ENSIGN LAW FIRM NEWSLETTER
Congress and President Bush Slashed Medicaid Eligibility
Sadly for the most vulnerable of our citizens, poor children and poor elderly, a miracle did not happen and the juggernaut of budget cuts took aim directly at them. The Republicans in Congress rammed through the Deficit Reduction Act of 2005 (DRA 2005) with Vice President Chaney breaking a tie to assure passage. Then President Bush eagerly signed the Act into law on February 8, 2006. With the stroke of his pen putting the final touch on this law, Congress and the President have seriously impeded the ability of many poor senior citizens to qualify for Medicaid assistance with their essential nursing home care.
President Bush signed a version of the DRA only the Senate had passed; it never passed the House. So the law does not comply with the constitutional requirement that the same exact bill pass both Houses of Congress before the President signs it. At least two pending lawsuits are challenging the constitutionality of the law. It might be overturned but probably not any time soon. Most attorneys and states are proceeding as if the law is constitutional and will be fully implemented.
The proponents of DRA 2005 claimed ample justification for passage in the current and anticipated economic shortcomings of the existing Medicaid Program. With over 76 million Baby Boomers expected to retire with the upcoming decades and a decreasing population of taxpayers to foot the bill, it is not surprising that Congress and the President attempted reform. However the reform methods imposed by DRA 2005 seem like using a meat-clever for delicate surgery required to save a patient's life. The result will be felt by many potential Medicaid recipients and their families.
The implementation of these rules is just beginning. The Texas Health and Human services Commission has put in motion the rule-making process. Most likely the Texas rules will be in place on October 1st but the changes made by the DRA 2005 will be effective as of the date President Bush signed the law, February 8, 2006 and not on October 1st.
Substantive Changes made by DRA 2005
Extension of the Old Look-back Period to Five Years.
Presently, the Medicaid Program imposes a period of ineligibility for nursing home benefits to an individual who transfers assets for less than fair market value (we’ll call them gifts) within the three-year look-back period immediately prior to the date of filing the Medicaid application. Under the new rule, that look-back period will be extended to a five-year period.
Example: Under the old rule, if Ms. Smith gave her son an outright cash gift of $100,000.00 on November 15, 2002, the gift would not penalize Ms. Smith with Medicaid eligibility if she waited to apply for Medicaid more than 36 months from the date of the gift. Under the new rule, Ms. Smith’s cash gift would result in a penalty if she applied for Medicaid any time before the full five-year look-back rule had run its course.
While this change will have some impact, we don’t believe that it is a very substantial change or that its implications are nearly as significant as the next change. Its effects will be devastating to many people seeking assistance from Medicaid with their nursing home expenses.
New Transfer Penalty Period Beginning Date.
Presently, the Medicaid Program begins the penalty period for gifts on the first day of the month in which the individual makes the gift. Any gifts that were made prior to February 8, 2006 are “grandfathered” and the penalty period is determined under these old rules. Under the new rule, for any gifts made on or after February 8, 2006, this penalty period will not even begin until the individual applies to qualify for Medicaid benefits, and would have been eligible, except for the asset transfer (gift) and the corresponding penalty period.
Example: Using the facts illustrated in the prior example, under the old rule, the penalty period would have begun on November 1, 2002, and would have ended 854 days later ($100,000 divided by $117.09 per day) or two years and 124 days after the first day of November, 2002. Under the new rule, the penalty period would not even begin until Ms. Smith had been admitted to a Medicaid qualified nursing home, was in a Medicaid bed, had medical necessity for being in the nursing home, had total countable resources of less than $2,000 and her income was less than $1,809 per month. Only then would the penalty period begin to run for any gift made after February 8, 2006 and would last for one day for each $117.09 that was transferred as a gift.
Let’s consider the implications of this change in the hypothetical case of a grandmother who wants to help her only granddaughter through vocational school. Suppose on February 10, 2006, for love and affection, she gave her granddaughter $10,000 to pay her vocational school tuition. Suppose two years later, this grandmother has lost her health, has no home, and has spent all she had remaining after the gift on caring for herself and her medical bills. Her medical condition requires her to be in a nursing home and she entered the facility on March 1, 2008. The penalty period for the gift she gave over two years ago begins on March 1, 2008 and Medicaid will not make any payments towards her medically necessary nursing home care for 85 more days, almost 3 months.
