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.