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Cuts That Kill: Governor’s Budget Targets Long–Term Care Consumers


On January 9, 2004, Governor Schwarzenegger released his proposed budget for the 2004–05 fiscal year. As expected, many of the proposed cuts would hit programs that provide health care and other services to the aged, blind and disabled, particularly consumers of long term care. Many of the budget details are sketchy right now, but they do cut deeply into health and human services. Information on the Medi–Cal reform changes can be found on the CANHR web site (www.canhr.org). For more detailed information on the proposed budget, click on the budget committee web site (www.sen.ca.gov). Following are some highlights of what is proposed:

In–Home Supportive Services

The Governor’s budget proposes extensive cuts to the In Home Supportive Services (IHSS) program, which currently provides services to approximately 350,000 aged, blind and disabled California consumers, enabling them to remain at home.

Elimination of Residual Program: Proposed cuts include elimination of the "residual" IHSS program, i.e., consumers whose service provider is a parent or a spouse, consumers in need of protective supervision and persons with severe disabilities who receive payment prior to service delivery. This proposal will terminate services to approximately 75,000 aged, blind and disabled consumers.

Elimination of Domestic Services: Coverage for domestic services would be eliminated when the consumer resides with other able–bodied family members. Services such as house cleaning, meal preparation, laundry and errands would be eliminated for approximately 140,000 persons.

Reduction of worker wages and benefits: IHSS workers will also be greatly affected by the proposals, which would reduce state participation in IHSS provider wages, effectively reducing workers’ wages and benefits to the minimum wage of $6.75/hour and no benefits.

It should be noted that the average cost for IHSS is approximately $9,000 per consumer v. the average cost for Medi–Cal reimbursement in a nursing home of approximately $34,000 per consumer. The reduction in IHSS services will undoubtedly force beneficiaries into nursing homes sooner—at a much higher cost.

Medi–Cal Changes

The Governor has announced that he is seeking a waiver from the federal government by the end of 2004 so that the Department of Health Services can "redesign" the Medi–Cal program. The Governor hopes to save $400 million in general funds beginning FY 05–06 through major, but unspecified, Medi–Cal eligibility and benefits reductions. Clearly the denial of eligibility to thousands of aged and disabled recipients is one way to meet that goal.

New proposed regulations that would change the transfer of asset rules for Medi–Cal have also been released. Unfortunately, no one seems to know which version of these regulations will be the final version. The regulations will implement the 1993 federal Omnibus Reconciliation Act (OBRA ’93) and, at a minimum:

  • Change the look–back period from 30 to 36 months
  • Penalize concurrent transfers of assets
  • Change the rules regarding spouse–to–spouse transfers
  • Penalize annuities that do not conform to the Medicaid rules, i.e., require non–work related annuities to pay fixed, equal monthly payments over the life expectancy of the beneficiary.

The California Association of Homes and Services for the Aging (CAHSA)—the association of non–profit nursing homes—told CANHR staff that they would be sponsoring legislation to "reform" the Medi–Cal program to prevent transfers of assets. One change they want is a 60–month look back period, rather than the 36 months. It is CAHSA’s view that, by restricting transfers, more private pay money would be available to their member facilities. It is ironic that CAHSA would be concerned about the Medi–Cal program, since the majority of their members are either private–pay only or severely limit the number of Medi–Cal beds. Any such change, however, would require federal approval and approval by the legislature.

Protection of the Family Home

Since these changes would implement the federal laws, they were anticipated, and the initial version contained few surprises.

However, CANHR recently reviewed another package of regulations that went much further, in that they would penalize any transfer and prohibit nursing home residents from transferring the family home to anyone other than certain "exempt" individuals, i.e., the at–home spouse, a minor, blind or disabled child, a sibling with an equity interest or a son or daughter who has been living in the home and been providing care that enables the individual to remain at home.

Under current law, if a Medi–Cal applicant in a nursing home notes an "intent to return home" on the Medi–Cal application, the home is exempt and the beneficiary can transfer the home to whomever he/she wishes. If the home is transferred during the life of the beneficiary, there is no estate claim on the home when the beneficiary dies.

The proposed changes that CANHR reviewed would cause many Medi–Cal beneficiaries to lose their family homes or encourage them to transfer their homes prematurely to avoid Medi–Cal claims.

The public policy implications of deleting the home from protected transfers are also significant, as the overwhelming majority of long–term care applicants are more concerned with losing their family homes than they are with the potential for neglect and abuse in a facility.

Creating draconian rules that would deny long term care consumers the right to retain their homes and that penalize any transfer will do nothing for the Medi–Cal program, but a great deal for those who prey on the fears of elderly consumers—only now they won’t have to invent the fears. These consumers are guaranteed to be easy pickings for the myriad of living trust mills and salespeople who entice seniors into purchasing products and making transfers that are detrimental to their financial and personal well–being.

What Can You Do?

Most of our legislators are unaware of how any of the proposed changes would impact the lives of their constituents.

Let your State Assemblymembers and Senators know that these proposed cuts will not save Medi–Cal any money; they will not serve the interests of good public policy; and they will do much to foster elder abuse.