimer’s through no lifestyle fault, may lose everything they own because they did not “live responsibly.”
Aside from being fundamentally wrong, there is another reason why the law needs to change again. This time it is the world that changed. We will cover later the reasons why the estate tax on the rich was repealed. But in short, supporters argued that if the estates of millionaire business owners had to pay the inheritance tax, competition would be hurt since the family would have to sell or mortgage the business. Now America finds it must compete with China, India and southeast Asian countries for jobs and business. We are in a boat as was England 100 years ago when it was declining in world power. We need a 21st Century workforce that is highly trained, educated and skilled. Our best asset is our people who do the work. Just as millionaire businesses need money, families need money to get the education to be competitive. They need the equity of their homes to be able to take time to get that education.
You can help stop this unjust and wrong law. Call your Congressional Representatives and ask them to support H.R.6698 – Stop Unfair Medicaid Recoveries Act of 2022
If you want to read more about the effect of this unfair and simply wrong law read this article from the US News and World report.
Debt After Death: The Painful Blow of Medicaid Estate Recovery