Medicare Beneficiaries and Their Assets: Implications for Low-Income Programs

The Henry J. Kaiser Family FoundationMedicare Beneficiaries andTheir Assets: Implications forLow-Income ProgramsbyMarilyn MoonThe Urban InstituteRobert Friedland and Lee ShireyCenter on an Aging Society, Georgetown UniversityPrepared for The Henry J. Kaiser Family FoundationJune 2002 The Henry J. Kaiser Family Foundationis an independent, national health philanthropydedicated to providing information and analysis on health issues to policymakers, the media,and the general public. The Foundation is not associated with Kaiser Permanente or KaiserIndustries. 1Medicare Beneficiaries and Their Assets:Implications for Low-Income ProgramsReport HighlightsEligibility for existing health programs for low-income seniors is generally based on applicants’income and assets. Targeting assistance to those with limited means requires consideration ofhow eligibility will be determined and whether the criteria currently used by existing programsallow them to reach their intended populations.This report, prepared by Marilyn Moon, Robert Friedland, and Lee Shirey, of The UrbanInstitute, reviews the income and assets of the current Medicare population, provides anoverview of the asset test and other aspects of the process used to determine eligibility forprograms assisting low-income Medicare beneficiaries, and considers how a range of policyoptions would affect eligibility and enrollment.• Forty percent of all beneficiaries have less than $12,000 in countable assets, with even higherrates reported by women (45%), African Americans (75%), beneficiaries in poor health (52%),and non-elderly beneficiaries with disabilities (74%).• Beneficiaries with low incomes tend to have minimal assets. Eighty-five percent of allMedicare beneficiaries with incomes below the poverty level have less than $12,000 incountable assets and more than half (57%) have less than $1,500 in countable assets.• The asset test often used for Medicaid (based on eligibility criteria for the SupplementalSecurity Income (SSI) Program) has remained the same since 1989, at $2,000 for individualsand $3,000 for couples. Since that time, the poverty guidelines for couples have increased by60 percent. This means that more people each year who qualify based on income are likely tobe ineligible due to their assets.• Even moderate asset holdings can prevent beneficiaries from qualifying for low-incomeassistances, with two million Medicare beneficiaries having countable assets that exceed theSSI limits.This paper considers the potential implications of either easing or eliminating the asset test in avariety of ways. For example, if $2,000/$3,000 asset limits were lifted to $8,000 for individualsand $12,000 for couples, an additional 740,000 people could qualify for benefits throughtargeted programs that assist people with incomes up to 100% of poverty. If income eligibilitycriteria were relaxed or new programs covering those up to 175% of poverty were implemented,2.2 million more beneficiaries would be eligible for assistance using these higher asset levelsthan would be eligible under the $2,000/$3,000 limits. 2The paper also explores the implications for seniors of receiving pension income as a lump-sumdistribution versus receiving the income in monthly installments over the course of theirretirement. The authors observe that lump-sum distributions have the potential to disqualifypeople who would otherwise be eligible for low-income programs if instead their retirementbenefits were paid out over the course of their retirement.• For example, if a program were targeted to Medicare beneficiaries with incomes below 175percent of the poverty level using a $2,000/$3,000 asset test, 7.5 million Medicarebeneficiaries would meet the income criteria, but would be disqualified based on theircountable assets. If, however, these resources were counted in terms of what they would yieldin annual income if spread over the course of a lifetime, then almost 5.5 million of these 7.5million beneficiaries would be eligible for assistance. While this does not mean that publicpolicy should rely on converting assets into annuities, it helps to put the value of retirementassets into context when considering programs targeted to low-income Medicare beneficiaries.This analysis demonstrates how people with the same overall level of resources may be treatedvery differently in terms of their eligibility for public programs depending on the way in whichtheir assets are defined and distributed to them upon retirement.SummaryWhile intended in part as a means of keeping spending on low-income programs in check,current asset tests exclude many low-income beneficiaries from programs designed to assistthose with limited resources. The data presented in this paper demonstrate that, generallyspeaking, those with low incomes also have minimal assets, particularly when considered asresources that need to be distributed over the rest of their lives.This analysis provides an overview of the existin