November 2005

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By ROBERT PEAR

Published: October 20, 2005
WASHINGTON, Oct. 19 - The Bush administration approved a sweeping Medicaid plan for Florida on Wednesday that limits spending for many of the 2.2 million beneficiaries there and gives private health plans new freedom to limit benefits.

The Florida program, likely to be a model for many other states, shifts from the traditional Medicaid "defined benefit" plan to a "defined contribution" plan, under which the state sets a ceiling on spending for each recipient.

Children under the age of 21 and pregnant women will be exempt from the limits.
The Florida plan says, "The state will set aside a specific amount of money for each person enrolled in Medicaid," based on the person's medical condition and historic use of health care.
Michael O. Leavitt, secretary of health and human services, approved the proposal 16 days after it was formally submitted to him, with strong support from Gov. Jeb Bush.

After meeting here on Wednesday afternoon with Governor Bush, Mr. Leavitt said: "Today will be remembered as a day of transformation for the Florida Medicaid program. Florida's framework will be helpful to other states."

Joan C. Alker, a senior researcher at the Health Policy Institute of Georgetown University, said: "Florida's proposal is one of the most far-reaching and radical proposals we've seen to restructure Medicaid. The federal government and the states now decide which benefits people get. Under the Florida plan, many of those decisions will be made by private health plans, out of public view."

Vernon K. Smith, a former Medicaid director in Michigan who is now a consultant to many states, said: "Florida's program is groundbreaking. Every other state will be watching Florida's experience. South Carolina has developed a similar proposal.Georgia and Kentucky are waiting in the wings." In his state of the state speech to the Florida Legislature in March, Mr. Bush called for transforming Medicaid, saying it was unsustainable in its current form. "Over the last six years," he said, "Medicaid costs have increased an average of more than 13 percent annually. State revenues grew an average of 6 percent a year." The plan, to be put into effect over five years, will significantly increase the use of managed care. Questions and answers prepared by federal officials say that a principal aim of the Florida program is "to bring predictability to Medicaid spending and to reduce Medicaid's rate of growth." President Bush has proposed similar changes at the federal level for several years, but Congress has not accepted those ideas. In Congress, Democrats and some moderate Republicans resisted the president's proposals on the ground that they would have allowed states to reduce coverage for very poor and very sick people. On Wednesday, Mr. Leavitt waived many provisions of federal law, letting Florida make the changes in a demonstration project.

Under the waiver, Florida will establish "a maximum per year benefit limit" for each recipient and fundamentally change its role. The state will largely be a buyer rather than a manager of health care.

In an interview, Alan M. Levine, secretary of the Florida Agency for Health Care Administration, estimated that no more than 5 percent of Medicaid recipients would hit their annual limits. At that point, Mr. Levine said, "the health plan will still be responsible for providing services to the consumer, but the state's reimbursement would be limited to that amount." Asked whether the beneficiary would be responsible for paying costs beyond the limit, he said: "That can happen today. There are arbitrary limits and caps embedded in the state Medicaid program, limits on home health services, doctors' visits, prescription drugs."

For each beneficiary, Florida will pay a monthly premium to a private plan. Insurance plans will be allowed to limit "the amount, duration and scope" of services in ways that current law does not permit.

The Florida Medicaid director, Thomas W. Arnold, said he believed that insurers would tailor benefits for different groups like people with AIDS and children with chronic illnesses. About half of Medicaid recipients in Florida are children, but they account for less than 20 percent of the costs.

The Florida program includes these features, approved Wednesday by the federal government:
If a recipient does not choose a private plan, the person will be automatically enrolled in one that the state selects.

Medicaid recipients can "opt out" of Medicaid altogether and receive subsidies to help pay the employee's share of the premium for employer-sponsored health insurance. Those beneficiaries will have to pay co-payments and deductibles like other employees in the same plan, even if the charges exceed normal Medicaid limits.

The state will deposit money into individual accounts for recipients who enroll in programs to help lose weight, stop smoking and lead healthier lives. Florida and the federal government will establish a pool of money providing up to $1 billion a year to help hospitals and other health care providers who treat large numbers of uninsured people.

