Is Medicaid Planning Ethical?

July 20, 2015 | by the NCPC

As in any area of consumer spending, knowing what to look for and what strategies to use in arranging for paid care services can often result in saving money. Some strategies such as Medicaid planning allow for preserving the home or relieving the pressure of spending retirement savings. Oftentimes a strategy will provide tax advantages as well.

A person facing the prospect of long-term care with moderate income and moderate savings may eventually have to rely on Medicaid to pay part or all of the cost of care. For instance someone making $2,000 a month would not be able to afford a nursing home at $4,000 a month. Savings would be depleted quickly and the income from a spouse may be needed as well. Medicaid may become the only option.

Medicaid has provisions to protect a healthy spouse at home financially. But many states rob a healthy spouse of a previously adequate income by allowing too little in protected resources and income. Likewise, children, relatives and friends are not recognized for the financial sacrifices they make in providing the early care before a recipient becomes bad enough to need Medicaid funded professional help.

Medicaid planning, using a professional Medicaid planning advisor or qualified elder law attorney, allows families to correct inequities in the system. Medicaid planning has gotten a bad name because some individuals, who would normally have too many assets to ever qualify for Medicaid, deliberately use it, many years in advance, to give away everything to their family so as to qualify for Medicaid. It is wrong to abuse the system in this way and to use taxpayer dollars to insure an inheritance for the family. And if the person giving away assets is not anticipating immediate care, this strategy is just plain dumb. There are much better ways to plan for long term care in advance.

Some Medicaid planners will attempt to discredit other forms of funding long term care such as using insurance or a reverse mortgage. They do this in order to discourage the public from using these other strategies. The intent is to limit competition ensuring that paying clients will rely entirely on Medicaid planning as a solution.

On the other hand, many long term care funding specialists will use the same strategy against Medicaid planners to eliminate competition from their services. These people make Medicaid planners appear as evil or dishonest.

Medicaid planning is no different from tax planning. In fact a Supreme Court decision condones honest methods of eliminating income taxes or estate taxes. Tax planning and Medicaid planning both put an additional burden on taxpayers, but one is considered ethical and the other is often frowned upon.

All strategies have their place in the scheme of things. Medicaid planning fits certain circumstances usually where families are in a crisis mode trying to preserve a few assets such as a house or a savings plan. There is no attempt to take advantage of the taxpayers.

Using other strategies for paying the cost of care is a much better approach than Medicaid planning for a younger generation. Not relying on Medicaid will allow greater choice in care settings and care services provided.