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We have two family members in an assisted car facility for almost eight years now, and between the two of them, they've tapped Medicare for just under $700K. To

by nkurz 9y ago

We have two family members in an assisted car facility for almost eight years now, and between the two of them, they've tapped Medicare for just under $700K. Together, the sum of both their incomes throughout their entire working lives never totaled that amount. Oh, but it gets worse. It's bad enough that the government is being bilked for hundreds of thousands of dollars on behalf of those without the ability to pay, but even for those with significant assets, there are "perfectly legal" tax dodges that can be set up for $XX,XXX so that Medicaid pays the $XXX,XXX bills while the family inherits the $X,XXX,XXX estate. And if you pay the lawyers a little more, they can probably even figure out how to avoid paying capital gains on the distributed assets if they are below $10 million. I don't see much hope for the insurance reform in the US until we can get end-of-life costs under control. I don't if "Ponzi" is quite the right term, but it's definitely a system rife with fraud. More generally, "House of God" is a stunning inside look on how the US medical system actual works: http://slatestarcodex.com/2016/11/10/book-review-house-of-god/ http://slatestarcodex.com/2016/11/10/book-review-house-of-go...

wighty 9y ago
House of God is indeed an interesting book and a good read. I read it during second year of my residency, and it is incredibly sad how the stuff that is talked about in the book has gotten worse in some ways, though better in others. I'm actively against the "bowel run" mentality. I do my best to avoid even the CYA test ordering, though I'm not in the ED where this can be the most rife. I see first hand the "ponzi scheme" (though IMO it is not the correct term) of the system and I chose to go into primary care because I actively want to fix this in any way I can, and being a specialist was not the way I thought would be best to do this.
- ownagefool 9y ago
  I think the term is "gravy train".
hkmurakami 9y ago
> And if you pay the lawyers a little more, they can probably even figure out how to avoid paying capital gains on the distributed assets if they are below $10 million. Capital gains costs bases are currently "stepped up" during the estate transfer. No need to pay anything to lawyers. If your estate is below $10.5M (or thereabouts, I forget what the exact number is since it's now inflation adjusted), you won't be liable for any of that capital gains, nor will you owe any estate tax since you're within the exemption.
- nkurz 9y ago
  Yes, but I think the trickiness is combining this with the combination of revocable and irrevocable trusts that "protects" the assets from Medicare. Although it's possible that in the case I'm aware of, it's NY state and city rules that required the additional layers. My main point is that the current system is designed so that it can be gamed by those with the money to pay the lawyers, and the lawyers have enough influence to keep the system broken such that they continue to benefit. Despite this, do read "House of God" --- it's a terrifying and eye-opening book!
  - hkmurakami 9y ago
    Ah I see. There are a variety of irrevocable trusts that move assets to a separate legal identity from the original owner of the assets (ex: charitable grantor trusts that are used by the Waltons often). This would reduce the size of the estate for both estate tax and medicare purposes. In the past, transferring assets to such a trust entailed gift tax, but since the estate tax and lifetime gift tax exemption are now bundled together, you can basically "use" the estate tax exemption to fund this irrevocable trust "for free". As a result your personal assets plummet, you name your heirt the beneficiaries of the irrevocable trust, and you (the parent) can take advantage of medicare fully as you describe. The drawback to this strategy is that you do lose real flexibility in controlling your assets. Also, the legality of this widespread practice is definitely in a gray zone and carries future legal risk. Transferring a significant portion of one's assets to such a complex instrument is definitely not advised.
maxerickson 9y ago
Medicare doesn't examine assets. Medicaid does. Medicaid is the payer of last resort for nursing care though, not Medicare (which doesn't really cover long term care).
- nkurz 9y ago
  You are right. I can never keep straight which is which. I edited to my repetition of the mistake, but left the original quote as it was.
nathancahill 9y ago
More book recommendations on HN should be a link to a good review like this, instead of just an Amazon link.
- stickfigure 9y ago
  Sure - convince Scott Alexander to review more books? The problem is the supply of good reviews like this.
  - Kluny 9y ago
    Sivers.org has got reviews and cliff notes for quite a lot of HN's favorite books, if you're interested. They're actually such good summaries of the books that a lot of the time I just read his synopsis and skip the book.
    - nebabyte 9y ago
      Thanks for the book recommendation engine recommendation! Noting it for when I get home; been looking for good ones.
gmarx 9y ago
This isn't much the case anymore from my experience. A generation ago I recall it being general knowledge that if a loved one had to go into the nursing home you would bankrupt and have medicaid pay. A relative tried that this recently and is close to destitute as a result.

