by Locker Room contributor
Our own Joe Coletti will make his debut today (Wednesday) at noon on ?The State of Things,? the public-affairs program produced by WUNC-FM in Chapel Hill (91.5 FM in the Triangle area, 90.9 in Rocky Mount and Eastern NC, and 88.9 towards the Outer Banks). He?ll be on a panel of analysts discussing proposed Medicaid reforms in North Carolina.
As Joe and I were talking about potential issues and questions, I brought up an e-letter I received this morning from one of my favorite sources on Medicaid, the Center for Long-Term Care Financing. Reacting to a new report on the use of reverse mortgages for long-term care, the center criticized only the report?s conclusion that policymakers should encourage seniors needing nursing-home care voluntarily to use reverse mortgages ? which allow homeowners to tap their equity to pay for things such as nursing home, with the remaining equity transferring ownership to the lender upon death. The center, and I, believe it should be mandatory that anyone applying for Medicaid who owns a home must take out a reverse mortgage, with only the gap between what the mortgage pays and their costs to be funded by Medicaid.
Here’s a quote:
Because Medicaid exempts the home and all contiguous property regardless of value, and estate recovery is easy to evade, merely jawboning people to use their home equity before applying for Medicaid won’t work. Why encumber your home equity if Medicaid will let you keep it, pass its value to your heirs, and still pay for your long-term care?
Besides, the report’s argument against making spend-down of illiquid home equity mandatory is specious: “If reverse mortgages became mandatory to qualify for Medicaid, the healthy spouse who is still living at home could be left without any assets. Many could become trapped in an inappropriate living situation because they no longer have the financial resources to move out of a house that has become unsafe or too much to handle.” In truth, ever since the Medicare Catastrophic Coverage Act of 1988, community spouses have been assured an income and asset floor that has increased with inflation up to as much as $2,377.50 per month of income and half the joint assets not to exceed $95,100 as of 2005. If that isn’t enough, or if the community spouse would have nothing left after spending down home equity, then special hardship waivers could and should apply as they do for other areas of Medicaid eligibility.
The primary point to remember is that as long as home equity remains exempt and reverse mortgages are voluntary, Medicaid will remain “inheritance insurance” for the baby-boom generation. Until that fundamental fact changes, few seniors will use their home equity to fund long-term care; most will end up in nursing homes on Medicaid; and Medicaid will continue to spiral down toward total fiscal collapse.
That is a great line: Medicaid is inheritance insurance for the baby-boom generation.