Is Medicaid Planning Ethical?



The Greatest Financial Risk for Seniors: Part XIII

Is Medicaid Planning Ethical?

My previous article in this series concerned the issue of whether “Medicaid planning’ is legal. The answer to that question is simple: “yes.” Medicaid planning is just as legal as tax planning. But while it may be legal, is it ethical for lawyers to be advising clients who have family member in a nursing home, especially those who have accumulated a comfortable amount of assets, to intentionally impoverish themselves in order to take advantage of Medicaid rules that were intended to help poor people?

In thinking of how best to address this issue, I found an article I wrote on this topic seventeen years ago that seems to me to be even more relevant today than it was then. So here is it, with the numbers up-dated to reflect the 2019 reality.

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As readers of [my] articles . . . will know, the Medicaid laws permit seniors to protect a substantial part of their life savings from the ruinous cost of nursing-home care. But while it is legal to take advantage of these laws, is it ethical? An editorial by Diana Conway in the January 27, 2003 issue of Newsweek magazine (“Cheating Uncle Sam for Mom and Dad”) says “No.” It characterizes Medicaid planning as an unethical practice used by clever lawyers and “opportunists in search of legal loopholes” to hide their assets at the expense of all other taxpayers.

In her editorial Ms. Conway makes two arguments:

1. Medicaid planning is unethical because it involves “hiding” money and other assets to trick the government into thinking that one is poor in order to get Medicaid benefits to pay for nursing home care.

2. Medicaid planning is unethical because it “steals” money from the federal government meant to benefit the “truly” poor and gives it to “the upper middle class” to use to pay their nursing home bills, money which these folks don’t need and don’t deserve.

I take such criticism to heart because “Medicaid planning” is an important part of my Elder Law practice, along with traditional estate planning, financial planning and quality-of-care issues. I don’t think of myself as involved in unethical behavior when I help my elderly clients and their families use the Medicaid laws to protect as much of their life savings as they can. Am I deceiving myself?

As to Ms. Conway’s first argument, I agree with her that “hiding” assets in order to qualify for Medicaid is clearly wrong. In fact, it’s fraud. And consequently this is something I am very careful to see that my clients never do. Our office staff takes great pains to be sure that every question on the Medicaid application is answered fully and truthfully – particularly questions about any gifts our clients have made – so that the Medicaid Office gets a complete picture of our clients’ financial situation.

But as to Ms. Conway’s second argument, I do not agree that advising my clients on the Medicaid laws is helping them get benefits they don’t deserve. I think Ms. Conway has succumbed to the sales rhetoric of some insurance industry promoters who nourish the myth that Medicaid is being exploited by the well-to-do. She doesn’t define what she means by “upper middle class,” but the great majority of the families we see who have someone in a nursing home have total life savings (including their house) averaging less than $250,000. And if that sounds like a lot, keep in mind that with the “average” cost of a nursing home in Pennsylvania [in 2019] over $125,000 a year, such families could run through everything in just a couple of years.

Ms. Conway’s reply would apparently be, “Well, if that’s what it costs for your nursing care, that’s where your money should go. You saved it for a rainy day, and that rainy day has come.” Reasonable people can differ on fundamental policy questions such as these. For my part, I have several problems with this way of looking at the issue:

  • First of all, for me as an attorney to fail to disclose to my clients the legal options available to them for planning to meet the catastrophic cost of long term care would violate my duty as their advocate under the ethical rules governing our profession.
  • Second, the goal of Medicaid planning is not merely to preserve an inheritance. A primary goal of the planning is to increase the quality of life for elders. Increasing the quality of life requires money. So helping our clients preserve what assets they have is just as important in Medicaid planning as it is in any other aspect of estate planning.
  • Third, Medicaid planning is only necessary in the first place because we as a country have failed to protect our elderly from the economically ruinous effect of skyrocketing healthcare costs. As Charles Sabatino, past president of the National Academy of Elder Law Attorneys, pointed out, “The fact that some planning options sound strained is a testament to the fact that, unlike most Western countries, there is no national policy to provide long term care in the United States. Instead, families are left to find their way through an uncoordinated hodge podge of programs not covered by Medicare nor most conventional insurance.”[1]
  • Finally, both Medicaid planning and tax planning involve using the laws as written to increase the amount of money going to a client’s choice of beneficiaries at the expense of the public fisc (and therefore at the expense of all other taxpayers). Is it not unfair that at the very time Congress has passed a law to phase-out the federal estate tax over the next few years, and thereby enable the estates of millionaires, multi-millionaires, and even billionaires to pass much more of their wealth down to their children and grandchildren (rather than have that money go into the public fisc to help pay for universal long-term care coverage), middle income people are labeled irresponsible and unethical for using the Medicaid laws to preserve their much more modest savings? Why should only the rich be able to leave a legacy to their children?

“The complexities of the law that come into play, as hapless middle-class Americans seek to save themselves from financial ruin as the result of astronomical nursing home costs, should never be allowed to blind us to the essential proposition that a man or a woman should normally have the absolute right to do anything that he or she wants to do with his or her assets, a right which includes the right to give those assets away to someone else for any reason or no reason. We would only amplify this by stating that no agency of the government has any right to complain about the fact that middle-class people confronted with desperate circumstances choose voluntarily to inflict poverty upon themselves, when it is the government itself which has established the rule that poverty is a prerequisite to the receipt of government assistance in the defraying of the costs of ruinously expensive, but absolutely essential, medical treatment.”[2]

A major goal of Elder Law attorneys is to empower seniors – whether poor, middle-class, or wealthy – with knowledge of their options and help them achieve their goals, as defined not by the attorney, nor by the Diana Conway’s of the world, but by the client.

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The content herein is for general informational purposes only and does not constitute legal advice. For specific questions you should consult a qualified elder law attorney

Note: Working with the long-term care system we have in this country, seniors and their families need to understand that despite the restrictions in the Medicaid law, it is almost never too late to protect part or your remaining assets, even when facing an immediate crisis and with no advance planning. Whether you are 75 years old and living in your own home, or have an 85-year-old spouse in a nursing home, there are steps you can be taking now to preserve part – and often a very significant part – of your life savings otherwise at risk of being spent on your nursing care. But “time works against you.” Every day of delay in a crisis can result in $250 or more of irretrievable loss, so it is important to contact a knowledgeable and experienced elder law attorney for advice sooner rather than later.

Kemp Scales is now retired, but elder-law attorney Schellart Los continues to serve clients throughout western Pennsylvania from offices in Erie and Titusville. She can be reached toll-free at (888) 827-2788 or by e-mail at schelly@losscaleselderlaw.com. Los Scales Elder Law, LLC has an Internet presence at www.losscaleselderlaw.com.

  1. Tennessee elder law attorney Timothy Takacs put it this way: “Medicaid planning can be justified ethically only by placing it within the context of the economic system in which the planning takes place. Within the United States free-market system, no one has a right to basic health care and long-term care. Instead, better care goes to the individual who can afford to pay for better care. . . . Until the United States elevates health care to a moral right, instead of a property right, Medicaid planning is morally and ethically justified.” http://www.tn-elderlaw.com/resources/is-medicaid-planning-ethical.

  2. In the Matter of Shah (N.Y. App. Div., 2 Dept., 257 A.D.2d 275, July 6, 1999)