A spokeswoman for Mr. Leavitt, Christina Pearson, said the decision on the Florida plan was not influenced by the fact that Governor Bush is the president's brother. Federal officials are prepared to approve similar innovative solutions from other states, Ms. Pearson said.
Medicaid provides health insurance to more than 50 million low-income people. The states and federal government jointly finance it.

Last Updated: 11/15/2005

Organizations representing the interests of impoverished older and disabled Americans with Medicare filed suit November. 14 in federal district court in Manhattan seeking an order assuring that people do not lose access to life-preserving medication when the Medicare drug benefit takes effect on January 1.

Under Bush Administration plans, 6.4 million people enrolled in both Medicare and Medicaid will be denied their existing Medicaid drug coverage on January 1. The Bush Administration is then required to provide coverage to these men and women through the new Medicare Part D program.

The lawsuit seeks protections for people who are not seamlessly and immediately switched to the Medicare drug program.

The poorest, sickest, and oldest Americans face grave risk of losing their life-saving medications once the clock strikes twelve on New Years, said Robert M. Hayes, president of the Medicare Rights Center, a national consumer service group. This lawsuit seeks to force creation of an essential safety net to protect the health and lives of the frailest Americans.
The suit warns that countless numbers of poor men and women will fall through the cracks of this massive program transition,? and that these impoverished people will face the loss of medicines needed ?to function or survive.

It also says that the characteristics of the people at risk  nearly 40 percent are cognitively impaired and only 39 percent have a high school diploma will prevent up to a million poor seniors from immediately mastering the complexity of the new Medicare drug benefit so they can maintain their access to needed medicine.

Protecting the oldest, poorest and sickest Americans through this transition is a legal and moral imperative, Hayes said. If the government transitions 99 percent of these men and women flawlessly, there will still be 64,000 people without their medicine come January. That cannot be allowed.

Among the organizations that have filed the suit are: Action Alliance of Senior Citizens of Greater Philadelphia, Congress of California Seniors, Massachusetts Senior Action Council, National Alliance for the Mentally Ill: Maine, New York Statewide Senior Action Council, The Coalition of Voluntary Mental Health Agencies, Inc., United Senior Action of Indiana and the Medicare Rights Center. The organizations are being represented by volunteer attorneys with the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, and the Medicare Rights Center.
A copy of the complaint filed in federal district court in Manhattan is available athttp://www.medicarerights.org/complaint.pdf; also online is the Medicare Rights Centers report Protecting the Poorest Americans During the Medicare Drug Transition.

To read a Cleveland Plain Dealer article on the suit, click here.

Last Updated: 10/24/2005

Topic: Medicaid

Republican members of the Senate Finance Committee have reached an agreement on Medicaid and other health care budget cuts that does not include an extension of the "lookback" period for asset transfers or a change in the start of the penalty period for transferred assets.
The transfer-of-asset proposals, which many elder law attorneys viewed as harmful to their clients, were among the recommendations of the Medicaid Commission which was established to advise Congress on how to cut $10 billion from Medicaid, as called for in the 2006 budget reconciliation bill approved earlier this year.

The agreement, released by Senate Finance Committee Chair Charles Grassley (R-Iowa), does attempt to close a number of "loopholes" in Medicaid transfer rules, changes that taken together would save Medicaid an estimated $305 million over five years. Among the changes:
The purchase of a life state would be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.

Annuities purchased by a Medicaid applicant would be subject to transfer penalties unless they are irrevocable, non-assignable, actuarially sound and provide for equal payments. Also to avoid being classed as an improper transfer, the annuity must name the state as the remainder beneficiary for at least the total amount of Medicaid expenditures or the state must be named as beneficiary after the community spouse, providing the spouse does not dispose of any of the remainder for less than fair market value.

Annuities would be Included in the definition of assets that are subject to estate recovery unless the annuity was purchased from a business that regularly sells annuities.
Funds to purchase a promissory note, loan or mortgage would be included among assets unless the repayment terms are actuarially sound, provide for equal payments and prohibit the cancellation of the balance upon the death of the lender.
States would be barred from "rounding down" fractional periods of ineligibility when determining ineligibility periods resulting from asset transfers.
States would be permitted to treat multiple transfers of assets as a single transfer and begin any penalty period on the earliest date that would apply to such transfers.

