Head-spinning solution

Aunt Mabel was discombobulated. Before Uncle Henry died two years ago, he had always handled all their financial affairs. But during the months he had been so sick, he had also patiently stepped her through all the details of what she'd have to look after when he was gone. She thought she'd understood it at least as well as she needed to. But now everything was different.

"I hate this," her accountant told her. Normally, because of Uncle Henry's good planning, she needed to talk to her accountant only at tax time. But the scuttlebutt among her friends had sent her to him early this time.

"I hate this," he repeated. "But I have to advise you that if you really want to be careful about the future, you're going to have to cut out the giving you've been doing to your church. And those thoughtful regular gifts for the orphanage in the upper part of the state, I'd really have to suggest that you eliminate those as well."

Uncle Henry and Aunt Mabel (yes, they're fictitious-but they're also all too real) had by no means been wealthy people. That's one reason Uncle Henry's careful planning had been so important. They had both worked through most of their lives at middle-income jobs. Both of their retirement plans were closer to "adequate" than to "posh." So now, because Aunt Mabel, who is a 68-year-old widow, has a life expectancy of perhaps 20 more years, she'll have to watch her p's and q's if she wants to live out her time as comfortably as she is living right now. And the word is definitely "comfortable" rather than "extravagant."

Besides, one of Uncle Henry and Aunt Mabel's two children had died 20 years ago in a traffic accident. The other, while a solid citizen, has had a whole series of business reverses. He loves his mother and keeps in touch with her, but Aunt Mabel knows she'll never be able to look to him for financial support if she finds herself in an emergency situation.

And that's what her accountant is telling her she has to worry about. Seems that the U.S. Congress, in a January frenzy to reach an agreement on a federal budget, stubbornly included a change that is likely to change radically the giving and stewardship habits of elderly people like Aunt Mabel and Uncle Henry. I say "stubbornly" because sharp-eyed observers warned the legislators about the harm they were doing. They just didn't care. And now, already, I've begun hearing from older people across the country-and they're understandably disturbed.

The troubling problem has to do with qualifying for Medicaid's long-term care coverage, a federal benefit for folks who can't afford standard care. For the elderly, Medicaid becomes especially significant when people like Aunt Mabel fall into debilitating diseases and, with no family to care for them, are forced to move into nursing homes or other assisted-care facilities. Medicaid officials obviously can't provide such assistance to everyone; with good reason, they must insist that benefits be limited to people with financial assets below a certain designated level.

So in good entrepreneurial (but sometimes dishonest) style, folks seeking the aid have through the years sought ways quietly to move assets off to their children or other safe parking places. In response, the government has tried to block that door by deducting all such "gifts"-for a three-year period prior to the award of any benefits-from the value of the benefits awarded. If Aunt Mabel decides to give her $100,000 house to her struggling son in the hopes that her own assets will be reduced, she discovers to her chagrin that Medicaid will immediately also trim $100,000 from her future benefits.

Fair enough, most people would say. How else could you run such a program?

But then comes the new rub-as of Jan. 31 of this year. The law just passed by Congress doesn't try merely to discourage such intra-family dealings. Now it extends the "look-back" period from three years to five years. And now it requires that all charitable giving-including every bit of her tithe to her local church, and starting at the beginning of the five-year period-also be deducted from future benefits. There is an appeal process, but one that is altogether too daunting for someone who, by definition, finds himself or herself in Aunt Mabel's plight.

Welfare like Medicaid has always been a boondoggle, and now it is almost certainly bankrupt. But for Congress to try to fix it on the backs of ordinary people like Aunt Mabel and her regular gifts to her church-it makes your head spin almost as fast as Uncle Henry must be spinning in his grave.