'Mine Eyes Dazzle; She Died Young’: Medicaid Dead at 40?

“Cover her face. Mine eyes dazzle. She died young." (Duke Ferdinand, Act 4 Scene 2, in English dramatist John Webster’s revenge tragedy from 1612 "The Duchess of Malfi")

Medicaid is just 40 years old. As the “one, big beautiful” budget bill?makes its way through the House and Senate in March 2025, massive cuts to Medicaid are expected. Will the passage of this bill sound Medicaid’s death knell? And what might that mean to your financial health?

History of Medicaid

The Medicaid program?came into existence in 1965, signed by President Lyndon B. Johnson in his “unconditional war on poverty.”?As Judith Moore?defines it, “Medicaid was a broad program to provide States the opportunity to receive Federal funding for services provided to many groups of categorically eligible needy people.”

A 2014 press release from the LBJ Library?explains Johnson’s commitment, revealed in his State of the Union address on Jan. 8, 1964, “to alleviate poverty in America. From [Johnson’s] perspective, the social issues of civil rights, joblessness, inadequate schools, housing, and healthcare were symptoms of the impoverished living conditions of one-fifth of American families. Johnson believed that the most effective way to ‘win the war on poverty’ was to introduce legislation, programs, and tax cuts that would result in a Great Society, giving all Americans — not just the poor and underprivileged — a better quality of life. This address also underscores President Johnson's commitment to bipartisanship as he asks Congress to 'to put [their] country ahead of [their] party, and to always debate principles; never debate personalities.'"

Johnson's plan worked; from 1963 to 1970, the portion of Americans living below the poverty line dropped from 22.2 percent to 12.6 percent.

Who Relies on Medicaid?

Medicaid helps many types of people who struggle, including kids, disabled people, and the elderly —?20 percent of the U.S. population (KFF, 2019) or about 68 million human beings. If you’re specifically looking at spending for the elderly, KFF’s 2024 report?estimates that in July 2024, "Medicaid was the primary payer for 63% of nursing facility residents.”??It estimates that there are 1.2 million nursing facility residents in the U.S.

Remember the Medicaid Spend Down Era?

A few decades ago, back when we had printed newspapers, not a day went by when a law firm didn’t advertise its services to create a Medicaid spend-down trust. The theory was that if you moved your assets to your kids via a trust or other methods, you’d leave yourself with the appearance of poverty so that the government, through Medicaid, would cover your stay in a nursing home.

That way instead of whittling down the kids’ inheritance by nursing home costs, you’d pass that cost onto fellow taxpayers and protect your family coffers. By 2025, the folks who took advantage of that loophole are probably no longer with us, but how much regret would you have if you’d done the spend down — especially if the kids had already run through the money and nothing was left?

Will Medicaid Cuts Affect My Finances?

If you are a financially poor person of any age, these cuts will remove the limited safety net you currently rely on. For elderly people, if you start out at a nursing home as a relatively wealthy or at least financially comfortable person with some savings, you may also be affected. How?

Let’s say you enter a nursing home with assets of $300,000 that grow to $337,000 over 3 years (assuming 4% return)?and an annual Social Security income of $12,000. According to SeniorLiving.com, the average annual cost for nursing home care in a semi-private room could be about $110,360. So you’d pretty much be out of all of your saved assets in about 3 years, and your $1,000 per month Social Security won’t touch the $9,197 monthly cost of the nursing home.?What happens then?

For decades, Medicaid would pay that difference for you so that you could continue to live in the nursing home. Without Medicaid or another source of funds, you would be forced to move out of that nursing home. Where would an infirm, dependent, 80+-year-old you go? The answer to that is well beyond the scope of this blog, but for me at age 63, it’s a bit of a concern!

Is Medicaid Dead at 40?

It’s anybody’s guess what will happen to Medicaid funding in the next few months and years. Suffice to say, it’s likely that it will be reduced or dramatically cut. Each state could work to try to make up the difference and continue to pay for state residents to live in nursing homes. But if states don’t have the funds or don’t wish to commit their finite funds — also used for infrastructure, education, and many other competing tax-dependent needs — we old folks might be out of luck. And the millennial kids that many of us are still helping support probably won’t have the money to help us.

As Duke Ferdinand’s hit-man Bosola says as they look at the murdered duchess, "Other sins only speak; murder shrieks out."

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