Who is going to pay for those three months of care until the grandmother is qualified? The grandmother’s only child is deceased. Her only grandchild no longer has the money and cannot afford to pay anything towards her grandmother’s care as she is divorced with a small baby to care for. Who is going to pay? The nursing home can’t afford to absorb the costs that will probably exceed $12,000. The government isn’t going to pay because she’s not qualified for Medicaid. Who will pay for her care? What will the nursing home do? Will the nursing home take her to the hospital on the pretext that she has an acute care need and then refuse to readmit her to the nursing home when the hospital finds there is no such need? Will the nursing home call a cab and put her and all her worldly possessions in it and pay the fare to her granddaughter’s home?
What will happen to this poor lady? Unfortunately, this is the critical question that we anticipate will be asked innumerable times in the future once the full impact of the DRA 2005, especially this provision, is felt across America.
In an apparent effort to answer these questions, DRA 2005 requires each state to have a process whereby a hardship waiver can be granted if application of the transfer penalty results in the deprivation of medical care that would endanger the applicant’s health or life, or of food, clothing, shelter or other necessities of life.
Presently in Texas, hardship waivers can be granted by appealing to a fair hearing officer appointed by the Texas Health and Human Services Commission. However, there is no state court judicial review of the hearing officer’s decision. If one disagrees with the decision, the only remedy is to file a new lawsuit in court if there is a reasonable basis for doing so, which may not be too likely.
But to obtain such hardship relief, someone has to be in place to file the appropriate paperwork and push through the application for hardship relief. Do you think the State of Texas is going to be granting these hardship waivers often when to do so would be effectively defeating the purpose of DRA 2005 and depleting its Medicaid budget on people who did not plan well?
Restriction on the Sale of Medicaid Qualified Annuities.
Presently, the Medicaid Program allows an individual/Medicaid applicant who purchases an irrevocable and non-assignable, actuarially sound, level payout Medicaid qualified annuity, to name anyone as the beneficiary. Under the new rule, if an individual/ Medicaid applicant purchases such a Medicaid qualified annuity, he or she will have to name the respective State of Texas Medicaid Program as the primary beneficiary. This means that if the amount of Medicaid assistance paid for the individual is greater than the amount of the annuity, nothing will be paid to the remainder beneficiaries. And if the non-institutionalized spouse (or a minor or disabled child) is the first beneficiary, the secondary beneficiary must be the State of Texas Medicaid Program. So it will collect from the annuity if that first beneficiary does not survive or if they transfer the annuity for less than fair market value.
Elimination of the “Asset First Test”.
Presently, the Medicaid Program allows a community spouse to increase his or her Community Spouse Resource Allowance (“CSRA”) to whatever amount is necessary so that he or she can achieve his or her Minimum Monthly Maintenance Needs Allowance (“MMMNA”), without first taking into consideration the monthly income received by the institutionalized spouse. Under the new rule, which is defined as the “income first rule”, a community spouse will first have to take into consideration any monthly income received by their institutionalized spouse when evaluating his or her opportunity to achieve his or her increased MMMNA amount.
Texas has already adopted this rule for all applications now being filed. There is an exception for cases in which the snapshot date (the first day of the month in which a period of 30 days or more of institutional care began) was before September 1, 2004.
Limitation on Home Equity.
Presently, the Medicaid Program allows an individual/Medicaid applicant to exclude the entire value of his or her homestead. Under the new rule, an individual/Medicaid applicant would be allowed to exclude a homestead with an equity value of no more than $500,000.00 with few exceptions and with this amount being indexed for inflation starting in 2011. However, in this area of Texas it is highly unlikely that any person attempting to qualify for Medicaid would have that much equity in a homestead.
