In my short career as a health policy blogger, I have learned that any posting that screams “Screw the insurance companies!!” attracts many groupies who salute me with raised Zippo lighters outside the family home. Criticizing the purveyors of bogus links between vaccines and autism will also attract a crowd. These people deploy the same lighters to more hostile effect. Postings that address knotty problems that lack evildoers, hysteria, and conflict attract…well pretty much nobody. Consider S2743, the Financial Security Accounts for Individuals with Disabilities Act.
Are you still reading? You may be the only one.
If you have a serious disability, Medicaid and other means-tested benefits are often your lifeline to medical care, housing, and other basic services. If you care for a disabled parent, sibling, or child, establishing and protecting your loved one’s continued eligibility is essential. This is not straightforward or easy, given arcane rules and regulations in many states. Because our health and social service systems are so screwed up, this causes countless problems. One of the most annoying and harmful difficulties is that disabled people cannot have something the rest of us take for granted: a savings account.
Consider one scientifically selected representative case: my intellectually disabled brother-in-law Vincent. He has many health problems, and runs a six-figure healthcare tab, which Medicaid generously covers. It also covers his sheltered workshop and other services he needs. He recently moved into a nonprofit group home. In return for room, board, and various forms of assistance, Vincent signs over his monthly Social Security and Food Stamp benefits to the agency. He can keep a $50 monthly allowance for his incidentals.
For many people, that $50 is their entire disposable income. It doesn’t go far to pay for the occasional movie, buying a morning coffee, replacing those old blue jeans that are wearing through. It goes even less far to cover decidedly non-frivolous services not otherwise covered. In some states, this includes dental services, various copayments, vocational, and transportation services. Vincent is more fortunate. He mostly needs to buy the occasional key chain or wallet. He needs to address some surprisingly expensive habits, including his wont to mutilate clothing with scissors or his efforts to clean his prized electric razor by immersing it in water.
He might handle these issues by dipping into a savings account. Only one catch: Illinois’s Medicaid asset limit is $2,000.
My wife and I are his guardians. We do various things to help him, avoiding anything that might jeopardize his access to the programs and entitlements he needs. . We do everything by the book. It’s an expensive and tedious book. We have impressive legal bills to prove it. For us, it’s a hassle but not a huge problem. It’s more important for many other people.
Right now, an estimated 700,000 intellectually disabled men and women are living with family caregivers over the age of 60. These disabled adults generally outlive their caregivers. This prospect terrifies many parents. Behavioral economics suggests that public policies should channel ambivalent and confused parents down a pathway which encourages prudent long-term planning. Instead, public policies make things worse. We encourage parents to leave disabled children officially penniless. We require caregivers to waste time and money, shuffling financial papers to preserve public entitlements.
In fact, special needs trusts can be established to address these difficulties. These allow families to secure benefits for a disabled relative and to address specific, non-medical needs. The rules can be complicated and daunting. Special needs trusts leave important areas ambigous or uncovered. The sophisticated and affluent are equipped to navigate these waters. A prospering branch of the legal profession serves this market niche. Not surprisingly, many families devise their own backhanded solutions to such problems.
As often happens with backhanded solutions, unintended consequences abound. Thus, a widow might nominally disinherit her disabled son to maintain his Medicaid eligibility, leaving her home to an able-bodied daughter under the implicit understanding that the remaining equity is intended for her brother.
Such an arrangement is unenforceable, and its furtiveness discourages planning. What if the daughter gets divorced ten years from now, and her husband fights for his share of the inheritance? What if she dies, loses her job, or borrows from these funds?
The Financial Security Accounts for Individuals with Disabilities Act, Senate Bill 2743 and a comparable House bill seek to address these problems.
The Act would allow families to establish accounts to assist loved ones living with significant disabilities. The accounts would carry tax advantages similar to those provided by IRAs and college savings accounts. They would provide an accepted, sensible way for families to set money aside over the decades to support a loved one’s continued care.
Bear with me as I provide the incomprehensible money quote:
SEC. 3. TREATMENT OF FINANCIAL SECURITY ACCOUNTS FOR INDIVIDUALS WITH DISABILITIES UNDER CERTAIN FEDERAL PROGRAMS. (a) Treatment as a Medicaid Excepted Trust- Paragraph (4) of section 1917(d) of the Social Security Act (42 U.S.C. 1396p(d)(4)) is amended by adding at the end the following new subparagraph: `(D) A trust which is a financial security account for an individual with a disability described in section 530A(b)(1) of the Internal Revenue Code of 1986.’.
(b) Account Funds Disregarded for Purposes of Certain Other Means-Tested Federal Programs- Notwithstanding any other provision of Federal law that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such provision to be provided to or for the benefit of such individual, any amount (including earnings thereon) in any financial security account for an individual with a disability of such individual, and any distribution for qualified disability expenses (as defined in section 530A(b)(2)) shall be disregarded for such purpose with respect to any period during which such individual maintains, makes contributions to, or receives distributions from such financial security account.
In plain English: Families can set aside funds to help a disabled loved one without jeopardizing her access to services she needs, reducing the need for pointless, sometimes dishonest and dangerous shenanigans families are now prone to do.
S2743 is decent and smart legislation. As far as I can tell, this issue attracts zero attention, even from the health policy crowd obsessed with medical savings accounts and individual mandates. The bill would attract useful buzz if its co-sponsors were caught seeking horizontal refreshment in establishments frequented by Elliot Spitzer. With Senators Casey and Hatch leading the charge, we probably need a backup plan.
These intricate byways in health policy can be boring, but they can be central to people’s lives. We can do better.