Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Earlier this week, The Wall Street Journal reported on the latest negative unintended consequences of Obamacare:
Millions of people have gained health coverage through Medicaid since states began expanding the program under the Affordable Care Act. That also means more Americans may find themselves caught in a little-known law that lets states go after their assets after they die.
For more than 20 years, federal law has allowed states to recover almost all Medicaid costs if recipients are 55 or older when they die. This now applies to many of the 11 million people who joined Medicaid since the health law’s expansion of the state-federal insurance program.
The upshot: Some families are discovering they may have to sell a home or other assets of a deceased relative to reimburse the government.
To understand how this has come to pass, we need to take a brief look at some history.
Although Medicare and Medicaid have similar-sounding names, they were created for different purposes. Medicare was designed as an entitlement, something everyone pays into and everyone (eventually) benefits from. Medicaid, on the other hand, was designed as a welfare benefit, to temporarily help those who find themselves in unfortunate circumstances. So whereas Medicare eligibility is based on age, qualifying for Medicaid used to involve both income and asset tests.
At some point, families of the elderly (and their financial advisors) realized that once an elderly relative had exhausted Medicare benefits, Medicaid would pay for nursing home care if the elderly beneficiary were poor. In principle, the designers of Medicaid assumed that someone would spend down all of his or her assets before applying to Medicaid for benefits. In practice, savvy elderly began giving away assets to family in order to qualify for Medicaid.
This was a ripoff of fellow taxpayers. In effect, Joe Lunchpail was paying taxes to fund the medical care of people who could afford to pay for it themselves but were gaming the system. So in 1993, Congress mandated that states implement a “lookback” for Medicaid: if a beneficiary had unreported assets — or had given away assets within a certain window before applying — the state could go after the family for those assets. Laws beget negative unintended consequences, which beget more laws.
Which brings us to today’s new legislation, and its new negative unintended consequences.
A major feature of Obamacare is its expansion of Medicaid eligibility. No longer is Medicaid for the destitute. The Federal government will now give participating states additional funding to enroll adults who earn up to 300% of the poverty level, without an asset test. In fact, consumers have complained that the Federal Obamacare exchange steered them to Medicaid, even when they preferred to purchase true insurance.
But neither states nor the Federal government stopped to consider that the lookback laws on the books would interact with the newly relaxed eligibility standards. People enrolled in Medicare without being asked to declare their assets. And now — unlike with true insurance — surprised citizens are on the hook for the cost of their care. States have little say in the matter; Medicaid’s lookback provisions are an act of Congress.
All of this is one more example of why government is unsuited to the task of managing the mind-numbing complexity of something like health care and its financing. If the government really wants to help, it can give us all vouchers or tax credits for health insurance and then get out of our way. Let our individual decisions work their magic in a free market. Medicare and Medicaid and, yes — Obamacare too — are products of an earlier time. In the age of Amazon, Uber, TripAdvisor, we are surely empowered with enough information to make our own good decisions for our own individual circumstances.