Following a September hearing before the House subcommittee focused on Medicaid eligibility abuses, one ranking member probed further on the use of reverse mortgages as a way to offset Medicaid costs for those who have plenty of home equity to use toward health care expenses. The questions revealed some false ideas about reverse mortgages.
In response, Center for Long-Term Care Reform president Stephen Moses provided additional insight into reverse mortgages and Medicaid costs at the request of Rep. Danny Davis (D-Ill.).
Of the five questions to Moses following the “Examining Abuses of Medicaid Eligibility Rules,” hearing, three focused on reverse mortgages and the use of home equity to pay for health care costs. Mainly, they seem to indicate that the house committee may need some more knowledge of reverse mortgage products and how they work.
One question notes the costs of reverse mortgages—”up to $10,000″—as a deterrent, to which Moses stresses the point that there are many ways for people to extract home equity, and Medicaid should not exempt up to three quarters of a million dollars worth of home equity while paying for the owner’s long term care services.
A second question asks how reverse mortgages can be a viable means to saving $30 billion annually with only a small portion of dual eligibles being 65+. (Apparently, the congressman was not informed that those who are 62+ are eligible.) Third, a question asks whether an individual would be more likely to sell his or her home, rather than take out a reverse mortgage, when that individual is single and receiving Medicaid nursing care.
“Under existing Medicaid eligibility rules, the home remains exempt as long as the Medicaid recipient or his or her representative expresses a subjective intent to return to the home,” Moses writes. “It makes no difference whether the recipient is able medically ever to return to the home, is single or married, or whether anyone is residing in the home or not…If Medicaid eligibility rules were changed to exempt a smaller amount of home equity, individuals would need to extract the value of the home to pay for long-term care by various means. Reverse mortgages, either formal ones with a financial institution or informal ones with family members, are one means to put home equity to use to fund LTC.”
The follow up questions were not surprising, Moses told RMD in an email.
“The prejudice against private sector options and in favor of protecting the dominant government-financed status quo is ingrained,” he said.
Ultimately, the questions from Rep. Davis represented a lack of support for Medicaid alternatives, Moses said.
“Rep. Davis and his colleagues in the minority were unwilling to consider alternatives or solutions. I worry the Medicaid LTC safety net will collapse before they act. That will hurt the poor most because the middle class and affluent can turn to their savings, home equity, and private insurance,” he said.
Written by Elizabeth Ecker
