Congress is examining ways to cut Medicaid by $10 billion over the next five years. One proposal they have their eye on is the equity in seniors' homes. Under the proposal, low-income seniors could wind up paying more for nursing home stays and other health care, take longer to qualify for Medicaid assistance, and might lose one of the few sources of income that the government doesn't currently count in order to qualify for Medicaid.
Seniors who enter nursing homes, or seek to qualify for other Medicaid-covered health care, must meet stringent low-income asset tests. Under current law, however, neither the value of a senior's primary residence nor the equity proceeds from a properly structured reverse mortgage is counted. Reverse mortgages allow seniors to borrow against the equity in their homes without having to repay the loan right away. The stay-at-home spouse of a Medicaid-covered nursing home patient can thus take out a reverse mortgage to supplement meager Social Security benefits to cover daily living expenses.
The proposal would change this by making home equity a countable asset and would require seniors to take out a reverse mortgage to cover their nursing home costs and other medical expenses. TSCL believes Notch babies and their spouses may be among the seniors most adversely affected. Notch Babies receive lower benefits than other retirees with similar work and earnings records. An ongoing analysis by Advisor editor Mary Johnson has found that those who have few assets other than their Social Security benefits are likely to be at risk for living at or near the federal poverty level. Notch babies are also at the age at which they may soon need nursing home care.
TSCL opposes this proposal. If Congress wants to find the $10 billion to fund Medicaid, and the $40 billion to pay for Notch Reform, the estate tax cut should be allowed to expire. The estate tax cut was enacted in 2001, and is due to "sunset" or end in 2010. President Bush and Congressional leaders have proposed to permanently repeal the estate tax, however, a move estimated to cost more than $70 billion a year once put into effect, while benefiting the wealthiest 1% of the nation's tax payers. TSCL believes this cannot be justified when Medicaid, Medicare and Social Security face looming financial pressures.
TSCL will continue to aggressively fight these cuts and work for passage of "The Notch Fairness Act in 2006."
Source "Hurricane's Toll is Likely to Reshape Bush's Economic Agenda," Edmund L. Andrews, The New York Times, September 7, 2005.
November 2005