Section 6041 of DRA 2005 permits states to increase cost sharing for any group of Medicaid beneficiaries subject to certain limitations. Cost sharing could be imposed and/or increased for any item (e.g. prescription drugs, durable medical equipment) or service (e.g. hospital stays, doctors’ visits, occupational, physical or speech therapy sessions). Obviously the individuals who would be forced to pay these added costs are already at or below the income and asset eligibility thresholds for Medicaid. So they will likely be forced to choose between food, winter heat and medical care. Although not part of DRA 2005, perhaps such sad circumstances could eventually lead to “family responsibility” as discussed below in some detail.
Also changed were rules regarding (1) the purchase of life estates in homes owned by someone other than the Medicaid applicant and (2) the use of promissory notes and loans in planning for Medicaid qualification. DRA 2005 also permits the expansion of state long-term care partnership programs that encourage the purchase of long-term care insurance in exchange for keeping more assets when applying for Medicaid. At the present time, Texas does not offer such a program but it may be considering one in the foreseeable future.
In presenting these significant changes, I hope you will consider the implications before you find yourself or your loved one or your clients in the midst of a health care crisis. The decisions you make today may have a significant impact upon the future.
As we have been refocusing our practice to be an elder-centered practice, we have come to realize that the key issues elders and their caregiving loved ones face actually revolve around providing high quality care that improves their quality of life. The money issue is not the central issue when the care and quality of life issues are faced realistically. This is because nursing home care is not the primary source of care for the vast majority of elders. So Medicaid is not going to be available because it primarily pays for nursing home care and sometimes for in-home care, though rarely. When we get our priorities straight and recognize that our elders’ funds are for their care, the money issues usually work themselves out with some planning, often short of Medicaid qualification.
Implications for the Future of Elder Law
The National Academy of Elder Law Attorneys met in late April and, naturally, the hot topic was DRA 2005 and where the Elder Law community goes from here. Three primary conclusions were drawn by most participants.
First, elders will still have chronic long-term care needs and will confront dilemmas associated with their aging. They will still need planning for incapacity, property management, health care decision-making, public benefits eligibility, obtaining quality care and proper wealth transfers. In fact, as our population ages the problems they face from poor planning (or no planning) will be exacerbated. So elder law attorneys will still be needed to help solve such problems.
Second, DRA 2005 was poorly written and few, if any, of us “know” with any certainty all of the ramifications that will arise over the years. There are many questions about how this law will be construed by the Medicaid authorities in the various states as well as the courts, both federal and state.
Third, with the changes in the asset transfer rules, attorneys who have focused on asset protection may be scratching their heads and looking for more work. Many of the strategies and procedures that worked in the past won’t work anymore. Real forethought must be applied to solving the elders’ problems in their changing circumstances. Focusing on enhancing the quality of life of our elder clients may mean “spending” the money rather than “saving” it. Elder-centered Life Care Planning (as described below) will become more valuable to our clients and their families.
Medicaid Estate Recovery Has Begun in Texas
In the last week, my Texas NAELA colleagues have been reporting that their clients are beginning to receive notices on behalf of the State of Texas claiming repayments for Medicaid. These notices are in the form of letters from The Recovery Unit of the Public Consulting Group, Inc. (PCG). It is the contractor hired by the Texas Health and Human Services Commission to send the notices and file the claims.
Sadly, my colleagues report that some of these letters are without any basis in fact. In one case there was not property left at the death of the Medicaid recipient in his name. In another case, the notice was sent to the estate of a Medicaid recipient who had qualified before the effective date of the estate recovery rules (applications filed after March 1, 2005) and would have been exempt. To make matters worse, that notice came to his surviving spouse and upset her greatly because she knew there is not supposed to be any estate recovery if a spouse survives.
In yet another case, the notice was sent to the nursing home where the deceased Medicaid recipient had resided and it was sent to the attorney by facsimile. The letter of notice of intent to file a claim gave the personal representative just two weeks to respond and the day the attorney received the notice was the deadline. The attorney did not have letters testamentary in hand. And the letter stated that information forwarded without supporting documentation would be ignored. So what kind of a problem does this family and their attorney have on their hands? Oh, yes, this recipient also had qualified for Medicaid before the March 1, 2005 deadline. So the notice was like that from a supposed creditor to whom the recipient of the letter is not indebted – or a claim for a fictitious debt. If you or I sent such a notice, we would be in big trouble under the Federal and Texas Debt Collection Acts that prohibit such false claims and regulate fraudulent notices and other practices.
