Towards Universal Disability and Elderly Services Insurance

As I work to understand disability financial planning, the utter cruelty of our current disability services system screams at me. We have built a system that intentionally financially cripples disabled people … and is hardest on those most in need.

It is brutal “Poverty by Design” and we need to rebuild it.

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Welcome to Disability Drumbeat #12

Fellow Disability Changemakers –

Happy New Year! This was the last week of “Camp Parents” and my kids are going back to school this week so I’ll be able to get back to work:

Hosting Wednesday Coffee Conversation on Disability – at 830ish. Upcoming Dates here.
Working on Disability Financial Planning Course
… and the next newsletter issue of course. You can check out the newsletter archives.

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My bottom line is:

“Much Better is Possible” for children with disabilities and the disabled adults that they will become…

and I hope you want to help make that change happen.

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We are all in this together.

Steve
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Correction

In my ABLE Account Doubts article, I stated that ABLE accounts and Special Needs Trusts were subject to “Medicaid estate recovery” (sometimes called clawbacks). This is true for both ABLE Accounts and First Party Special Needs Trusts, but not for Third Party Special Needs Trusts or Pooled Trusts.

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Cut-and-Paste Poverty by Design

The US didn’t create its disability services programs from scratch, it built off of existing systems. We see this in the 11-year-old ABLE account which is a 529A account built off of the 529 College Savings Program.

No problem. We all do the easy thing all the time.

Except that the US Disability System is built off of our welfare benefits program… and this basic model has had devastating consequences for disabled people

Limited Assets and Income

Because the purpose of welfare is to get people off of welfare, it is set up to penalize people who stay on it. Specifically with strict limits on assets and income. These limits are quite strict for SSI, but even more rigorous for Medicaid – $2000 in savings and other non-housing assets for a single person and $3000 for a married couple (this is where the bulk of disability benefits are distributed including home and community-based services – HCBS – and long term support services – LTSS)… see below.

These systems are very similar for elderly people who need to access Medicaid.

And this is problematic. While you can technically own a house or car, you can’t have enough money saved to fix a roof or other ordinary maintenance.

You are always living on the edge.

The Shell Game

Disabled and elderly people can shelter assets and income through various means (for Special Needs Trusts for disabled people and Qualified Income Trusts or Miller Trusts for the elderly). But these tools all have various restrictions – your money is no longer yours to spend as you need, and it is difficult to pass on any funds that may remain to your heirs.

In the early 1980s, my grandmother developed Alzheimer’s and my mom took over taking care of her. My grandfather had done a good job of making sure she had enough money … for ordinary life. Long-term care was expensive then and is even more expensive now. My mom had to spend down my grandmother’s assets so that she could first live in an assisted living facility and then a nursing home.

The Costs

The Kaiser Family Foundation did an excellent analysis of the costs of long-term care in the US. Adult daycare is around $24,700 per year (all numbers for 2023), a private room in assisted living is $64,200. a semi-private room in a nursing home is $104,025, and a 24×7 aide is $288,288.

As very little of this is currently covered by Medicare or conventional insurance and there is very little private long-term care insurance, disabled and elderly people are pushed into Medicaid (or support by family members). This is confirmed by the fact that in 2022, half of the $415 Billion spent on LTSS was paid by Medicaid.

Natural Allies – it should be noted that the users of Home and Community-Based Services and Long Term Support Services in the US are about evenly split between elderly and disabled people.

Marriage Penalty

Medicaid eligibility is affected by your household income and so, if only one person is disabled, your household income to be eligible is the same as for a single person at MOST $2901 per month (2024)* … this can be complicated depending on state and disability.

Thus, a disabled person can be financially penalized for wanting to get married – especially to a non-disabled person.

The Disability Tax

Disabled people often pay more just to operate in our society. For example, one study said that the additional costs for a family with an autistic child are around $5000 to $7000 per year.

How does this happen?

Co-pays, for one.

In the US, every time you have a healthcare service, you have a co-pay. Now if you go to the doctor once or twice a year for many people $30 a visit is a minor nuisance.

My autistic son at “peak services” was getting daily therapies.

We regularly were running into our “out-of-pocket” maximum for our health insurance. Ironically, one year both of my parents had heart surgeries and our healthcare costs were notably higher than theirs.

Everything is more complicated and expensive.

I regularly spend hours (and hours) on hold to run down problems with insurance and services (not to mention all of the time spent on my son’s IEP and working with our school).

Time. Dollars.

Everyone experiences this in their own way for their specific disabilities.

It all adds up…. though no one is counting.

Medicaid Estate Asset Recovery – The Clawback

To add insult onto injury…. when a disabled or elderly person dies, Medicaid wants their money back.

In a fit of perverse “fiscal prudence” targeting our most in need and their families, the US goes after any remaining assets that they can legally get to.

Sophisticated individuals (likely those with the most assets) can do a better job of sheltering their home and funds, but if you haven’t set things up properly and hired the right lawyer, the government can seize your house to pay for your Medicaid services.

Towards Universal Disability and Elderly Services Insurance

This madness has to end. We shouldn’t penalize people for needing support due to age or disability.

Our welfare “benefits” program model – if it is appropriate for anyone – certainly isn’t the system on which we should provide services to our disabled and elderly.

We need to move from a benefits system to universal insurance with eligibility based on need, like healthcare. I don’t need to be broke to pay for heart surgery – why should I need to be broke to pay for long-term care? A disabled person should be able to work (and pay taxes) without fear of losing their necessary services.

The core of the system needs to be: