October 2005

Last Updated: 10/31/2005

Topic: Medicaid

Charged with the task of finding ways to trim $10 billion from the Medicaid program over five years, the federal Medicaid commission has submitted a report to Congress that it says will reduce Medicaid spending by $11 billion.

To no one's surprise, among the commission's recommendations are proposals to delay Medicaid eligibility for individuals who transfer assets for less than fair market value. Taken together, the transfer rule changes would allegedly save about $1.5 billion over five years.

The commission would save $1.4 billion of this by "moving the start date of penalty period from the date of the transfer to the date of application for Medicaid or the nursing home admission date, whichever is later." The panel also recommends increasing the "lookback" period for all transfers from 36 months to 5 years. This would save "less than $100 million" over five years, according to the commission.

The lion's share of Medicaid savings -- $4.3 billion over five years ? would come from changing the way state programs buy drugs and how pharmaceutical companies report data. Also, Medicaid beneficiaries above the federal poverty level would be required to contribute more to the cost of prescription drugs not on a state's preferred list, a change anticipated to save another $2 billion.

The Medicaid cuts were called for in the 2006 budget resolution agreed to by the House and Senate earlier this year. In addition to the Medicaid spending reduction the first sustained by the program since 1997 the budget resolution called for the creation of a study commission to recommend where the cuts should be made and offer advice on longer-term changes to the Medicaid program.

The commission, appointed by Health and Human Services Secretary Michael Leavitt, took a little more than a month to study the Medicaid program and issue its recommendations. The commission held two meetings over three days and heard presentations from a total of five individuals, according to the Centers for Medicare & Medicaid Services' Web site. A second commission report, focusing on recommendations for stabilizing Medicaid over the long term, is due Dec. 31, 2006.

Senate Finance Committee Chair Chuck Grassley (R-Iowa) called the commission's recommendations "constructive" and said his committee would consider them as it explores ways to reduce Medicaid's growth by $10 billion over five years. As previously reported, Republican members of the Senate Finance Committee appear headed for a fight over whether to spare the Medicaid program drastic cuts by trimming the growth of Medicare.

See GOP Senators Split on Whether to Cut Medicaid By $10 Billion.

For the full commission report, click here.

Two days before the commission issued its recommendations, The National Governors Association (NGA) weighed in with its own guidance for Congress on how to secure the $10 billion in Medicaid savings. The NGA recommendations include the following:

"Asset Transfer. States should have increased ability to prevent inappropriate transfer of assets by seniors to qualify for Medicaid. To that end, 1) the look-back period should be increased from 3 to 5 years; 2) penalty periods should begin at the time of application; and 3) the sheltering of excess resources in annuities, trusts or promissory notes must be prevented."

The report goes on to state that "Home equity should be considered a countable asset in order to require individuals to use home equity to off-set long-term and other medical expenses that would otherwise be paid by Medicaid." It also calls for reforms to facilitate the use of reverse mortgages to convert home equity into cash, as well as the expansion of Long-Term Care Insurance Partnership programs.

For the NGA's recommendations, click here.

Last Updated: 10/16/2005

The Florida Supreme Court rules that if a decedent does not have a surviving spouse or child, homestead property that is not specifically devised passes to the residuary devisees, not the general estate. McKean v. Warburton (Fl., No. SC04-1243, September 8, 2005).

Henry Pratt McKean II had a will leaving a specific cash bequest of $150,000 to Peter Warburton and the remainder to his brothers. When he died, he had only a homestead property valued at $140,000 and nominal assets. Without the homestead property, the estate's assets did not satisfy creditor's claims and the specific bequest.

Mr. Warburton argued that the homestead property should be used to fund his specific bequest. Mr. McKean's brothers argued that it should pass to them through the residuary clause.

The court of appeals ruled that Mr. Warburton was entitled to the property (Warburton v. McKean, January 19, 2004). It held that because a homestead can be freely devised if there is no surviving spouse or minor child, the homestead becomes property of the estate and is subject to division in accordance with the established classifications giving some gifts priority over others.

The Supreme Court of Florida reverses, holding that if a decedent is not survived by a spouse or minor child, the decedent's homestead property passes to the residuary devisees, unless the testator specifically orders the property to be sold and the proceeds made a part of the general estate. According to the court, "while it is true that a decedent may devise protected homestead property in his or her will if there is no surviving spouse or minor child, the property may only pass as a general asset of the estate by a specific devise."

To download the full text of this decision in PDF format, go to: http://www.floridasupremecourt.org/decisions/2005/sc04-1243.pdf and click on "Opinions." (If you do not have the free PDF reader installed on your computer, download it here.)

Last Updated: 10/17/2005

Senate Majority Leader, Bill Frist (R-Tenn.), says that $10 billion in cuts to Medicaid requested by the Bush administration will have to be weighed against the need to provide health care to victims of Hurricane Katrina. Thousands of people have lost health insurance through their employer, so the demand on Medicaid may grow, according to an article in the Palm Beach Post. In May, the House and Senate passed a budget resolutionto reduce Medicaid spending by $10 billion over five years. Frist said that Congress should still look at reducing Medicaid costs by considering changes that would eliminate waste, fraud, and abuse, but not by cutting back on care.

