Is Medicaid Planning Ethical?

A colleague of mine did a piece for the PA Bar Quarterly recently on the ethics of Medicaid Planning.  It presented a slice of how ethics and obligation to the client can appear to conflict when often they do not.  I will not address each and every point he did or dissect his article but we often confront conflicts in our daily contact with our clients and personal contacts and this is another example that illustrates how generally perceived ethical conflicts are truly dependent on one’s perspective.

Medicaid Planning is a process by which Elder Law attorneys guide clients on structuring assets so that the client can preserve more assets and access Medicaid (Medical Assistance in Pennsylvania) for long term care services sooner than they would otherwise be able.  The general goal is to preserve the quality of life of the community spouse, a disabled loved one or relative or in some cases to preserve or enhance an inheritance to others.

There is a real concern that has to be addressed and was dismissed early on in the article that when someone seeks long term care in a nursing home there are two ways they are going to enter.  The first way is a direct admission from home or other non-medical location (personal care home, etc.).  The second way is from a discharge from some other acute care provider or other rehabilitation provider and the older adult is coming to the nursing home to seek rehabilitation services.  There is a huge practical difference in these circumstances and they affect the attorney’s advice and obligation.

When someone seeks a direct admission from a non-medical facility, the nursing home can determine if they want to accept the resident.  While the federal law prohibits nursing homes from discriminating based on payer source, it happens on a daily basis from direct referrals.  While a nursing home cannot say “you must pay 15 months at our private pay rate and then you can apply for Medicaid”, they require asset information as part of their application process and if they perceived that a potential resident would be costly to the bottom line, they can find reasons not to accept that resident.

Now I am not knocking nursing homes for doing this.  The rate of reimbursement from Medicaid does not even come close to the costs of housing or caring for a typical resident in a nursing home.  And that is to keep staffing ratios to state required minimums, let alone the ratios to provide top quality care.  I have no doubt that a nursing home that had 100% of its residents receiving Medicaid funding would be losing money on a daily basis and would cease operating in short order.

When a person is admitted from a hospital or other rehabilitation facility, the situation is vastly different.  Since most nursing homes survive off of the Medicare admissions, they usually will accept any Medicare admission.  Federal law is very clear that once someone is admitted to a nursing facility, they cannot be discharged unless the facility cannot provide the care that they need or the resident presents a risk of harm to other residents.  There is often a lack of knowledge with nursing home admission staff about the availability of “long term care beds” versus “rehab beds.”  They often tell families that have residents in for rehab that they cannot accommodate their loved one in a long term care bed.  Whether this is an accidental or intentional misstatement, it is not true.  There is no distinction under the law between beds.  If you are licensed to accept Medicaid, every bed in your nursing home is a Medicaid bed.

Now how is this relevant to the ethics of Medicaid planning?  Well, at attorney advising clients on this process needs to make a clear distinction between planning from the perspective of discharge from a hospital or from a non-medical location where there is no enforceable obligation by the nursing home to accept the resident.  In those cases, an ethical attorney has to balance the financial and lifestyle needs of the other important parties (spouse, disabled child, etc.) with the possibility that the preferred nursing home has no obligation to accept the resident and that the family may have to spend money to get the loved one into the better care location when a lesser quality nursing home may conceivably accept the loved one straight on Medicaid.

So what about the argument that by accelerating Medicaid eligibility, the cost of one’s long term care is placed on the taxpayers when some of the people who do Medicaid planning could pay for their care for a longer time before applying for Medicaid?  From a purely ethical perspective, an attorney must have blinders on.  The attorney’s obligation is only to the client’s interests and not to society at large. Where the nursing home resident is competent and expresses the desire to preserve assets for the family or there is clear evidence that the incapacitated resident would desire Medicaid planning to proceed, the attorney’s obligation is to devise
and implement a plan to achieve the greatest possible protection for the client’s estate.  Any moral compunction the attorney may have about achieving eligibility for someone who is not “truly needy” must not affect the attorney’s exercise of his or her ethical duty to pursue the client’s interests, as expressed by the client. A tax attorney would not hesitate to exploit all possible tax exemptions, deductions, credits and offsets, no matter how wealthy the client is. That, like Medicaid Planning, transfers the burden to society when a wealthy person finds legal ways to pay less taxes. Similarly, it is the Medicaid-planning attorney’s duty to explain the options for achieving Medicaid eligibility and allow the client or the client’s surrogate to decide whether to move forward with any particular plan.

While there is an emotional appeal that Medicaid is only for the “truly needy,” the vast majority of the senior population would be financially devastated by two years in a nursing home. This is particularly troubling as it relates to community spouses. To restrict the ability of older citizens to protect their net worth and qualify more easily for Medicaid, state and commonwealth Medicaid agencies
and legislatures and Congress have created labyrinthine regulations to thwart asset transfers by nearly anyone over 55. The Deficit Reduction Act of 2005 severely restricts Medicaid benefits for long-term care if an application is filed within five years of a transfer for less than full consideration.  These provisions were added to the Social Security Act due to the perception that many middle-class individuals and families hide or give away large amounts of property to qualify for government assistance in paying for long-term
care and that this is exacerbating the growth of the cost of this care to the government. However, societal factors—low and decreasing median net worth and the declining purchasing power of fixed senior citizen income—are driving Medicaid costs up, not manipulation of individual estates to accelerate eligibility.

He quoted a New York judge who stated:

The complexities of the Medicaid eligibility rules. . . . should never be allowed
to blind us to the essential proposition that a man or a woman should normally
have the absolute right to do anything that he or she wants to do with his or her
assets, a right which includes the right to give those assets away to someone else
for any reason or for no reason.
*  *  *  *  *
[N]o agency of the government has any right to complain about the fact that
middle-class people confronted with desperate circumstances choose voluntarily
to inflict poverty upon themselves when it is the government itself which has
established the rule that poverty is a prerequisite to the receipt of government
assistance in the defraying of the costs of ruinously expensive, but absolutely
essential, medical treatment.

The reality of Medicaid Planning is that there are many factors we, as lawyers, need to consider.  Fortunately for our clients, lawyers’ only obligations is to provide the client all options to achieve the client’s goal, as long as the goal and the means to achieve it are legal.  The failure to explain all opportunities for a clients, whether we agree or disagree with the impact on society, would violate our ethical duty to our client and could be considered malpractice.  That does not mean we do not present all sides and learn from the client if the societal impact is a priority to the client.  But we have an obligation to our client and his or her needs, first and foremost, and the benefit or detriment to society has to take a back seat.  And in my opinion, this is unequivocally in the best interest of the client and society.