The proposed bill would also require states to give more information about undue hardship exceptions, including notice and appeal rights, and it would exempt from estate recovery individuals enrolled in either an existing or future Long-Term Care Insurance Partnership plan.
Grassley's plan cuts Medicaid by $7.6 billion over five years but adds $3.3 billion, including $1.9 billion for Medicaid coverage for hurricane victims. About $5 billion of the Medicaid savings would come from changing the payment formula for pharmacies. The plan also would provide new savings of $5.76 billion in Medicare costs, although the bill does away with a scheduled 4.4 percent cut in Medicare payments to doctors and instead gives them a 1 percent raise for a year.

The Finance Committee must vote on the plan on Monday, Oct. 24. The plan is expected to become part of a $35 billion measure of spending cuts that will be debated in the full Senate next month. The House Energy and Commerce Committee takes up similar legislation later this month. The committees cuts are expected to predominantly come from Medicaid instead of Medicare.

Capitol Hill Watch Senate Conservatives, Moderates Still Divided on Medicare, Medicaid Cuts in Reconciliation Package
[Oct 24, 2005]

The Los Angeles Times on Monday examined support and opposition among Senate Finance Committee members for committee Chair Chuck Grassley's (R-Iowa) budget reconciliation package to cut $10 billion over five years from Medicaid and Medicare (Havemann/Simon, Los Angeles Times, 10/24). The plan includes $25.1 billion in proposed spending reductions and about $15 billion in spending increases for Medicaid and Medicare. It would provide a net savings of $4.26 billion in Medicaid costs and a new savings of $5.76 billion in Medicare costs (Kaiser Daily Health Policy Report, 10/21). Committee members are scheduled to vote on the package Tuesday, a move that "could be crucial to this year's effort to rein in federal spending," the Times reports. Some conservative Republicans "are reportedly upset that the [Hurricane] Katrina aid is too generous," according to the Times. Democrats are unified in opposition to the package, meaning that Grassley must win support from all finance committee Republicans (Los Angeles Times, 10/24).

Republican Opposition Sen. Craig Thomas (R-Wyo.) is said to be "balking" over additional spending outlined in the package, CongressDaily reports. A Thomas spokesperson said he did not know how the senator will vote but indicated that Thomas has serious reservations. In addition, Sen. Jim Bunning (R-Ky.) reportedly wants the bill to include language barring specific types of intergovernmental transfers of Medicaid funds, which states sometimes use to increase federal contributions. A Bunning spokesperson said, "As it stands, he would vote against it. But we're working with the committee to try to get his concerns addressed." Finance committee moderates "insist" that language on intergovernmental transfers should not be included in the reconciliation package, CongressDaily reports. A spokesperson for Sen. Gordon Smith (R-Ore.), a committee moderate, said, "If you put language [on intergovernmental transfers] in the statute, CMS loses flexibility, states lose out and it ultimately harms beneficiaries" (Heil, CongressDaily, 10/21). Smith and Sen. Olympia Snowe (R-Maine), a fellow moderate, favor Grassley's package, according to the Times (Los Angeles Times, 10/24).

House Leaders 'Struggling' In related news, House leaders are "struggling" in their attempt to increase budget reconciliation savings from $35 billion to $50 billion, CQ Today reports. The targeted cuts include an additional $7 billion from the House Ways and Means Committee, which has some oversight of Medicare (Dennis/Higa, CQ Today, 10/21). Rep. Jeff Flake (R-Ariz.) said, "The leadership is saying they will only go to the floor if they know they have the votes. They don't have the votes" (Los Angeles Times, 10/24). Analysts from the Center on Budget and Policy Priorities on Friday in a conference call with reporters said the committee likely will look for cuts in programs other than Medicare. Robert Greenstein, executive director for CBPP, said, "There are clear indications that the House Republican leadership is reluctant to have any cuts in Medicare in reconciliation." A spokesperson for the committee on Friday said no final decisions had been made on which programs will be targeted (CQ HealthBeat, 10/21). "Even if both chambers can settle on their own totals [for cuts], they may have difficulty compromising on a package that is neither too robust for the Senate nor too anemic for the House," the Times reports (Los Angeles Times, 10/24).

