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Congress Votes to Deny Benefits To Thousands of Nursing Home Residents
On February 1, 2006, the U.S. House of Representatives, by a narrow margin of 216-214, voted to pass the Deficit Reduction Act (DFRA) of 2005 (S. 1932), which includes numerous provisions aimed at denying Medicaid benefits to current and prospective nursing home residents. Every House Democrat voted against the bill, along with 13 Republicans. It is also interesting to note that every California Republican House member voted for the bill.
The President signed the bill with great fanfare on February 8, 2006. However, as we go to press, there is still some question as to whether the DFRA is still a bill or if it has been signed into law. Apparently, a clerical error resulted in the President signing a slightly different version of the bill than the House voted on and different from the Senate version, where the bill squeaked by on a 51-50 vote, with Vice-President Cheney breaking the tie. This means that the President signed a bill that had not passed both chambers of Congress. In order for a bill to become law, the House and Senate must agree to it on identical terms. Although the customary solution is a unanimous consent agreement, after the contentious House vote, there is some question as to whether House members are willing to go this route. How they will fix this "typo"h is unclear, but it has not been fixed yet.
Over the next few weeks, CANHR will provide a more detailed analysis of the bill and its likely impact in California, particularly the implementation dates and whether legislation or regulations or both will be needed to implement the new federal law. Regardless of when the bill’s provisions are implemented, there is no question that the lives of long term care consumers will be impacted dramatically.
Five-Year Look Back and Period of Ineligibility
Current federal law requires the states’ Medicaid programs to "look back" 36 months (3 years) to determine if a Medicaid applicant has given away assets without adequate consideration. Since California never implemented the federal law, the look-back period in California has been 30 months. Under the new federal law, the look-back period has been extended to 60 months (5 years) and applies to gifts made on or after the date of implementation of the federal law.
Under current law, the period of ineligibility begins from the date of the transfer. For example, your grandmother could give $5,000 to a grandchild on March 1 and be eligible for Medi-Cal on April 1, since the period of ineligibility (one month) has already run during March. Under the new federal law, the period of ineligibility will begin from the date of application. What this means for nursing home/Medi-Cal applicants is that they will be penalized for transfers made within five years of applying for Medi-Cal and the penalty period will begin to run the same day that they apply, when the money is long gone and all of their private pay money is spent.
Date of Implementation
Under the federal law, the date of enactment for most of the provisions is the date the President signs the law, which may or may not be February 8, 2006. The DFRA also allows states until the close of their legislative session, if statutory changes are necessary to comply with the new laws. However, since California hasn’t even implemented the OBRA 1993 laws, there are a lot of questions as to what the date of implementation would be in California. Eligibility Workers have not been given any new instructions and are following the current law. When California does implement the law, will it be through legislation, regulations or simply an All County Letter? Will the Department follow their past practices and only apply the new law to transfers made on or after the new laws go into effect in California? These and many other questions need to be answered by the Department and soon.
Undue Hardship Provisions
The DFRA requires states to provide for a hardship waiver process to determine whether an undue hardship would exist when the new transfer of asset provisions are applied.
Although California currently has undue hardship provisions, it is not known whether the state will retain these regulations or promulgate new ones. In order to prove hardship, those denied Medicaid would have to be able to understand their rights, file for a hearing in a timely manner and have legal representation at fair hearings. This is not likely to happen for the majority of elder and disabled applicants, who have already spent their assets and can’t afford legal representation.
Income First Rule
Under current California law, if the community spouse’s minimum monthly maintenance need allowance (MMMNA) is below the annual rate ($2,489 for 2006), he/she can apply for a fair hearing or court order to retain assets over the Community Spouse Resource Allowance (CSRA) level - if they have excess assets - because they are needed to generate income. This means that an at-home spouse whose income is, for example, only $500 per month, can often retain assets well above the $99,540 level, before looking to retain any of the nursing home spouse’s income. This is the most preferred way to ensure that the community spouse can be somewhat financially secure, since after the nursing home spouse dies, much of their income dies with them. Under the new federal "income first" rule, states are required to allocate any available income from the nursing home spouse first, before any additional assets will be allocated. Thus, spouses will be required to spend down most of their assets regardless of how much income will be left after the nursing home spouse dies.
Outright denial of Medicaid to anyone with more that $500,000 equity in a home, unless there is a spouse or a minor, blind or disabled child living there. Given the housing values of homes in California, thousands of prospective Medi-Cal applicants will be automatically denied benefits for nursing home care. Although the federal law allows states to increase this limit up to $750,000 in equity, no steps have been taken to do this yet in California.
The bill encourages elder fiduciary abuse by forcing people to take out equity loans or reverse mortgages to pay for care. While there are a few reverse mortgage organizations that are reputable, applicants must live in their homes in order to qualify. They are not available for those who are going into nursing homes. A new cottage industry will be born again. Seniors and the disabled will be faced with sleazy mortgage lenders who will offer money for unconscionable rates that they will never be able to pay. In addition, those who do take out equity loans are unlikely to use those funds to pay for nursing home care as a first choice. They are much more likely to try to pay for at-home care or a less-restrictive alternative to institutionalized care.
Disclosure and Treatment of Annuities
Under current California law, the principal in an annuity is considered "unavailable" for the purposes of Medi-Cal eligibility as long as the annuity is structured to pay out fixed, equal payments over the lifetime of the beneficiary. However, balloon payment annuities, i.e., annuities structured to pay out a large lump sum payment at the end of the period, have been common, since no penalty attaches. Any income from the annuity is counted toward the share of cost. Annuities purchased on or after September 1, 2004 are subject to Medi-Cal recovery.
The new federal laws are substantial and comprehensive. In short, the new annuity rules:
These are just the highlights of the Medicaid provisions of a bill that will impact hundreds of thousands of low-income elders, disabled, students and families throughout the country. Watch our website for news of how these provisions will be implemented in California.
The latest version of the Deficit Reduction Act of 2005 and the list of California House members who voted for the bill can be found at: http://www.canhr.org/news/MedicaidAlert200512.html