Medicaid as a Tax on the "Estates" of the Poor


#1

Link to WT article

From the article: Most people think they’re exempt from the estate tax (often called the “death tax”) because they don’t have $2 million. A lot of people with low incomes do have some assets, however, and if they have used any Medicaid benefits, their heirs may be in for a shock.

...“Estate recovery tends to reach individuals of very modest means and has a chilling effect on low-income people seeking benefits to which they are entitled,” he notes. To enroll in Medicaid, people have had to sign a disclosure form explaining this requirement, and some decide to forgo the benefit.

A potential for greatly expanded use of estate recovery was created in Obamacare, as pointed out in an anonymously authored, well-documented article distributed by economist Paul Craig Roberts. Obamacare increases the number of people eligible for Medicaid by dropping the asset test for enrollment (Page 162 of Obamacare).

Sheesh.

PS This happens to people who are on or use Medicaid age 55 and up. They can always avoid getting put on Medicaid by simply paying a -]fine/-] tax


#2

[quote="St_Francis, post:1, topic:345609"]
Link to WT article

From the article: Most people think they’re exempt from the estate tax (often called the “death tax”) because they don’t have $2 million. A lot of people with low incomes do have some assets, however, and if they have used any Medicaid benefits, their heirs may be in for a shock.

...“Estate recovery tends to reach individuals of very modest means and has a chilling effect on low-income people seeking benefits to which they are entitled,” he notes. To enroll in Medicaid, people have had to sign a disclosure form explaining this requirement, and some decide to forgo the benefit.

A potential for greatly expanded use of estate recovery was created in Obamacare, as pointed out in an anonymously authored, well-documented article distributed by economist Paul Craig Roberts. Obamacare increases the number of people eligible for Medicaid by dropping the asset test for enrollment (Page 162 of Obamacare).

Sheesh.

PS This happens to people who are on or use Medicaid age 55 and up. They can always avoid getting put on Medicaid by simply paying a -]fine/-] tax

[/quote]

I wondered about this. Thanks for the post.


#3

[quote="St_Francis, post:1, topic:345609"]
Link to WT article

From the article: Most people think they’re exempt from the estate tax (often called the “death tax”) because they don’t have $2 million. A lot of people with low incomes do have some assets, however, and if they have used any Medicaid benefits, their heirs may be in for a shock.

...“Estate recovery tends to reach individuals of very modest means and has a chilling effect on low-income people seeking benefits to which they are entitled,” he notes. To enroll in Medicaid, people have had to sign a disclosure form explaining this requirement, and some decide to forgo the benefit.

A potential for greatly expanded use of estate recovery was created in Obamacare, as pointed out in an anonymously authored, well-documented article distributed by economist Paul Craig Roberts. Obamacare increases the number of people eligible for Medicaid by dropping the asset test for enrollment (Page 162 of Obamacare).

Sheesh.

PS This happens to people who are on or use Medicaid age 55 and up. They can always avoid getting put on Medicaid by simply paying a -]fine/-] tax

[/quote]

I don't see what the problem is, you use government money for health care and then when you die, if you have assets you pay back the welfare benefits you received. Who else should be paying for your benefits?


#4

[quote="St_Francis, post:1, topic:345609"]
Link to WT article

From the article: Most people think they’re exempt from the estate tax (often called the “death tax”) because they don’t have $2 million. A lot of people with low incomes do have some assets, however, and if they have used any Medicaid benefits, their heirs may be in for a shock.

...“Estate recovery tends to reach individuals of very modest means and has a chilling effect on low-income people seeking benefits to which they are entitled,” he notes. To enroll in Medicaid, people have had to sign a disclosure form explaining this requirement, and some decide to forgo the benefit.

A potential for greatly expanded use of estate recovery was created in Obamacare, as pointed out in an anonymously authored, well-documented article distributed by economist Paul Craig Roberts. Obamacare increases the number of people eligible for Medicaid by dropping the asset test for enrollment (Page 162 of Obamacare).

