The legislative attempt to criminalize advising clients about the Medicaid program, popularly known as the “Granny’s Lawyer Goes to Jail” law, was found unconstitutional almost two decades ago. NYSBA v. Reno, 999 F. Supp. 710, (N.D.N.Y. 1998). It has been assumed that there was an understanding that the long-term care system itself is irrational and seniors should not be blamed.
However, a recent column in the New York Times has again questioned the ethics of advising clients about Medicaid eligibility. Ron Lieber, “The Ethics of Adjusting Your Assets to Qualify for Medicaid,” The New York Times, July 21, 2017. The planning is pejoratively described as “the mini-industry of lawyers and others who help people arrange their financial lives so they don’t spend every last dime on a nursing home.” Once again, it is necessary to explain the circumstances that lead seniors to seek valid legal representation.
Skilled Care vs. Custodial Care
Whether you will be financially comfortable or impoverished in later life depends strongly on the illness that you contract. Medicare, the primary health insurance program for most seniors, discriminates against a distinct set of illnesses. It covers “skilled care” and does not cover “custodial care.” Skilled care is the type of medical care that can only be safely provided by a trained medical professional such as a doctor, nurse, or physical therapist. Custodial care can safely be provided by someone without an advanced medical degree.
In practical terms, this means that a person who neglects his or her health, a smoker for example, who needs a lung transplant, will have his or her medical expenses covered. At the same time, an Alzheimer’s patient who needs nursing home care, will have no coverage.
The Price Tag
One year of care in a nursing home in the metropolitan New York City area can cost $150,000. Patients with long-term custodial illness can remain in the nursing home for extended periods of time. There are very few couples that can sustain that level of medical expenditure without financial ruin. This leaves the surviving spouse in a precarious fiscal position. Home care costs are comparable. On average, home care agencies charges are $20 an hour. The charges for a patient who needs round the clock care would be $480 a day. The long-term aspect of this care is the factor that is responsible for the dilemma. This is not an issue for individuals who need short-term care.
This Is a Hidden Issue
The distinction between skilled and custodial care is unknown to most people as it is counterintuitive. An AARP study found that 60 percent of respondents thought (incorrectly) that Medicare covered custodial care. AARP, “The Cost of Long-Term Care: Public Perceptions versus Reality in 2006,” December 2016. They were not being irresponsible, they were simply uninformed. They only become aware of the jeopardy when a diagnosis is made of a long-term custodial illness, such as Alzheimer’s or Parkinson’s or poststroke. They cannot be expected to plan for a risk that they are not aware of.
Failure of Long-Term Care Insurance
Some seniors who are aware of the financial risk of a long-term custodial illness have taken responsibility and considered long-term care insurance. This is private insurance that will make payment for custodial care.
At the time that the policy is purchased, the individual must choose the amount per day that the policy will pay and how long the policy will continue to make such payments. The premium for such insurance increases with the amount of daily coverage and the duration. Many seniors are unable to afford the premiums. Those who can afford the premiums today often incorrectly believe that the premiums are fixed. The premiums can be increased. The recent premium increase of 60 percent by Genworth made policies unaffordable for some who had paid premiums for years.
It is difficult to predict the amount of coverage that will be needed since a claim under the policy may not be made for 10 or 20 years. In addition, the recent failure of one long-term care insurance company, Penn Treaty Network America Insurance, has generated concern about the viability of the long-term care insurance product.
Contributions Already Made By Caregivers
What is missing in the debate over the ethics of elder law planning is a recognition of the contributions that caregivers are already making in providing free care for family members.
These caregivers incur financial penalties when they provide uncompensated care to their parents. To provide this care, the children forgo promotions, reject transfers to other cities, reduce their work hours, and retire early. The cost is not just in the reduced wages, but more importantly in the reduced retirement benefits they eventually will receive. They will receive lower Social Security and lower IRAs or 401(k)s because they have shortened their working career to assist their family. A study estimates that each caregiver loses $304,000 in retirement benefits and that the total loss is $3 trillion dollars. Met Life Study of Caregiving Costs to Working Caregivers, “Double Jeopardy for Baby Boomers Caring for their Parents” (June 2011).
There is a common myth that children are abandoning the elderly, but this study disproves that claim. The study found that nearly ten million adult children (those over the age of 50) are providing unpaid care to their aging parents. That figure is 25 percent of adult children in the United States. Notably, this study does not include those caring for spouses, grandparents, siblings or children with special needs so the figures are quite conservative.
Another cost is the toll on the caregiver’s own health. The stress of caregiving and the pressure of caring for one’s own family as well as an ailing parent have negative impacts upon the health of caregivers.
The qualification for Medicaid is typically a last resort, when the caregiver has already made a significant contribution. It is not an easy decision and stigmatization of those who seek Medicaid assistance is not helpful. Particularly for married couples, it is a decision based upon the fear that the healthy spouse will be impoverished.
An attorney is required to discuss all options legally available and then it is the client’s decision as to whether to proceed. An elder law attorney who failed to discuss the Medicaid option would be guilty of malpractice.
The dimensions of this problem are due to increase exponentially with the entrance of 80 million baby boomers into the age when the custodial illnesses are likely to present. The honest solution to this conundrum is to cover custodial care under the Medicare program.