Health insurance in the United States has a structural history of indemnity insurance. The philosophical underpinning is that health insurance should be sufficient to pay for the activities and procedures that get a worker back on his feet and back to work after an accident or unexpected illness. It aims to intervene in short bursts without long sustaining interventions. The goal is to get someone back to health after a temporary downturn.
This plays out in benefit design. For instance, Medicare (which follows the indemnity model) covers the first sixty days of hospitalization at a high benefit level, the next thirty at a medium level and then the regular benefit runs out. There is a lifetime reserve of 60 days where Medicare effectively pays 50% of the base rate, and after those are exhausted, Medicare covers nothing. My personal insurance covers 25 physical therapy sessions a year.
These are limited, acute situations that are being covered. They are not long term nor chronic conditions where improvement is a low probability event.
Medicaid is not like Medicare or most private health insurance in this country. Medicaid is schizophrenic in its benefit design. For relatively healthy and young people who have Medicaid, it is functionally similar to Medicare or any other insurance plan. People go to the doctor’s office, get a prescription, and perhaps pay a small co-pay and then go home. There is nothing unusual in Medicaid being a dessert topping here.
However, Medicaid serves a second function that no other health insurance program serves. It is the payer of last resort for long term care in this country. Medicaid eligibility for nursing home care is fairly restrictive — people who qualify can not have a significant number of assets in their name. Medicaid is also a floor wax.
The federal floor is $2,000 in personal assets, although states may allow higher limits, and the signing over of most personal income. For instance a 67 year old on Social Security and needing Medicaid for nursing home care can expect to sign over 90% of their check to cover a portion of their nursing home expenses.
This dual nature of Medicaid instead creates a few odd rules. The first is the look-back rule. Since nursing home care is extremely expensive, Medicaid does not want to pay unless there is a clear need. If an individual with significant assets begins to transfer the ownership of those assets to family members right before Medicaid payments begin, Medicaid will go after those assets as a transfer meant to hide assets. Estate recovery is similar in that Medicaid can go after an estate for assets that it did not know about to cover the costs of nursing home care.
Medicaid’s ability to do so is restricted to individuals over the age of 55 and to those who get long term care. The goal is to provide an incentive for people to pay for their own long term care via either self-funding or the purchase of private long term care insurance.
I don’t think the MA expansion changes these rules. Individuals over the age of 55 who get regular medical coverage won’t have to see their assets or income attached. Individuals who receive nursing home care will see Medicaid administrators going after assets and income streams if those exist.