Sheesh.

PS This happens to people who are on or use Medicaid age 55 and up. They can always avoid getting put on Medicaid by simply paying a -]fine/-] tax

[/quote]

Estate recovery has been around since 1949. It is nothing new. And it only applies to long term (aka nursing home) care in most states. Generally, the program recovers about 1% of the money that they pay out. Iowa has one of the highest recovery rates. The laws are also much broader than the federal laws.

I see nothing wrong with refunding the government for care provided. The person receiving the care isn't out anything while they are alive. The losers are those who would normally inherit.


#5

[quote="St_Francis, post:1, topic:345609"]
Link to WT article

From the article: Most people think they’re exempt from the estate tax (often called the “death tax”) because they don’t have $2 million. A lot of people with low incomes do have some assets, however, and if they have used any Medicaid benefits, their heirs may be in for a shock.

...“Estate recovery tends to reach individuals of very modest means and has a chilling effect on low-income people seeking benefits to which they are entitled,” he notes. To enroll in Medicaid, people have had to sign a disclosure form explaining this requirement, and some decide to forgo the benefit.

A potential for greatly expanded use of estate recovery was created in Obamacare, as pointed out in an anonymously authored, well-documented article distributed by economist Paul Craig Roberts. Obamacare increases the number of people eligible for Medicaid by dropping the asset test for enrollment (Page 162 of Obamacare).

Sheesh.

PS This happens to people who are on or use Medicaid age 55 and up. They can always avoid getting put on Medicaid by simply paying a -]fine/-] tax

[/quote]

There should be NO estate tax for anyone! :banghead:

Bloated government needs to be size down! :thumbsup:


#6

[quote="SuperLuigi, post:5, topic:345609"]
There should be NO estate tax for anyone! :banghead:

[/quote]

Tax, heck. I was happy my parents didn't leave us with any debt. :)


#7

[quote="SuperLuigi, post:5, topic:345609"]
There should be NO estate tax for anyone! :banghead:

Bloated government needs to be size down! :thumbsup:

[/quote]

I have no problem with medicaid and medicare recipients paying estate tax to cover what the government spends on their health care. I mean if you rack up 50k in medical bills before you die, why shouldn't your estate pay?

Of course, imho, I think the best taxes are the ones I pay after I am dead. They are less painful than taxes I pay while I am alive.


#8

I do agree that some sort of arrangement to reimburse the government is fair; however, these are the problems I have with what was described in the article:

  1. It seems that this is not always clear to the recipient. I imagine this is less clear when the recipient goes on Medicaid before the age of 55 and continues til after that age.

  2. It seems that this is not always regulated in a way which protects surviving residents such as a spouse.

  3. Those who are poor either have to go on Medicaid or pay a fine.

  4. Even if the person doesn't use the Medicaid, or even if the person uses less, the entirety of the asset is taken, as described in the article.

  5. Those with more money are able to set up their assets to avoid these problems.

  6. This is applied only to those who go on Medicaid of a certain age--it is not applied fairly.


#9

[quote="Dawnia, post:4, topic:345609"]
Estate recovery has been around since 1949. It is nothing new. And it only applies to long term (aka nursing home) care in most states. Generally, the program recovers about 1% of the money that they pay out. Iowa has one of the highest recovery rates. The laws are also much broader than the federal laws.

I see nothing wrong with refunding the government for care provided. The person receiving the care isn't out anything while they are alive. The losers are those who would normally inherit.

[/quote]

Undoubtedly, some who had employer-paid insurance will now be under the expanded Medicaid. Recovery would be a new thing for them, however many there are.

Most people who would be required to go under the expanded Medicaid would not have much in the way of assets other than their home. I have seen instances in which the home was the only chance an adult child had to own a home at all.

