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Medicaid's Nursing Home Coverage and Asset Transfers

Board of Governors of the Federal Reserve System, Washington, D. C.

Medicaid covers the costs of a long nursing home stay. This coverage may create an incentive for the elderly to transfer their assets to their children to qualify for Medicaid before entering a nursing home. Previous researchers had found little evidence that such behavior was widespread or that asset transfers were large. However, data from the Study of Asset and Health Dynamics Among the Oldest Old (AHEAD) suggest that the self-assessed probability of entering a nursing home is a significant determinant of the likelihood of making an asset transfer. The budgetary implications of these Medicaid-induced asset transfers were probably fairly small at the time of the study, but not insignificant, and are likely to have risen steadily since.

Key Words: Medicaid • nursing home care • federal budget • inheritance and succession

Public Finance Review, Vol. 35, No. 3, 414-439 (2007)
DOI: 10.1177/1091142106293944


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