So if you or your family members or clients receive such a notice, be aware that some response is needed in a timely fashion. We recommend you consult with qualified legal counsel for assistance to preserve any rights against such claims. The notice may be accurate and the claim valid – but then it may not be. How will you know without some legal assistance?
Family Responsibility Laws May Come to Texas
At the recent meeting of the Texas Chapter of the National Academy of Elder Law Attorneys in Dallas, a member reported a disturbing conversation with a highly-placed employee of the Texas Health And Human Services Commission. This HHSC employee predicted that so-called “Family Responsibility Laws” (sometimes called “familial” or “filial”) may come to Texas soon to help alleviate the high costs to the State and HHSC for long-term care costs.
In 2005, The National Center for Policy Analysis, a conservative policy group, released an issue brief proposing that states begin enforcing filial responsibility laws to reduce long-term care costs. At that time, 30 states had laws that require adult children to care for their indigent parents. This group claims that adult children should be forced under such laws to reimburse the state programs that provided care for their indigent parents.
So far filial responsibility laws have not been enforced in such a way because federal law prevents state Medicaid programs from considering the finances of anyone but the applicant or his/her spouse. However, one element of the Medicaid reform proposal passed by Congress and vetoed by President Clinton in 1995 would have allowed such state “Family Responsibility” laws to become commonplace as a source of paying for the cost of nursing facility and other long-term care services. Adult children, at least the wealthy initially, could have been required to pay some or all of the cost of caring for their parents in nursing homes or other state-provided arrangements.
So elders and their caring family members need to start thinking of alternatives for quality long-term care that improves their quality of life. They should consider other sources for funding this care. With the Baby Boomers growing older and approaching their own need for long-term care and with the younger generation being smaller and less affluent, there just will not be government funds from tax revenues to pay for all those who need nursing home care in the future. If the trend continues, perhaps the clock will eventually be turned back to 50 or more years ago when families took care of their aging parents by making whatever sacrifices were necessary because there was no governmental program for doing so at the expense of taxpayers as a whole.
Avoiding the need for nursing home care for as long as possible is a viable solution for some families. It is one of the things our profession interdisciplinary team encourages and facilitates for our Life Care Planning clients. By empowering caregivers with information, skills and motivation to provide the best care using the elder’s resources, elders benefit with a higher quality of life and less likelihood of ever requiring nursing home care. And when they must have it, their experience can be enhanced and made more enjoyable under the watchful eyes of their family caregivers.
Elder-Centered Life Care Planning
Since Bonnie McMillan, R.N., was employed as our Geriatric Care Manager in December (as announced in our December, 2005 newsletter), she has hit the ground running and has become a welcome and essential member of our interdisciplinary professional caregiving team. As a highly skilled, experienced and recognized chronic care giver, she has been exceptionally well-received by her fellow caregivers in the community of chronic care providers. Their response has been gratifying to all of us at the Firm.
After their initial shock that such a competent long-term care specialist is working for a law firm and is not a litigator but a care giver, they recognize our firm has the same goal as they do: to promote the good health, safety, and well-being of their resident or patient who is our elder-client. So when Bonnie or our other staff members visit our elder-clients at nursing homes, assisted living facilities, or wherever they happen to be, the facility’s management and staff understand that we are all focused on helping take care of someone’s mother, or father, or spouse, or other loved one.
This wonderful relationship with fellow caregiving professionals has benefited our clients directly in several cases. In one case the mere fact that she paid a professional courtesy call on a facility and spent time talking with a long-time friend who had been a coworker with Bonnie produced a noticeable change in the care our elder client received until she passed a few weeks later. And this was not at all a case of Bonnie encouraging accountability to standards of care or advocating for better care. Bonnie’s mere mention to her friend that our client was a patient there improved the conditions to the extent the family caregivers noticed immediately.