Recovery isn't too easy, though. Usually when adult children realize the state is going after the parent's home, they abandon it to the elements and the vandals, don't insure it, don't winterize, don't pay taxes, etc. If there is a mortgage, however small, they let it go into foreclosure. In my state, at least, the state is poorly equipped to collect on real estate. They file a lien, which prevents anyone from selling it except in cooperation with the state. Nobody bothers, and the property just sits. Sometimes the property ends up being sold for county real estate taxes.


#10

[quote="SuperLuigi, post:5, topic:345609"]
There should be NO estate tax for anyone! :banghead:

Bloated government needs to be size down! :thumbsup:

[/quote]

It's a state issue too, is it not?

The immediate tax on one's IRA is also a concern for the beneficiary, btw.


#11

[quote="Ridgerunner, post:9, topic:345609"]
Undoubtedly, some who had employer-paid insurance will now be under the expanded Medicaid. Recovery would be a new thing for them, however many there are.

Most people who would be required to go under the expanded Medicaid would not have much in the way of assets other than their home. I have seen instances in which the home was the only chance an adult child had to own a home at all.

Recovery isn't too easy, though. Usually when adult children realize the state is going after the parent's home, they abandon it to the elements and the vandals, don't insure it, don't winterize, don't pay taxes, etc. If there is a mortgage, however small, they let it go into foreclosure. In my state, at least, the state is poorly equipped to collect on real estate. They file a lien, which prevents anyone from selling it except in cooperation with the state. Nobody bothers, and the property just sits. Sometimes the property ends up being sold for county real estate taxes.

[/quote]

There are a lot of states like yours. States are required to try and collect, but really don't want to, so they make a half hearted effort just to comply with the fed law. Seems counter productive to let perfectly good houses go to waste.

In Iowa the estate can't be closed until the state is paid back or files a waiver, which is why Iowa has the highest recovery rate. Very bad things can happen to an Executor if they don't get the estate closed. However, there are a multitude of ways to get around the law.


#12

In principle I agree with the state recouping expenses paid for the medical care of those on Medicaid. But in practice, there is a HUGE issue that needs to be addressed that is creating VERY detrimental and negative incentives. The current situation REWARDS those who have not saved and built any assets. Those are rewarded by completely free care. But those who have saved up some assets are PUNISHED.

This is a very perverse incentive that encourages people to either not save up an estate, to squander the estate in frivolous means they ordinarilly wouldn't, or to hide/transfer the estate to others.

Perhaps the state should look at putting a cap on the amount taken from the estate, to make the collected amount higher, not have such a perverse incentive, and free people from ridiculous movements of assets to hide them.

Something similar happened in Florida where the Legislature put a cap on doc stamp taxes for non-real estate loans some years ago. For really big loans, people were either going out of state to close the loan, or chartering a boat to go to international water to close the loan. They were avoiding the tax. But when the Legislature changed the law, and capped the tax, this completely ended because it wasn't worth the hassle because the savings were eliminated. And the tax revenues actually went up when they did this, as most people did not work to avoid the tax.


#13

[quote="zz912, post:12, topic:345609"]
In principle I agree with the state recouping expenses paid for the medical care of those on Medicaid. But in practice, there is a HUGE issue that needs to be addressed that is creating VERY detrimental and negative incentives. The current situation REWARDS those who have not saved and built any assets. Those are rewarded by completely free care. But those who have saved up some assets are PUNISHED.

This is a very perverse incentive that encourages people to either not save up an estate, to squander the estate in frivolous means they ordinarilly wouldn't, or to hide/transfer the estate to others.

Perhaps the state should look at putting a cap on the amount taken from the estate, to make the collected amount higher, not have such a perverse incentive, and free people from ridiculous movements of assets to hide them.

Something similar happened in Florida where the Legislature put a cap on doc stamp taxes for non-real estate loans some years ago. For really big loans, people were either going out of state to close the loan, or chartering a boat to go to international water to close the loan. They were avoiding the tax. But when the Legislature changed the law, and capped the tax, this completely ended because it wasn't worth the hassle because the savings were eliminated. And the tax revenues actually went up when they did this, as most people did not work to avoid the tax.

