Thelma, 85, has almost $1 million in assets, including the house she owns in the tony neighborhood of Roslyn Heights, and $75,000 in bonds and $50,000 in savings she hopes to leave to her two daughters. She also collects her late husband’s pension and her own Social Security.
Yet Thelma is poor enough to qualify for Medicaid.
That’s because in 2008, an estate planner advised her to go broke — at least on paper — by divesting herself of almost all of her assets. That way, if Thelma ever needs to enter a nursing home, it would be paid for by the state.
To qualify for Medicaid, individuals over 65 must show that they have not had an annual income or more than $9,200 for the past five years. This is called the “look-back” period (the window was expanded from three to five years in 2006 to make it slightly more difficult to qualify for Medicaid).
Any assets transferred before the “look-back” period are not counted, and any funds in an IRA are not considered an asset.
“You could have $1 million six years ago, and you put it in a trust for your kids and then it looks like you have nothing,” said Patrick Cucinelli, senior director public policy solutions at the New York Association of Homes and Services for the Aging. “There is a common strategy that you set up your home as a trust in your child’s name and then you maintain the right to live in it. Attorneys are guiding people through the process.”
It’s partly because of the tens of thousands of New Yorkers like Thelma that state taxpayers shell out $51.5 billion every year — a whopping 38% of the entire state budget — to fund the state health system. Medicaid enrollment, meanwhile, has climbed almost 13% since 2008.
But you can’t really blame Thelma. Even for those who can afford to pay for their own late-life care, why not take advantage of the government system and leave your children an inheritance?
“It’s a relief to know I’ll be covered,” said Thelma, who spoke to The Post on the condition that her last name not be used. “I don’t want my daughters to lose everything if I have to go into a nursing home. I don’t want to leave them nothing.”
With the assistance of attorney Paul Hyl, Thelma set up an irrevocable trust and put her home and her bonds in the name of her daughters. She retained control only over $50,000. “I wanted it to pay for any large expenses, like a new roof,” she said. She also purchased a new car.
“You work very hard your whole life for your money and I’ve worked a lot of years,” said Thelma, who was a secretary for five decades. “At this point, if I go into a nursing home, how long am I going to live, anyway? Your money is used up and you’re on Medicaid in no time. They take from you anything you worked for and there’s nothing left.”
New York’s nursing home population is currently functioning at capacity.
At the Coler-Goldwater hospital on Roosevelt Island, the city’s largest nursing home facility, all but nine of the 1,389 nursing home beds are occupied by residents, who pay a median day rate of $277.55. That’s $101,306 a year per person, and about 80% of residents are covered in full by Medicaid.
New York is expected to spend $8 billion on nursing homes this year — far more than any other state in the country. Florida, by way of comparison, spent $2.8 billion on nursing homes last year.
Spending on nursing homes in New York has increased by 51% — from $5.29 billion in 2000 — and the costs are expected to skyrocket as baby boomers age and the population lives longer.
Experts said that it’s perfectly legal for upper- and middle-class New Yorkers to follow Thelmas’ model to qualify for Medicaid coverage. But the practice is raising concerns.
“Medicaid was intended for indigent people to get healthcare,” Cucinelli said. “It was meant to serve elderly people with serious health problems, disabled people and blind people. Now you take someone with significant assets who is taking advantage of a loophole in the law. The program designed to care for indigent people is de facto long term care insurance for financially OK people. It’s a serious public policy issue.”
Attorney Hyl, however, said it’s simply irresponsible not to plan like Thelma.
“A nursing home can easily cost $100,000 a year,” he said. “A typical client of mine has a house, some IRA money and assets in bank accounts and stocks. The first thing we do is take the house and put it in an irrevocable trust. But the seniors keep the right to live there for life and the kids can’t kick them out.”
Hyl said he expects the federal government to become stricter about qualifying for Medicaid as the costs increase. “In the future they might start counting the IRA as an asset,” he said. “They might not overlook that anymore, they’ll say ‘use it to pay us back and then it will go to your kids.’ ”
For now, nobody knows how many “fake poor people” are on Medicaid, said Cucinelli, because millionaires look exactly like paupers on paper. More than 4 million New Yorkers currently receive Medicaid-eligible services every month.
In the past 10 years, overall Medicaid spending in New York has increased by $15.57 billion, according to the state budget office. The state’s also takes 41% more from the federal government in Medicaid payments — from $10.31 billion 10 years ago to $14.5 billion today. The federal government accounts for 28% of the state’s Medicaid spending.
The state’s big spending is no mistake.
“It was a conscious decision for decades on the part of the State government to maximize Medicaid — to cover as many services as possible to draw down federal dollars,” said Courtney Burke, director of the Rockefeller Institute’s New York State health policy research center. “Lawmakers saw it as a revenue source.”
New York state has long had a liberal mentality of offering more generous benefits. “On the one hand, it’s a robust safety net for people,” Burke said. “On the other side of the aisle, it’s a robust safety net that may be too expensive to maintain.”
Last week, Albany lawmakers voted to cut $385 million in health care spending in order to try to balance a budget that is over two months late. The state is also looking to cut costs by shifting long term care in nursing homes to home care, said Claire Pospisil, a health department spokeswoman. The emergency spending bill includes cutting aids to hospitals and nursing homes by $183 million.
Total savings: 2%.