Poor on paper: an overview of the ethics and morality of Medicaid planning.

• Author: Karp, Joseph S.

Scenario 1: Judy worked as a schoolteacher since the age of 22. She scrimped and saved her entire life and retired at the age of 67. She continued to live within modest means, with the hope that one day she would be able to pass a tidy inheritance to her grandchildren. Now at age 70, she has been diagnosed with Alzheimer's disease. Judy is devastated by the fact that her savings might be entirely depleted by the costs of future long-term care at a nursing facility.

Scenario 2: Anne also worked as a school teacher since the age of 22. She saved but never scrimped on herself. Each time she amassed enough money, she went on a ski trip or on a cruise. She always spent money to dress as fashionably as possible, often dined out, and frequently attended movies and shows. Now at the age of 70, she has been diagnosed with Alzheimer's disease. Anne is concerned about the prospect of long-term care at a nursing facility since she is poor because of her wasteful ways.

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The two people in the above scenario are in almost identical situations. Both made a living as teachers, and both were diagnosed with Alzheimer's disease. With no family willing or able to care for them, they will almost inevitably need long-term care at a nursing facility. If Anne and Judy lived in many developed countries of the world, both would be able to receive 1) medical home care, 2) nonmedical home care, and/or 3) long-term institutional care as a universal right (i.e., not means-tested). But Anne and Judy live in the United States. Under the United States' current scheme of health care for the elderly, only Anne, who has spent all her money throughout her life, will be able to receive long-term institutional care subsidized by Medicaid since she is both over the age limit and is poor. The reasons why she is currently poor do not matter. Judy, however, who has saved diligently her entire life, will not be covered by Medicaid since she is not poor. Nor will she be covered by Medicare as her illness is a chronic one that will last over an extended period of years. Thus, Judy's only choices are 1) to spend down, that is to pay for the costs of a nursing facility, which will quickly deplete her savings and then apply for Medicaid since she will then be poor, or 2) to engage in Medicaid planning.

Medicaid planning has been defined in numerous ways, sometimes euphemistically, sometimes pejoratively. For the purposes of this article, Medicaid planning refers to the legal fiction of "rearranging assets" to make someone poor on paper so that he or she may qualify for Medicaid. The morality and ethics of Medicaid planning have been examined in the past and are still an issue today. This article explores the history of Medicaid, examines some of the various arguments both for and against the morality of Medicaid planning, and concludes by briefly inspecting long-term care solutions for elder care around the world. This article does not purport to answer the question of whether Medicaid planning is ethical, but rather explores the arguments and suggests an altogether different solution to the problem of long-term care in the United States.

History

Medicaid was initially developed by Congress in 1965 during the presidency of Lyndon B. Johnson, and during an era of civil rights reforms. (1) A companion program, Medicare, was promulgated during the same congressional session. (2) A main objective of Medicaid was to provide long-term health care for needy elderly and disabled persons. (3) At the time of enactment, Medicaid was considered to be "first and foremost a program for the poor." (4) There is debate, however, whether Medicaid is still intended to be exclusively a program for the poor.

Medicaid planning soon followed the passage of Medicaid. As the requirements for Medicaid eligibility changed, so did the plethora of planning techniques. (5) Currently, with legal assistance, people who are not in fact poor can make themselves appear poor on paper by methods such as transferring assets and by making purchases of items that are excluded from the determination of eligibility. (6) Medicaid planning has created a debate among those who say that such asset "rearranging" is ethical and moral, and those who say that it is unethical and takes resources away from those for whom Medicaid was intended to provide for.

Ethics of Medicaid Planning

Ethics and morality are two distinct yet overlapping concepts in the world of lawyering. Ethics refers to an adherence to established canons, namely the Model Rules of Professional Conduct as adopted in the state of the lawyer's practice. (7) Morality, on the other hand, is the study of right and wrong and what ought to happen. (8)

There is disagreement whether Medicaid planning is ethical as well as whether it is moral. Since the model rules are delineated and limited in scope, there is less controversy with the ethics issue. Although there are particular situations and problem areas where ethical questions would be raised (as is true with many other areas of law)...