[/quote]

I think that is a risk with all welfare programs. Why work or save if you just get penalized for being poor? I don't think there is an easy answer, but a cap sounds like an interesting idea.


#14

[quote="Dawnia, post:11, topic:345609"]
There are a lot of states like yours. States are required to try and collect, but really don't want to, so they make a half hearted effort just to comply with the fed law. Seems counter productive to let perfectly good houses go to waste.

In Iowa the estate can't be closed until the state is paid back or files a waiver, which is why Iowa has the highest recovery rate. Very bad things can happen to an Executor if they don't get the estate closed. However, there are a multitude of ways to get around the law.

[/quote]

It's my understand that the state's attempts to collect are so lame because they're not sufficiently staffed to really deal with real estate. There's a lot of work to that, especially if the house is in bad shape or has a mortgage. So, at least here, they'll bargain. If they don't, they'll be stuck with a deteriorating house with real estate taxes mounting up.

But you're right in saying there are a multitude of ways to get around the law, though not many know what they are.


#15

[quote="Ridgerunner, post:14, topic:345609"]
It's my understand that the state's attempts to collect are so lame because they're not sufficiently staffed to really deal with real estate. There's a lot of work to that, especially if the house is in bad shape or has a mortgage. So, at least here, they'll bargain. If they don't, they'll be stuck with a deteriorating house with real estate taxes mounting up.

But you're right in saying there are a multitude of ways to get around the law, though not many know what they are.

[/quote]

One of my aunts planned pretty well, but after ten years in a nursing home and two different cancers, she ran out of money in the final month of life at 85. It was not a problem until her sister died the following year without changing her will, so now there were suddenly assets to recover.

Personally, I have no problem with the family providing for a relative if they can, but the legal fees from the State of Illinois trying to recover one month of care were more than the amount they recovered. There is practical lesson here if you want to avoid this. Change your will to remove an heir who will not benefit from the inheritance and save on legal fees.


#16

[quote="Trader, post:15, topic:345609"]
One of my aunts planned pretty well, but after ten years in a nursing home and two different cancers, she ran out of money in the final month of life at 85. It was not a problem until her sister died the following year without changing her will, so now there were suddenly assets to recover.

Personally, I have no problem with the family providing for a relative if they can, but the legal fees from the State of Illinois trying to recover one month of care were more than the amount they recovered. There is practical lesson here if you want to avoid this. Change your will to remove an heir who will not benefit from the inheritance and save on legal fees.

[/quote]

Perhaps the most effective thing to do is to give away your assets long before you need long term care. That's not as important for men (almost no men in nursing homes, we die before that) as for women. One can put one's main assets into a "spendthrift trust" for one's children, and that's that if one outlasts the "lookback period".


#17

[quote="Ridgerunner, post:16, topic:345609"]
Perhaps the most effective thing to do is to give away your assets long before you need long term care. That's not as important for men (almost no men in nursing homes, we die before that) as for women. One can put one's main assets into a "spendthrift trust" for one's children, and that's that if one outlasts the "lookback period".

[/quote]

You men are pretty smart that way.


#18

[quote="SuperLuigi, post:5, topic:345609"]
There should be NO estate tax for anyone! :banghead:

Bloated government needs to be size down! :thumbsup:

[/quote]

I completely agree


#19

How does this "automatic enrollment" in Medicaid occur? How can you avoid it?


#20

[quote="Suudy, post:19, topic:345609"]
How does this "automatic enrollment" in Medicaid occur? How can you avoid it?

[/quote]

Good question as to how to avoid it.

Heretofore anyone with assets over $115k (?) was not eligible for Medicaid. Therefore perhaps some home ownership could work here (too). Or a reverse mortgage as well. But then you're only sticking your heirs with a home with no equity if you use up all the cash so that doesn't leave them better off either.


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