Do The Wealthy Use Medicaid?

A common estate planning strategy often discussed is the “Medicaid spend down.” This occurs when a person reduces his or her assets so that he or she can qualify to receive Medicaid benefits. Medicaid, of course, is an entitlement program. Individuals rely on Medicaid as a last resort to cover the astronomical costs of long-term care at the end of their lives. A recent article discusses whether the wealthy can really benefit from Medicaid.

One way wealthy people may take advantage of Medicaid is by transferring or sheltering their assets so the assets are not counted when their Medicaid eligibility is determined. Recent studies reveal, however, that there is little basis to believe that this is occurring. According to a study conducted by the Kaiser Family Foundation, if the government recovered Medicaid costs from those who transferred assets in order to qualify for coverage, the government would only regain only 1 percent of Medicaid spending.

Another way that wealthy people are believed to take advantage of Medicaid is to spend large amounts of their money. This is also not a widespread phenomenon. According to a study conducted by the Urban Institute, half of the individuals who received Medicaid coverage for nursing home costs had less than $10,000 in assets besides their home in the 10 years before they entered the nursing home.