As the population ages, Medicaid spending on nursing homes could easily lurch out of control. That is, unless it's limited to the people who really need it.

Medicaid is supposedly for the poor. But increasingly, it's being exploited by the well to do. Instead of buying nursing-home insurance or using their personal savings, they're getting the government to cover their bills.

Medicaid is a state and federal welfare program, providing various kinds of medical assistance to low-income people. Its charter includes nursing home coverage.

If you need nursing home care and are too poor to pay, Medicaid picks up the cost. But if you have personal savings, you're supposed to cover your own expenses.

When your savings drop below a certain level, Medicaid steps in. From that point on, the taxpayers support you for the rest of your life.

Growing numbers of middle- and upper-middle-class people don't like these rules.

They're willing to take care of themselves as long as they maintain their health. If a nursing home looms, however, they decide to quit being responsible. They look for ways of leaving their own money to their children, while forcing the taxpayer to provide their care.

I suspect that some of the well-off people who weasel their way onto Medicaid are vigorous supporters of big income-tax cuts. But where do they think the money for Medicaid comes from? Chocolate bars?

In general, their gambits are legal. The state laws on who's eligible for Medicaid conceal many weak points that let moneyed people onto the rolls.

To me, exploiting these weaknesses is unethical. The question for families is whether money will always trump morals.

Determining eligibility

In determining whether you're eligible for Medicaid, the states look mainly at your assets. If your assets are too high, you can't go on the welfare program. What's "too high" varies by state.

Married couples might not qualify if their savings exceed $87,000, plus house, car, personal property, pension income and other items. (That assumes one person in a nursing home and the other at home.)

Singles might not qualify if they have more than $2,000 to $4,000 in savings. They, too, might be able to keep a paid-up home and other assets, even though they'll be in the nursing home for the rest of their lives.

If you give away money to get yourself under the savings limit, there's a waiting period before you can collect benefits. Anyway, that's the way the law is supposed to work.

Planning options

But there are loopholes. So-called "Medicaid planners" use the loopholes to make you instantly "poor." You can qualify for taxpayer help without a waiting period.

That turns Medi-caid into an "inheritance insurance plan for the middle class," said Stephen Moses of the Center for Long-Term Care Financing in Bellevue, Wash. Parents go on welfare so they can leave their money to their kids.

Here are some of the Medicaid-planning ideas promoted at a recent Elder Law Symposium in Vancouver, sponsored by the National Academy of Elder Law Attorneys:

-Cut your spouse loose. When one spouse enters a nursing home, assets can be moved into the name of the healthy spouse. The healthy spouse signs a statement, refusing to support the nursing-home spouse. That spouse then goes on welfare (Medicaid).

The state can sue the healthy spouse to recover the money, but that's infrequent.

-Put your assets into a small business or farm. Medicaid generally doesn't require you to use business assets to help pay the nursing-home bill, as long as you or your spouse are active in the business in some way. You could even hire someone to start a business for you.

-Put your assets into an annuity. The income would go toward the nursing-home cost. But you could arrange for an heir to get payments if you died early.

Bottom line Medicaid is in serious trouble. The government isn't spending enough for quality care. The more people with money exploit the system, by not paying for themselves, the worse the care is going to be for everyone.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington, D.C. 20071-9200.

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