Simulating the Fiscal and Distributional Impacts of Medicaid Eligibility Reforms

About 43 percent of nursing home costs are paid by Medicaid for the poor and for those who spend-down assets to qualify for Medicaid. We estimate the costs and distributional impacts of changes in the Medicaid asset test and the effect on the number of people spending down to Medicaid eligibility levels. Increasing asset thresholds from $2,000 to $12,000 would cost less than $4 billion, reduce spend-down rates, and increase the proportion of people eligible for Medicaid on admission to a nursing home. Even after such a change, about 80 percent of Medicaid benefits accrue to individuals with incomes less than $10,000.