Bonnie has had a number of experiences that she had not anticipated when she was on the nursing side of the community. They have been good for her professional growth, enabling her to be even more fulfilled in the use of her education, experience and skills. She is a better person and a better Geriatric Care Manager as a result.
In somewhat of a baptism by fire, Bonnie was engaged as an expert witness in two guardianship cases. Her assessment of these elders’ physical well-being and situations, review of their medical records coupled with her wise counsel contributed greatly to the positive outcomes for these who were in need of protection and assistance of guardians under court order.
As we have been engaged for Life Care Planning by several clients, Bonnie has helped them and their caregivers with their various concerns about long-term care though personal assessments, conferences and telephone consultations. She is the point of contact to assist the family in accessing and coordinating the services necessary for their loved one.
Bonnie does not directly provide health care, long-term care or companion services to our elder-clients. But she educates and empowers their caregivers to procure and use such service at the highest level of quality care.
Bonnie has become an integral, valuable member of our professional interdisciplinary caregiving team. We are blessed with each team member and their contributions of special skills and talents: my wife, Joy, as our Paralegal and Firm Administrator; Trina as our Public Benefits Specialist and Legal Secretary; and Bonnie as our Geriatric Care Manager. Whenever they may assist you or your family and friends, please give them a call.
Continuing Education and Speaking
In March I met with my colleagues in the Texas Chapter of the National Academy of Elder Law Attorneys to learn more about the developments described above. This Chapter meeting was in conjunction with the Advanced Guardianship Course and the Advanced Elder Law Course presented by the State Bar of Texas in Dallas. These courses provided excellent education on these subjects that are so important in our practice.
All of the professional team attended a two-hour telephone course presented by the National Academy of Elder Law Attorneys entitled An Overview of Veterans Benefits that helped us all to better understand this important area of public benefits for veterans and their spouses.
In May I’ll be attending the two-day Institute on Estate Planning presented by the Amarillo Area Estate Planning Council. In August I’ll be attending the annual two-day Tax Institute presented by the Panhandle Chapter of CPAs. In September, Bonnie will be attending a two-day seminar in Nashville entitled Interdisciplinary Life Care Planning Concepts for Members of the Elder Law Staff for Geriatric Care Managers.
In April, Bonnie and I presented three sessions of the outstanding educational series, Understanding Geriatric Needs Course II: Advanced Principles of Eldercare at Amarillo College. Bonnie taught four hours on Dementia & Alzheimer’s Disease and Behavioral Management of Dementia. I taught two hours on the topic Ethical Issues and the Elderly. The first hour was the presentation of a paper I wrote entitled Ethical Issues and the Elderly: Guidance for Eldercare Providers. The second hour dealt with end of life issues, advance directives, elder abuse and the use of restraints. If you would like to receive a copy of my paper, Ethical Issues and the Elderly: Guidance for Eldercare Providers, I’ll email it to you if you will send me an email to MrEnsign@ensignlaw.com. If you would like a printed copy, please call Trina and request one. It is also posted on our web site.
Bonnie also taught a 3-hour course entitled Abuse of the Elderly in an extended continuing education series for social workers. She and I also spoke to the Super Seniors Group of the Westview Christian Church in January. If you would like us to speak to your group, please call.
Bonnie and Trina have represented the Firm at several health fairs providing information about our Life Care Planning and other legal services. Mark you calendar and plan now to attend the Senior Fall Festival on Thursday, October 12th, from 9:00 am to 1:00 pm at the Civic Center. Sponsored by the Senior Ambassadors Coalition, it will be a great opportunity to learn about many of the services available to elders from care providers in this community.
Our team members are grateful to God for affording us the opportunity to serve our community and the elder population while equipping us with the education, experience, wisdom and skills needed to provide appropriate services to meet their needs. Whenever we may be of assistance to you, your loved ones, your friends or your clients with Life Care Planning or any aspects thereof, please contact us. We look forward to working with you.
May your summer be warm but not too hot and wet with beneficial drought-breaking rains at appropriate times to refill our reservoirs and aquifer for our future.