A new Government Accountability Office
(GAO) study concludes that few of the elderly are transferring assets
in order to become financially eligible for Medicaid coverage of
long-term care, and that of the transfers that are made, the amounts
are modest. The study also finds that the impact of the Deficit
Reduction Act of 2005 (DRA), which imposed harsh new asset transfer
provisions, is uncertain.

"This
report confirms that the Medicaid long term-care program is not rife
with cheats and scam artists," House Energy and Commerce Committee
Chair John Dingell (D-MI) said in a statement issued along with House
Energy and Commerce Subcommittee on Health Chair Frank Pallone (D-NJ),
House Oversight and Government Reform Committee Chair Henry Waxman
(D-CA) and Sen. Sherrod Brown (D-OH), all of whom requested the report.

Analyzing
nationwide data from 1992 through 2004, the GAO found that at the time
most elderly individuals entered a nursing home, they had resources of
$70,000 or less, not including their home. This is less than the
average cost for a year of private-pay nursing home care. Nine out of
10 elderly nursing home residents had annual incomes of $20,000 or
less, and only 9.2 percent of elderly nursing home residents on
Medicaid reported transferring cash before applying.

To
get a better picture of the extent to which elderly Medicaid applicants
transferred assets, the GAO took a close look at 540 randomly selected
Medicaid nursing home applications from three states: Maryland,
Pennsylvania, and South Carolina. All the applications were covered by
the pre-DRA transfer rules. The GAO found that about 90 percent of the
applicants had total resources of $30,000 or less, excluding the home.
Most applicants were single women. Only one-quarter owned homes and the
median value of those homes was $52,954.

Only
10 percent of the who were approved for Medicaid coverage had
transferred assets during the look-back period, and the GAO could find
only two who had experienced a delay in their eligibility for Medicaid
as a result of the transfer. The other applicants were either not
assessed a penalty, because the penalty would have been for less than
one month of coverage, or the penalty they were assessed had expired by
the time they submitted their Medicaid application. The median amount
of all assets transferred was $15,152. Most of the asset transfers
involved the transferring of financial holdings, such as gifts of cash
or stocks, and applicants’ children or grandchildren were the most
common recipients of the transfers.

The
GAO says it is uncertain what the impact would have been on these
applicants had the DRA’s more stringent rules been in effect. Under the
DRA, the penalty period for transferring assets begins when the
applicant would otherwise be eligible for Medicaid coverage, not when
the transfer occurred, as was the case under prior law. All the
applicants in the study who had transferred assets would have
experienced a delay in Medicaid eligibility under the DRA, although
they may have been able to persuade the state to waive their penalty
period if it would cause undue hardship.

The
GAO found that the effects of other DRA provisions – for example, those
affecting home equity, life estates and annuities — "may be limited"
because few applicants fall under these provisions. "For example," the
GAO writes, "few applicants whose files we reviewed appeared to have
home equity of sufficient value to be affected by the DRA provisions."
Under the DRA, states will not cover long-term care services for an
individual whose home equity exceeds $500,000, although states have the
option of increasing this limit to $750,000.

For a copy of the GAO report, click here.