Thursday, February 10, 2005
"Use Your Home to Stay at Home"
["How seniors can fund retirement," NCPA Daily Policy Digest, 10 February 2005.]
NCPA highlights a new study from The National Council on Aging today that details how reverse mortgages can keep people off of Medicaid and in their own homes:
Reverse mortgages could be used by millions of older adults to pay the rising costs of long-term care, a study by the National Council on the Aging has found.
One of the paradoxes of our long-term care system is that older Americans are struggling to live at home at the same time they own more than $2 trillion in untapped wealth, the report said.
Reverse mortgages are loans that allow homeowners aged 62 years or older to convert home equity into cash while still living in their houses. They receive the money as a lump sum, line of credit or monthly payments. The loan comes due when the borrower moves out or dies.
Mark McClellan, Medicare and Medicaid administrator, estimates that increasing the market for reverse mortgages could save Medicaid $3.3 billion annually by 2010.
Stephen Moses at The Center for Long-Term Care Financing takes issue with that figure:
The report vastly underestimates the potential savings to Medicaid from
home equity conversion. We...recently estimated a potential savings to Medicaid of $20 billion per year from reverse mortgages . . . almost immediately.
What's the difference? The NCOA report only recommends that people use their home equity voluntarily instead of making reverse mortgages a precondition of eligibility for Medicaid long-term care benefits. Because Medicaid exempts the home and all contiguous property regardless of value and estate recovery is easy to evade, merely jawboning people to use their home equity before applying for Medicaid won't work.
Besides, the report's argument against making spend-down of illiquid home equity mandatory is specious: "If reverse mortgages became mandatory to qualify for Medicaid, the healthy spouse who is still living at home could be left without any assets. Many could become trapped in an inappropriate living situation because they no longer have the financial resources to move out of a house that has become unsafe or too much to handle."
In truth, ever since the Medicare Catastrophic Coverage Act of 1988, community spouses have been assured an income and asset floor that has increased with inflation up to as much as $2,377.50 per month of income and half the joint assets not to exceed $95,100 as of 2005. If that isn't enough, or if the community spouse would have nothing left after spending down home equity, then special hardship waivers could and should apply as they do for other areas of Medicaid eligibility.
["How seniors can fund retirement," NCPA Daily Policy Digest, 10 February 2005.]
NCPA highlights a new study from The National Council on Aging today that details how reverse mortgages can keep people off of Medicaid and in their own homes:
Reverse mortgages could be used by millions of older adults to pay the rising costs of long-term care, a study by the National Council on the Aging has found.
One of the paradoxes of our long-term care system is that older Americans are struggling to live at home at the same time they own more than $2 trillion in untapped wealth, the report said.
Reverse mortgages are loans that allow homeowners aged 62 years or older to convert home equity into cash while still living in their houses. They receive the money as a lump sum, line of credit or monthly payments. The loan comes due when the borrower moves out or dies.
Mark McClellan, Medicare and Medicaid administrator, estimates that increasing the market for reverse mortgages could save Medicaid $3.3 billion annually by 2010.
Stephen Moses at The Center for Long-Term Care Financing takes issue with that figure:
The report vastly underestimates the potential savings to Medicaid from
home equity conversion. We...recently estimated a potential savings to Medicaid of $20 billion per year from reverse mortgages . . . almost immediately.
What's the difference? The NCOA report only recommends that people use their home equity voluntarily instead of making reverse mortgages a precondition of eligibility for Medicaid long-term care benefits. Because Medicaid exempts the home and all contiguous property regardless of value and estate recovery is easy to evade, merely jawboning people to use their home equity before applying for Medicaid won't work.
Besides, the report's argument against making spend-down of illiquid home equity mandatory is specious: "If reverse mortgages became mandatory to qualify for Medicaid, the healthy spouse who is still living at home could be left without any assets. Many could become trapped in an inappropriate living situation because they no longer have the financial resources to move out of a house that has become unsafe or too much to handle."
In truth, ever since the Medicare Catastrophic Coverage Act of 1988, community spouses have been assured an income and asset floor that has increased with inflation up to as much as $2,377.50 per month of income and half the joint assets not to exceed $95,100 as of 2005. If that isn't enough, or if the community spouse would have nothing left after spending down home equity, then special hardship waivers could and should apply as they do for other areas of Medicaid eligibility.
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