While cuts to Medicaid may not be made, the costs associated with Hurricane Katrina are having the opposite effect on efforts to reverse a scheduled 4.3 percent reduction in Medicare physician payments. According to the Kaiser Daily Health Policy Report, several Senate staffers have questioned whether Congress will be willing or able to reverse the payment reduction because reversing the pay reduction would cost between $153 billion and $183 billion over 10 years. However, many doctors have said they will no longer treat Medicare recipients if the cuts go through.

Hurricane Katrina is also having an effect on proposed reforms to Social Security. According to an article in the Washington Post, Republican Congressional Committee Chairman, Thomas Reynolds (R-N.Y.), will recommend that the party drop efforts to restructure Social Security. He told a group of Republicans that now that Congress had Hurricane Katrina legislation to deal with, it would be difficult to mount an effective public relations campaign to restructure Social Security.

Meanwhile, the Senate is moving to provide Medicaid coverage to survivors of Hurricane Katrina. Senate Finance Committee Chair Chuck Grassley (R-Iowa) and Senator Max Baucus (D-Mont.) have introduced a bill to temporarily extend Medicaid coverage to displaced residents of Louisiana, Mississippi, and parts of Alabama. According to the Kaiser Daily Health Policy Report, the bill would require the federal government to pay 100 percent of Medicaid costs for five months, with an option to extend coverage for an additional five months.

In addition, the federal government would pay through 2006 100 percent of the costs for Medicaid beneficiaries in the affected states. Other provisions in the bill would eliminate asset tests, establish a fund to help survivors with private health insurance bills, and eliminate penalties for missed application deadlines for survivors.

Last Updated: 9/2/2005

Topic: Medicaid

Medicaid "has become a lifeline for millions of people who require nursing home care," and "simply cutting the program won't work," two professors write in a Los Angeles Times opinion piece that has been widely reprinted around the nation.

Jacob Hacker, a professor of political science at Yale University, and Harold Pollack, faculty chair of the University of Chicago's Center for Health Administration Studies, write that the real problem with Medicaid "isn't well-off senior citizens gaming the system" but rather that "few Americans have reliable and effective private alternatives that can protect them if they require long-term care." The authors say that long-term care insurance, touted as an alternative to Medicaid, "will never work for millions of Americans." Insurers themselves cannot reliably price such insurance due to uncertainties about the future costs of care, they contend.

Rather than pursuing the home equity of widows with Alzheimer's disease, "the federal government should pay for long-term care through Medicare, openly, for every American," Hacker and Pollack say. Doing so would give the elderly and disabled through the front door what they are now gaining through the backdoor under Medicaid, and would "protect everyone from one of life's most frightening risks."

To read the full Los Angeles Times article, "Health cuts are the real 'death tax'," click here.

Last Updated: 10/3/2005 Topic: Medicaid

Republican members of the Senate Finance Committee appear headed for a fight over whether to trim the growth of Medicare in order to spare the Medicaid program from drastic cuts. Congress's fiscal year 2006 budget resolution calls for cutting Medicaid by $10 billion over the next five years, but the resolution left open where the reductions should be made. Among the proposals is to tighten restrictions on the ability of the elderly to qualify for Medicaid coverage of nursing home care by transferring assets. The Finance Committee must submit a final proposal by September 16.

Committee Chair Chuck Grassley (R-Iowa) favors a proposal that would reduce Medicaid spending only, while Sens. Olympia Snowe (R-Maine) and Gordon Smith (R-Ore.) "have been working on ways to reduce the Medicaid cuts," such as finding ways to trim Medicare spending, according to CQ Today.

Demetrios Karoutsos, a spokesperson for Sen. Smith, said, "We certainly think there is room to reduce Medicare," adding, "Smith's goal throughout this entire process is to find ways that don't impact beneficiaries." A spokesperson for Sen. Snowe, Antonia Ferrier, said, "Taking $10 billion from Medicaid would be a wrong-headed approach. There are a lot of other things that we are open to exploring. That could very well be savings from Medicare as well."

AARP is urging lawmakers not to slash $10 billion from Medicaid, arguing that seniors will have more difficulty qualifying for nursing home care if the funds are cut. The organization suggests that savings can be realized through more efficient prescription drug spending by Medicaid.
In a letter to Congress, AARP and close to 40 other members of the Leadership Council of Aging Organizations (LCAO) opposed the proposals to further restrict the ability of the elderly to transfer assets, stating in part that the proposals "will create unacceptable new obstacles to nursing home admission for vulnerable, frail elderly and disabled persons" Other signatories to the letter included the National Senior Citizens Law Center, Families USA, the National Academy of Elder Law Attorneys, the AFL-CIO, AARP, and the National Citizens Coalition for Nursing Home Reform.

New Hampshire Seeks to Restrict Transfers on Its Own While Congress considers changing the asset transfer rules for the entire country, New Hampshire will soon be asking the federal Centers for Medicare and Medicaid Services for permission to impose on its residents the same restrictions. The New Hampshire Medicaid agencys proposal, among other things, increases the "lookback" period for all transfers from 36 months to 60 months and begins the Medicaid penalty period on the date on which an applicant applies for coverage or meets all eligibility requirements, whichever is later. (Currently, the penalty period begins on the first day of the month of the transfer.)

To review the New Hampshire draft waiver request, go to:http://www.dhhs.nh.gov/DHHS/OCOM/GraniteCare/HB691-waiver-assets.htmsee