SENIOR TREATMENT OF ASSETS

Improving the Treatment of Assets
The resource standards for the Medicare Savings Programs exclude many potential
beneficiaries who would be eligible on the basis of low income alone. Improving the
treatment of resources therefore provides further opportunities for reaching more
people who could use assistance with their Medicare premiums and cost sharing.
Option 8 would exclude financial assets from the resource test and include their
annuity value as a component of income. Option 9 would eliminate estate recovery
for participants in the Medicare Savings Programs.
8. Annuitize Assets
Under current rules, income from a defined-benefit pension or an annuity is counted
in determining eligibility for Medicaid and the Medicaid Savings Programs, but the
present value of future benefits is not counted as an asset. In contrast, if income is
derived from an Individual Retirement Account or from other funds held directly by
an individual, those funds count toward the asset limit. Thus some analysts have
suggested excluding financial assets from countable resources and adding to income
the estimated income that the funds could be expected to produce if invested in an
annuity (Moon, Friedland, and Shirey 2002).
Annuitizing assets would increase from 8 percent to 13 percent the portion of
Medicare beneficiaries who are eligible for full Medicaid benefits. The fraction of
beneficiaries who are eligible for any form of subsidy would increase from 25
percent to 29 percent (Merlis 2005). The option would cost about $11 billion a
year (Verdier 2006).
36 National Academy of Social Insurance
The major limitation of this option is its complexity. It would still be necessary to
identify assets and determine their value; estimating the assets’ annuity value would
be an additional step in the eligibility determination process. Also, if an asset is
already producing income, steps would have to be taken to avoid counting both the
cash income and the imputed annuity value. These complications would increase
the burden on program administrators and could discourage eligible beneficiaries
from applying for assistance.
9. Eliminate Estate Recovery
Nineteen percent of eligible non-enrollees cite worries about estate recovery as a
reason that they do not apply for the Medicare Savings Programs. (Haber et al. 2003).
Federal law requires states to seek recovery from the estates of Medicaid
beneficiaries for payments for mandatory services, including long-term care and
associated hospital and drug costs. In such cases, the state must also seek to
recover payments for premiums and cost sharing (Cusick and Nibali 2005). States
need not seek recovery from estates of beneficiaries who have not received longterm
care, and fewer than half the states seek estate recovery for payments made
for Medicare Savings Programs. Nonetheless, many beneficiaries still believe that
applying for benefits will result in losing their homes (Glaun 2002).
Eliminating estate recovery just for MSP beneficiaries is likely to have only a small
cost. Only 22 states include MSP payments in the services for which recovery is
attempted, and even they are not likely to recover significant amounts of money.
Because premiums and cost-sharing amounts are small, it is not advantageous for
states to devote any great effort to collecting them (Verdier 2006). If eliminating
estate recovery increases participation in the Medicare Savings Programs, costs
would rise, but the size of this effect cannot easily be estimated.