Arnold Kling  

Medicaid and Nursing Homes

Economics of Movies... Actuarial Scoring Errors...

The Wall Street Journal describes what people will do in order to have Medicaid pay for nursing home care.

Anyone can give away most of his assets and three years later become eligible for Medicaid with no questions asked. Or, since a home, business and car of unlimited value are excluded from the calculation of assets, someone who wishes to qualify for Medicaid may shield his money by remodeling his house, investing in the family business, or purchasing expensive cars that he then gives away to family members (the notorious "two Mercedes rule"). Term life insurance -- also of unlimited value -- is excluded as well.

The editorial includes an interesting chart, based on data from the Centers for Medicare and Medicaid Services. The chart shows that nursing home spending rose from $2.9 billion in 1968 to almost $100 billion in 2001. The share paid for by Medicaid rose from 23.7 percent to 47.5 percent of spending.

For Discussion. What would be the impact of using Medicaid to subsidize the purchase of long-term care insurance rather than nursing home care?

Comments and Sharing

COMMENTS (3 to date)
James writes:

Umm... subsidize... uh, you get more of it?

Seriously, if Medicaid subsidizes LTC, everybody will buy that instead, with the result being that LTC gets more expensive (supply and demand?) and we wind up paying the same amount of Medicaid. No?

al writes:

Government Share of Health Bill to Rise
The government will be paying nearly half of all U.S. health-care costs by 2014, up from 46% now, largely reflecting Medicare drug benefits.

Creative Accounting for Medicaid
U.S. governors plan to press Bush in a meeting Monday to drop plans to close loopholes many states rely upon to shore up Medicaid.

Lawrance George Lux writes:

Longterm Care insurance premiums would escalate while nursing care would decline in quality. lgl

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