Last Updated: 10/14/2005Topic: Medicaid

Senate Finance Committee Chair Chuck Grassley (R-Iowa) has presented to Republican committee members a proposal to reduce mandatory health care spending by $12 billion over five years, while making only minor cuts to the Medicaid program. Although this is $2 billion more in cuts than Congress called for, Grassley would reportedly still further tighten Medicaid's asset transfer rules.

According to CQ Today, Grassley is considering a spending package that would achieve most of its savings by shrinking Medicare payments to private insurance plans and home health agencies. For example, $6.8 billion would be saved by eliminating an incentive fund for insurers to participate in the new Medicare prescription drug benefit program. Another $5.4 billion would be saved by giving higher Medicare payments to insurers covering sicker patients and lower payments to insurers that enroll healthier patients.

But among his Medicaid reductions, Grassley would save a projected $1.5 billion to $2 billion by making it more difficult for the elderly to transfer assets and qualify for Medicaid. His proposals would presumably follow the recommendations of theMedicaid Commission, which was established to advise Congress on how to cut $10 billion from Medicaid, as called for in the fiscal year 2006 budget resolution agreement earlier this year. The Commission proposed moving the start date of any penalty period from the date of the transfer to the date of application for Medicaid or the nursing home admission date, whichever is later, and increasing the "lookback" period for all transfers to five years. (The Senate Finance Committee had not replied to inquiries at press time.)

In an October 7 letter to Grassley, AARP CEO William Novelli said that while AARP could accept steps to encourage people to save money for long-term care, changing asset transfer rules could result in the denial of care.

The budget resolution agreement also requires $70 billion in tax cuts.
The House Energy and Commerce Committee also is reportedly considering an adjustment to Medicaid prescription drug payments that is similar to what the Senate Finance Committee is proposing. House leaders delayed the fiscal year 2006 budget reconciliation deadline until October 28 to give authorizing committees time to reach a new target of $50 billion in cuts (up from $35 million) from mandatory programs, including Medicaid. The Senate so far has no plans to amend the budget resolution and is scheduling an October 26 markup by the Senate Budget Committee.

According to the National Senior Citizens Law Center's Oct. 14 Washington Weekly, an unsigned document titled "21st Century Medicaid Reforms" circulating through Capital Hill was identified as the Republicans? Medicaid-cutting blueprint. Among other provisions, the document proposes to strengthen the penalties for asset transfers and grant states the flexibility to narrow the package of Medicaid benefits.

Last Updated: 11/7/2005

Topic: Long-Term Care Insurance

When it comes to long-term care insurance, many people are intimidated by high costs and the bewildering array of benefit levels, deductible periods and other features, according to a recent article in The New York Times that examines the low popularity of this insurance.

In fact, only 10 percent of people over 65 own policies. Long-term care coverage often requires a lifetime commitment to one insurer; premiums can rise sharply if the policyholder switches, and policyholders can pay premiums for decades with no way to predict if their coverage is what they will need.

The article suggests that a lesser-frills policy, though still costly, may provide a more attractive safety net for many risk-averse elderly people.

For example, a new study shows that only a small percentage of policyholders need long-term care for long periods -- four years or more. The study, released in April, found that only 3.6 percent of claims filed for nursing home, assisted living and home services were for care that lasted four to five years, and 4.3 percent were for care lasting more than five years. In 76.7 percent of claims, care lasted less than two years.

So a growing number of specialists recommend more modest policies for which the policyholder pays a bigger share of the costs.

"Some insurance agents still strongly believe that people should buy the maximum possible for a policy to be worthwhile," said Dawn Helwig, a principal of Milliman Inc., and co-author of the study on insurance claims. "But those policies are very expensive. It puts you into the Cadillac market all the time, and a lot of Chevy owners are missed."

"I would go for four or five years of coverage, but for someone who has limited income and assets, three years should be satisfactory," Helwig said. Also, the article points out that not everyone needs long-term-care insurance. People with a net worth of $1 million to $1.5 million, not including the family home, could pay the cost out of their pocket, said John E. Ryan of Ryan Insurance Strategy Consultants in Greenwood Village, Colorado.

At the other extreme, those with a net worth of less than $250,000 may not have enough liquid assets to warrant paying premiums for years, Ryan said. They may be better off receiving benefits from state Medicaid programs.

To read the full New York Times article, click here or here.