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Seniors try to keep up with Medicaid laws

By Alison Hawkes For The 8 min read

HARRISBURG – Like any senior sitting at the crossroads between nursing home care and Medicaid, 80-year-old Janet has been under duress. The Warminster senior has sought to get her husband, who has dementia, onto Medicaid so that the public health care program for the poor can begin to pay for his nursing home care at the Bucks County-run Neshaminy Manor.

She’s burned through at least $144,000 in savings and cashed-out stocks for the year and a half he’s been there and at an assisted living facility, all as part of the process to spend down assets so he’ll qualify for Medicaid.

But she’s wondered what will be left for her to live on.

A reputable elder law attorney has helped, but the Byzantine process of Medicaid estate planning has left her confused and worried. Her husband recently qualified.

“It’s the insecurity, I think, because I don’t understand all this Medical Assistance,” she said. “It’s more or less over my head and I do worry. I wake up in the middle of the night and worry.”

Janet (not her real name) said she wanted to keep her identity disguised to prevent her husband from finding out how much she has spent from their private savings on his care.

It’s about to get even more complicated for seniors. Earlier this month, the state revised its Medicaid rules for the first time in a decade in an effort to stem abuses and restrain growth in the burgeoning program.

The more publicized changes deal with limits on doctor’s visits and psychiatric care. But the elements dealing with long-term care have the potential to delay eligibility to the nearly 246,000 Pennsylvania seniors who use the program.

State officials portray the changes as a way to stop applicants – with the help of estate planners – from gaming the system by sheltering assets while using taxpayer money to pay nursing home costs.

“Go to Google and type in ‘Medicaid estate planning’ and see what you get. That’s exactly why these things are being done,” said Niles Schore, a special assistant in the Office of Income Maintenance under the Department of Public Welfare. “We’re trying to create a system where people contribute not more than their fair share but not less than their fair share.”

But elder-law attorneys, who often serve as estate planners, worry that some of the changes will put greater financial strain on Medicaid applicants and their spouses, and will restrict their financial flexibility.

“I think this law was a knee-jerk reaction to this perception that rich people are qualifying for Medicaid,” said Leonard Shober, an elder law attorney in Montgomeryville. “These people going in have worked really hard to put that money aside. I don’t represent people doing this with millions of dollars.”

Sky-high costs

There are understandable reasons why Medicaid applicants seek to shelter assets. With nursing home costs reaching an average $70,000 a year, few but the wealthiest of people can afford to pay on their own. Those on moderate income want to see money remaining to pay for extra care when they need it most, or to leave some bit of inheritance to children.

The system rewards those who plan ahead. The state doesn’t go after assets that are transferred three years or more before a Medicaid application. But remaining assets within that time period are up for state scrutiny. With certain exceptions, the law requires applicants to pay their own way for nursing home care until they have $8,000 in assets left.

Many people are caught unprepared because they develop a sudden medical problem that forces them into a nursing home well before they anticipated.

Spouses still living at home may keep half the assets, and if there’s not enough for them to live on, they may draw assets and income from the institutionalized spouse.

The new law, however, requires that spouses at home put their assets into an annuity, which would pay out a regular income. Also, the Commonwealth of Pennsylvania must be listed as a secondary beneficiary on the annuity, so that if the spouse dies while the other is still under nursing care, the state can recover what it has spent on Medicaid.

In the past, remaining assets would go to inheritors.

Schore said this method is a way to ensure that Medicaid money is recovered and “the rest of us should not be subsidizing someone’s inheritance.”

But some attorneys say that wrapping assets into an annuity eliminates all other financial flexibility, and can be a costly choice given the commission fees involved. Plus, a recent spate in annuity fraud involving seniors means the state could be setting up Pennsylvania seniors to be taken advantage of, some say.

“It’s going to be very confusing for seniors, and the risk is that they may fall victim to unscrupulous annuity salesmen,” said Robert Gerhard III, a Glenside attorney who represents Janet.

The revised law also does the following:

– Formalizes federal requirements that ensure assets worth $500 or more are sold at fair market value when liquidating the estate to achieve Medicaid eligibility.

– Places a three-month limit on medical bills that can count as income deducted for Medicaid eligibility, unless an undue hardship is proven.

– Places a lifetime cap of $10,000 that can count as income deducted for Medicaid eligibility, unless an undue hardship is proven.

– Applies the same financial eligibility standards for people on Medicaid receiving care at home. Previously spouses could keep all the assets in their names.

– Includes money from lawsuit settlements as a spend-down asset for Medicaid eligibility.

Footing the bill

These changes delay – although do not eliminate – Medicaid eligibility because they extend the penalty period in which private assets must be used to pay for nursing home care.

But someone in desperate need of nursing home care may not be able to wait, even if they’ve improperly transferred assets or are paying medical bills that don’t count toward income deductions, said Alan Rosenbloom, president of Pennsylvania Health Care Association.

That means the state will accomplish its savings by shifting more costs onto long-term-care providers, who are often the institutions of last resort, Rosenbloom said.

“A lot of the problem here is you’re asking people not in the position to make sound financial decisions for themselves to find a way to get the money back that they’ve already placed somewhere else,” Rosenbloom said. “The trick, of course, is the person does not have that money, so who eats the cost?”

Schore said the two caps on medical bills are meant to close a loophole nursing homes have been using that allows them to collect a higher private rate while Medicaid eligibility is being established. Since the Medicaid rate is lower, Schore said, some nursing homes delay sending in Medicaid applications.

But those with legitimate medical expenses not related to nursing home care will be counted as a case of undue hardship and will be exempt from the stricter limits, Schore said.

“Our expectation is we will no longer have these long delays,” Schore said. “You’d have to be a very stupid nursing home to continue that scam.”

Stemming the growth

In the end, the changes save the state only $1.1 million a year, though the state’s argument is that they help stem longer-term growth in the program.

It’s well accepted that the state will have to take more drastic measures in future years to control Medicaid, a $14.2 billion program that’s eating 19 percent of the state’s budget this year. The program is also used for younger people and the disabled, but seniors are the fastest growing segment.

So far, there’s been little talk in state government of what comes next, although some lawmakers are proposing tax deductions for the purchase of long-term care insurance.

“It’s time to look at other avenues that can make a difference,” said Rep. Kathy Watson (R-Bucks), who serves on the House Health and Human Services Committee.

Officials are also looking to the federal government for answers.

The feds could extend the penalty period for transferring assets back more than three years.

Or, they could choose to reverse an anticipated $10 billion in federal cuts to the program over the next five years, which has left states footing a greater share of the bill.

“I think there’s a limit to how much fraud and abuse, realistically, is going on out there,” Department of Public Welfare Secretary Estelle Richman said at a luncheon Monday. “And I think there’s a limit to how long a current, perceived, health-care system can grow until there’s major changes in the federal government.”

Alison Hawkes can be reached at 717-705-6330 or ahawkes@calkins-media.com.

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