Episode #50 – Why Medicaid “Planning” Is Wrong – In So Many Ways

I was in a debate of sorts with some fellow financial planners on a Facebook page. My “opponents”, for lack of a better word, were arguing that to engage in techniques that allows one to use Medicaid for health care was a legitimate pursuit, even if one is affluent.

To say I am shocked at this doesn’t do justice to how I truly feel.

Let me explain what Medicaid is. Medicaid is health insurance for poor people. Medicare is for when you turn 65 and you qualify regardless of income or assets.

Medicaid though is based on your asset level. The goal was to assist those who are indigent with their health care.

What Medicaid “planning” does is try to get people who could otherwise afford to pay for their own care to hide assets in order to qualify for government aid.

Here’s the problem with this. Medicaid is BROKE! There is no money. And yet, under Obamacare there was huge incentives for individual states to expand the program…even though the program is already broke. It’s crazy. As at some point, the bills have to be paid.

Medicaid is not bringing in enough money to be self-sufficient. Do you want to guess what will happen to keep the program afloat? Well as is always the case with socialistic programs, fees will in increased and services will be reduced in the form of:
1. increase taxes on ALL Americans
2. reduce services
3. reduce fees paid to care providers

Thus for every affluent person on it, means there is less for poor people who truly have no other options.

Also, what do you think will happen to the care provider pool as their reimbursements get reduced? If you said it will reduce the number of care providers and the quality of those who remain, you are spot on.

So, as basic economics would tell us, increased demand due to more people being added to the rolls of Medicaid. Yet Medicaid is not solvent as it is, so inherently there will be reduced payments to providers as more ‘poor’ people sign up. Inevitably you have less providers. Demand (number of people on the system) increases and supply (number of people providing the services) drops, what happens next?

Rationing of course! And, of course, higher taxes for the rest of us.

As the Investors Business Daily said back in 2016:

So where will the money come from? Kaiser says eight of the expansion states are slapping new taxes and fees on providers to cover costs. Other states, the report says, will use “general funds.”

In other words, states that expanded Medicaid will either have to boost health costs, raise taxes or cut spending to cover this ObamaCare “freebie.” Given that Medicaid is already swamping state budgets, this will not be good news.

No such thing as a free lunch folks.  Never has been, never will be. So, if you are planning on using Medicaid to provide health care, remember there is a cost. And that cost is being paid for by your friends and neighbors, which is fine if you truly are indigent.

If you’re able to afford your care though, why not go ask your neighbors what they think about having their taxes raised to foot your bill.

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