A recent federal audit found more than a fourth of the people who applied for Medicaid long-term care benefits in three states owned more than $50,000 in assets but managed to keep their property because it did not count toward the program’s eligibility guidelines.

Though Oregon was not one of the states in the audit, the same thing happens here, officials say.

“There are people who have absolutely nothing (and receive benefits from our state),” said Dale Marande, manager of the Oregon Aging and People with Disabilities Section’s Medicaid Financial Eligibility Group. “And there are people who have more money than most people would think someone on Medicaid should have.”

According to a recent report by the U.S. Government Accountability Office, Medciaid programs paid about $50.6 billion, or 32 percent, of total U.S. nursing home costs in 2012.

This made the publicly funded health plans — which use a combination of state and federal money to provide health care services for low-income individuals — the largest payer of these expenditures that year.

“Medicaid spending on long-term care services is likely to increase, placing a burden on already strained federal and state resources,” GAO Health Care Director Carolyn Yocom wrote in a May 22 letter that accompanied her agency’s audit of the program’s eligibility guidelines.

Because it’s designed to serve as a safety net for people who cannot afford to pay their medical expenses, Medicaid has income and eligibility guidelines.

Generally speaking, the programs offer long-term care benefits only to people who earn less than three times the Supplemental Security Income threshold, which currently comes to $2,163 a month or about $26,000 a year. Several states, including Oregon, let people applying for long-term care benefits set up a special trust if they earn more than this amount.

They must also own less than $2,000 in countable assets — which exclude the value of a person’s primary residence, primary vehicle and other items that are considered exempt from the program’s eligibility guidelines — while couples are typically barred from owning more than $3,000 in assets.

But these income and asset rules vary from state to state. Marnade said that while Oregon’s Medicaid program, the Oregon Health Plan, has the same income eligibility guidelines for long-term care recipients as described above, its asset restrictions are a little different.

In Oregon, if the person applying for long-term care benefits is single, he or she must own less than $2,000 in countable assets. But if they are married, Marnade said, the couple’s total countable assets are divided equally between both spouses and the person applying for the benefits must spend down his or her share until they have reached the threshold.

For instance, he said that if the applicant and his or her spouse own $100,000 in countable assets, he or she must spend $48,000 toward their long-term care costs — the applicant’s half of the couple’s total countable assets minus the $2,000 threshold — before the Medicaid program will step in and cover the rest of the expenses.

They can use this money to make certain purchases but are barred from giving it to a child or another person besides their spouse, although loans or caregiving arrangements are permissible. The prohibition on gifting money to an heir spans the five-year period before applying for benefits.

“The reality is that most of our clients are poor and so the asset thresholds aren’t really an issue,” Marnade said, explaining about half of the people who apply for Oregon’s long-term care program already receive SSI benefits from the federal government and automatically qualify for Medicaid as a result.

According to the GAO’s audit — which looked at files pulled from Palm Beach and Sarasota counties in Florida, Nassau and Westchester counties in New York, and Charleston and Richland counties in South Carolina (each chosen because it has a large, wealthy senior population) — 41 percent of the people who applied for benefits had a total net worth of less than $2,500. This sum includes assets that counted toward Medicaid’s eligibility guidelines and exempt assets.

The audit found 32 percent of these people had a total net worth of between $2,500 and $50,000, 13 percent had a net worth of between $50,001 and $100,000, and another 14 percent had a net worth of more than $100,000.

In each of these cases, the auditors included items that counted toward the program’s asset threshold and those that were exempt from this criteria.

Breaking these exempt assets down by type, the audit found:

• 39 percent of the people who received the benefits owned a prepaid funeral arrangement that had a median value $9,311

• 34 percent owned a life insurance policy that had a median value of $2,422.

• 31 percent owned a primary residence that had a median worth of $68,350.

• 26 percent owned a vehicle that had a median vale of $3,110.

But while these assets are fairly common and it could be understood why someone would own them and still need help paying long-term care costs, the GAO’s audit also identified a few cases where people set up accounts that raised an eyebrow among regulators.

The audit found 2 percent of the beneficiaries had given their children or another loved one a loan or promissory note that had a median value of $116,500, 3 percent had set up a trust that had a median value of $82,000, and 3 percent set up a type of land interest known as a life estate that had a median value of $71,550.

Yocom wrote that while all of these practices face some level of scrutiny by the people who process the applications, they were a clear sign that certain applicants, “sometimes with the assistance of attorneys or financial planners,” had worked out a way to protect their assets that complied with existing law and allowed them to receive the benefits.

“There are always going to be exceptions,” Marnade said, explaining he has run across several people who may have a high net worth, or appear to have a high net worth, and still receive help from the state government.

But he also said that looks can be deceiving.

For example, a $100,000 bank account or trust set up to benefit a surviving spouse would pay $2,000 in interest each year — about $166 a month — at an annual interest rate of 2 percent. This would not offset the income lost from the death of the spouse, let alone cover any increased medical bills or long-term care costs incurred by the surviving spouse.

“They’re not spending the principle,” he said, explaining why this type of an account would be exempt from Medicaid’s eligibility rules. “They’re using it to generate capital.”

Marnade said the state, through its asset recovery program, can file a claim against the principle of this account once the individual’s spouse dies so it can recoup some of the money it spent paying long-term care bills.

— Reporter: 541-617-7816, mmclean@bendbulletin.com