At least once a week, someone will post a question on this board that basically amounts to asking how to “protect” some parental asset or amount of money and still apply for/qualify for Medicaid. Inevitably, such a poster gets jumped on by numerous people replying that trying to protect assets is “cheating” and grossly unfair to other taxpayers.
I’m not so sure. I'm not advocating trying to circumvent the system -- but I would like to start a discussion about whether it's immoral. I’d like to explain why I’m not so sure, and then I’d like to know what other people think.
Imagine two identical families. We’ll call them Family A and Family B. In both families, Mom and Dad work. Both Parents A and Parents B have identical jobs and identical incomes, and both families have three kids.
That is where the similarities end.
In Family A, even before the kids are born, Dad and Mom scrimp and sacrifice to save money. This an old-fashioned phrase for an old-fashioned concept, but Dad and Mom are 100% dedicated to it, and their commitment does not change as the kids grow.
The family goes on vacation every third year instead of every year. These vacations are usually “road trips” and involve camping in tents and peeing in terrifying, spider-infested outhouses to save money on hotels. Getting to eat out once a month is a huge treat, and usually occurs only at low-end chain restaurants with a mid-week “kids eat free” night. For their entire public-school education, the kids dress primarily in clothes that their mother sews by hand instead of wearing clothes bought from the store ... and sure, maybe they get teased and made fun of at school, because they’re wearing polyester pants instead of blue jeans, but Mom and Dad decide it’s a worthwhile sacrifice because the money that is being put away will make a difference in the kids’ lives later, when it really “matters.”
The family drives a beat-up old car that Dad manages to keep running year after year because hey, maybe the upholstery is all split open and the windshield is cracked, but at least it’s paid for. Cable TV is out of the question, so if a show doesn’t come in over rabbit ears to the family’s one small TV in the living room, no one watches it.
The house, which is uncomfortably small for the family and not in the best neighborhood – and which certainly does not feature hardwood floors or a kitchen with granite counters or stainless steel appliances! – is one that can be managed on a mortgage that still leaves a fair amount of each month’s paycheck available to go into savings instead. The family COULD qualify financially for a “nicer” place, but Dad and Mom believe that it’s better to put the money away so that it will be there to make a difference for their kids down the line – maybe by buying a college education or by helping them to buy their own homes when the time comes. Everyone sacrifices, sacrifices, sacrifices. Eventually, even the modest mortgage is paid off. Gradually, the little nest egg grows.
In Family B, by contrast, just about every dime that ever comes in is spent immediately. The family motto is “Instantaneous Gratification Isn’t Soon Enough!” The family denies itself nothing, ever.
The whole family goes on vacation to Disney World every year, always staying at an official Disney resort (where the kids get their own room). At home, all the kids have their own TVs (which get every premium channel imaginable), laptops and iPads and get new iPhones every time Apple releases an “upgrade.” Eventually, the kids get driver’s licenses, and guess how the family celebrates this rite of passage? You got it! Mom and Dad buy them their own cars. The family eats out at nice restaurants three or four times a week. The family car is replaced at least every two years, and loaded with every option the family’s creaking credit score can support.
The kids get designer clothes and shoes and the latest video games and pretty much whatever else they want at every gift-giving holiday. The family lives in a huge house in a nice neighborhood, with a pool and a hot tub, and yes, they’re carrying a lot of debt on their credit cards, and yes, they’re quite a bit overextended on the mortgage and the car notes, but what the heck – isn’t that the American way? Sure, there’s no nest egg ... but what does that matter? Living life in the moment is what it’s all about.
Fast-forward. Dad is now 75. Tragically, Mom died 6 years ago from cancer, and Dad has now been diagnosed with a progressive dementia, and will likely soon need very expensive long-term memory care in a facility.
In Family B, there are next to no savings. After retiring, Mom and Dad B traveled a bit, and spent every dime that came in in pension and Social Security income. After Mom B died, the overextended mortgage on the house turned completely upside down, and Dad B abandoned the equity in the house and walked away ....
(Continued in Part B, first post)