by nkurz 9y ago

wighty 9y ago

House of God is indeed an interesting book and a good read. I read it during second year of my residency, and it is incredibly sad how the stuff that is talked about in the book has gotten worse in some ways, though better in others. I'm actively against the "bowel run" mentality. I do my best to avoid even the CYA test ordering, though I'm not in the ED where this can be the most rife. I see first hand the "ponzi scheme" (though IMO it is not the correct term) of the system and I chose to go into primary care because I actively want to fix this in any way I can, and being a specialist was not the way I thought would be best to do this.

ownagefool 9y ago
I think the term is "gravy train".

hkmurakami 9y ago

> And if you pay the lawyers a little more, they can probably even figure out how to avoid paying capital gains on the distributed assets if they are below $10 million. Capital gains costs bases are currently "stepped up" during the estate transfer. No need to pay anything to lawyers. If your estate is below $10.5M (or thereabouts, I forget what the exact number is since it's now inflation adjusted), you won't be liable for any of that capital gains, nor will you owe any estate tax since you're within the exemption.

nkurz 9y ago
Yes, but I think the trickiness is combining this with the combination of revocable and irrevocable trusts that "protects" the assets from Medicare. Although it's possible that in the case I'm aware of, it's NY state and city rules that required the additional layers. My main point is that the current system is designed so that it can be gamed by those with the money to pay the lawyers, and the lawyers have enough influence to keep the system broken such that they continue to benefit. Despite this, do read "House of God" --- it's a terrifying and eye-opening book!
- hkmurakami 9y ago
  Ah I see. There are a variety of irrevocable trusts that move assets to a separate legal identity from the original owner of the assets (ex: charitable grantor trusts that are used by the Waltons often). This would reduce the size of the estate for both estate tax and medicare purposes. In the past, transferring assets to such a trust entailed gift tax, but since the estate tax and lifetime gift tax exemption are now bundled together, you can basically "use" the estate tax exemption to fund this irrevocable trust "for free". As a result your personal assets plummet, you name your heirt the beneficiaries of the irrevocable trust, and you (the parent) can take advantage of medicare fully as you describe. The drawback to this strategy is that you do lose real flexibility in controlling your assets. Also, the legality of this widespread practice is definitely in a gray zone and carries future legal risk. Transferring a significant portion of one's assets to such a complex instrument is definitely not advised.

maxerickson 9y ago

Medicare doesn't examine assets. Medicaid does. Medicaid is the payer of last resort for nursing care though, not Medicare (which doesn't really cover long term care).

nkurz 9y ago
You are right. I can never keep straight which is which. I edited to my repetition of the mistake, but left the original quote as it was.

nathancahill 9y ago

More book recommendations on HN should be a link to a good review like this, instead of just an Amazon link.

stickfigure 9y ago
Sure - convince Scott Alexander to review more books? The problem is the supply of good reviews like this.
- Kluny 9y ago
  Sivers.org has got reviews and cliff notes for quite a lot of HN's favorite books, if you're interested. They're actually such good summaries of the books that a lot of the time I just read his synopsis and skip the book.
  - nebabyte 9y ago
    Thanks for the book recommendation engine recommendation! Noting it for when I get home; been looking for good ones.

gmarx 9y ago

This isn't much the case anymore from my experience. A generation ago I recall it being general knowledge that if a loved one had to go into the nursing home you would bankrupt and have medicaid pay. A relative tried that this recently and is close to destitute as a result.