Medicaid spends huge sums on long-term care (LTC), $217 billion for 5.6 million recipients in 2020. Reputed to be a program for the poor, Medicaid still allows affluent people to shelter billions while consuming its LTC benefits. Arguably half or more of what Medicaid spends on LTC protects uncounted wealth retained by recipients, exempt from asset spend down.

Medicaid LTC applicants and recipients can usually have no more than $2,000 in countable assets. Countable assets are cash or anything else easily convertible to cash. But most large assets seniors own are not countable. Such exempt assets include most home equity, one vehicle, a business, prepaid burial expenses, personal care contracts, annuities, and others.

Countable assets are easily made non-countable by purchasing exempt assets. Medicaid planners, who help their clients qualify for Medicaid without spending down for medical or long-term care, provide them extensive lists of exempt assets to purchase. Books and the internet offer similar advice.

We know little about how much wealth that could have been used to purchase LTC privately has been converted to become a Medicaid cost and a taxpayer liability. No systematic study has ever been done. In 2014, however, four members of Congress asked the Government Accountability Office (GAO) to examine methods people use to reduce countable assets in order to qualify.

GAO responded with a report full of intriguing facts and potentialities. For example: GAO found that14 percent of approved Medicaid applicants … had over $100,000 in total resources; 75 percent owned noncountable resources with a median amount of $12,530; 31 percent owned homes with a median value of $68,350; 3 percent owned real property other than their primary residence with a median value of $47,300.

GAO explained that these findings were based on a small sample of cases in only three states and were not generalizable. GAO did not stress the findings’ significance, seeming rather to downplay their importance. But what if we imagine these results actually were generalizable nationwide? Would they justify further study to find out for sure?

Medicaid covered 5.6 million LTC recipients in 2020. If 14 percent of them had over $100,000 in resources, then $78.4 billion went unused for private LTC financing at Medicaid’s expense. That’s a lot of wealth for a poverty program to protect, fully 36.1 percent of the total $217 billion Medicaid spent on LTC.

If 75 percent of LTC recipients owned a median average of $12,530 each, then $52.6 billion found its way into sheltered wealth, largely as prepaid burial expenses. That is a giant subsidy for the funeral industry at the expense of LTC financing for the poor, fully 24.2 percent of total LTC expenditures.

If 31 percent of 5.6 million Medicaid recipients owned homes with a median value of $68,350, then $118.7 billion of real estate value was diverted from private LTC financing. Given that Medicaid exempts a minimum of $713,000 up to a maximum of $1,071,000 in home equity, it is evident that Medicaid replaces practically all potential LTC liability from personal home equity. The loss to Medicaid equals 54.7 percent of what it spends on LTC.

If 3 percent of recipients own real property other than their primary residence, such as vacation homes, with a median value of $47,300, then $7.9 billion is diverted from private LTC financing into a Medicaid liability while preserving a personal luxury. That’s where 3.6 percent of Medicaid LTC expenditures go.

We have no way to know how realistic GAO’s state-level estimates are. But we can say they are probably very conservative. GAO acknowledged that its results were based solely on information in case records none of which they verified independently. GAO made no attempt to interview recipients’ families or to analyze outside bank or tax records. Nor were assessors’ offices checked for ownership records or recorders’ offices for property transfers. A thorough analysis of their sample employing these tried and true investigative methods would surely have identified substantially more sheltered wealth.

Even though GAO’s findings are not generalizable, aren’t they significant enough to suggest we ought to investigate further? It is long past time to conduct a study based on a valid random sample of Medicaid LTC cases large enough to generalize to the whole United States. Whatever such a study would show, it is already incontrovertible that Medicaid diverts billions of dollars from private LTC financing into heirs’ inheritances.

There is no better reason than that to support mandatory Medicaid estate recoveries. They recoup at least some of this lost wealth to support the program’s truly needy recipients. Proposals to repeal or restrict Medicaid estate recoveries only redound to the benefit of more prosperous others. They reward failure to take responsibility privately for LTC.