Since hiding or sheltering assets in order to become Medicaid eligible has been much talked about of late, it's worth pointing to a new report by Ellen O'Brien of the Georgetown University Long Term Care Financing Project. The project is funded by the Robert Wood Johnson Foundation.
The report, Medicaid's Coverage of Nursing Home Costs: Asset Shelter for the Wealthy or Essential Safety Net? (PDF) emphasizes the "little evidence that nursing home residents transfer assets to gain eligibility for Medicaid."
I've long suspected that the scope of the problem does not match the rhetoric around it. And this report is suggestive that that's the case. However, some of the data cited are rather old (the 1989 National Long Term Care Survey) and the 1985 National Nursing Home Survey. And, if there's really no payoff what are all those lawyers advertising for? (Go do a Google search on "Medicaid asset trust" or something similar) and note the number of hits.
Other data suggest that some elderly people transfer assets to avoid taxation, but recent changes in the inheritance laws will likely reduce the incentives to do so. But those same data also suggest that while wealthy people in declining health give gifts to avoid taxation, but the less wealthy people hold on to their assets as a precaution.
A 1993 study estimated the maximum potential Medicaid savings in nursing home costs was three percent. But that estimate included those who might have transferred assets, but who did not enter a nursing home. Savings estimates associated with state Medicaid waiver applications have been relatively small, the largest being 1.4 percent.
As they say, "absence of evidence is not evidence of absence." This report is helpful and it sets a balanced tone, but by no means does it end the argument.