Taxpayer Cost Is The Same For Medicaid and Private Pay Nursing Home Patients

Question: I disagree with your column about Congress making it a crime for elderly people to transfer property in order to become Medicaid-eligible for nursing home long-term care. Why should I, as a taxpayer, have to underwrite the cost of an older person being in a nursing home so that person can leave an estate to his or her children? Although sometimes it's the older person's idea to shift assets, more often it's the children's idea to make sure they get their mitts on that estate so they can blow it on cars, travel, a more expensive home while I, the taxpayer, pick up the tab for nursing home care. Why don't you suggest to children of the elderly that if they want to make sure they inherit an estate from their sick, frail, and feeble parents, they take them into their homes and care for them. In this way, they will be able to preserve the estate they want to inherit.

Incidentally, I am a millionaire myself, and if I should have to go into a nursing home, I have long-term care insurance to back me up. And if I fall short, I intend to pick up the tab myself--not shift my money to my kids so the taxpayers have to pay for me.

Answer: Most of the negative responses we have received has come from folks who tell us they have the funds with which to pay for their long-term care and, as taxpayers, do not want to pick up the tab for others who are not so fortunate. Let's compare the cost to the taxpayer of a Medicaid and private pay nursing home residents who both enter "Pine Oaks Nursing Facility."

Mr. Jones has Social Security and other income totaling $850 per month and qualifies financially and medically for Medicaid-sponsored long-term care. He enters "Pine Oaks Nursing Home" where Medicaid purchases his nursing home bed for $2,000 per month. Since $800 per month of Mr. Jones' income will be applied toward his care, Medicaid -- and the taxpayers -- have a cost of $1,200 per month.

Mr. Smith has sufficient income and assets with which to pay privately for his long-term care. He enters "Pine Oaks" and pays the private pay rate of $3,000 per month for the same bed and services. Medical expenses are deductible to the extent they exceed 7.5% of adjusted gross income. Assuming all of Mr. Smith's nursing home charges are medically necessary and not custodial care and assuming Mr. Smith is in the 40% tax bracket, Mr. Smith should be able to deduct $1,200 per month.

The cost to the taxpayer in each instance is the same. While those who have long-term care insurance are, for the most part, cost-free to the taxpayer, those who qualify for Medicaid or pay privately and deduct their medical expenses have a cost to the taxpayer. And we have seen very few individuals who turn down a tax deduction.