Medicaid, Taxes, and Fairness
Interestingly enough, the battle over what for Democrats is a health care plan and for Republicans is a tax giveaway to the wealthy is now being waged largely over the issue of Medicaid. This is somewhat unexpected, as most of the talk before the election centered on health exchanges and their private health care plans. But for now Medicaid is front and center. While Medicaid is a health insurance program for the economically disadvantaged, it is another aspect of Medicaid that is garnering much of the attention. You see, the elderly account for a large chunk of Medicaid spending. According to the Kaiser Family Foundation, Medicaid pays for 62% of nursing home care in this country. And so slashing Medicaid, as Mitch McConnell’s tax cut masquerading as a health care plan will do, will not only hurt the poor, but also Grandma out in the nursing home, and for many people, this hits home. But that’s not the subject of this essay. Instead I want to talk about another aspect of Medicaid and nursing homes that many people are unaware of until it smacks them in the face.
Medicare does not pay for long-term skilled care in a nursing home, but Medicaid does. “But wait”, you say, “I thought that Medicaid was a health insurance program for the poor”. It is. “But Grandma isn’t poor”. Well, she may not have been when she entered the nursing home, but she is now. And that, as they say in Yiddish, is a shonde (disgrace). Most Americans are not rich. Many work hard all their lives and save so that they will have money for retirement, and hope to have a few dollars left over to leave to their children. This is where conservatives would chortle “Better hope that the death tax doesn’t get to that money first”. By “death tax” they mean the Federal Estate Tax, which has been a Republican target for ages. How horrible, they say, that people are deprived of the right to leave their hard-earned money to their children. In this, as in many other things, conservatives are hypocrites and I’ll explain why as we take a look at the estate tax in relation to the issue I raised at the beginning of this essay, i.e. Medicaid and nursing homes.
The Federal estate tax is currently assessed on the net value (after deductions) of $5.49 million. Right now, only about 1 in 700 estates is subject to any Federal estate tax. And it is a graduated tax, so net estates of $5.49M or lower pay nothing, and even if the net estate is over the threshold amount, tax is only paid on the overage; the first $5.49M passes estate tax free for even the largest estates. Remember also that every penny that is left to a surviving spouse passes totally free of any estate taxes. So let’s face it, for the overwhelming number of U.S. households the Federal estate tax is simply not an issue. So if the Federal estate tax affects so few Americans, why are Republicans so hell-bent on doing away with it? That’s an easy one; it’s because it affects their lords and masters, the richest of the rich.
Which brings us back to Medicaid and nursing homes. Yes it is true that Medicaid will pay for Grandma’s nursing home, but only if she is largely penniless. So if Grandma has a nest egg of say $150,000 when she enters a nursing home, she will have to spend almost all of her money on her care before Medicaid will kick in. This is a very common occurrence, and Republicans don’t give a damn about it. A person works hard her whole life to save that $150,000, but after about a year in most nursing homes that money is gone and she gets to leave nothing to her children. And that’s okay with Republicans, but if a person with a $10 million estate only gets to leave $7.5 million of it to her children (the poor darlings) it’s the fault of that horrible “death tax” that must be abolished. What a terrible thing that a person can’t leave all of their money to their children if that person has a net worth in excess of $5.49M, but when a working class person can’t leave their $150,000 to their children, who cares? Certainly not Mitch McConnell or Paul Ryan.
And so I have a radical suggestion. Have Medicare start covering skilled nursing home services. Since you don’t have to be poor to be eligible for Medicare, it means that people could get the nursing home services they need without having to spend down every last penny they have. We should also note that having Medicare cover nursing home costs would benefit the wealthy as well as middle and working class families, as Medicare is not a means-tested program. If Republicans really care about people being able to leave their life savings to their loved ones they would support this proposal, but I wouldn’t hold my breath. Of course having Medicare cover the cost of skilled nursing care for all seniors would be expensive, so how would we pay for it? How about a modest tax increase on the wealthy, including an estate tax increase? As we’ve seen, this course of action would leave no one destitute, unlike the current system.