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Bar News - October 21, 2005 Stephen Explains Medicaid Waiver Rationale By: Deborah A. Fauver
If approved, the waiver would make New Hampshire a national test case for several aspects of Medicaid reform. By protecting scarce federal dollars for the indigent elderly, the waiver request is aimed at individuals who “artificially impoverish” themselves in order to qualify for Medicaid. Critics charge that the waiver request sweeps too broadly, catching seniors who have tried to protect only meager assets. In the short term, lawyers are grappling with how best to counsel clients. Prior waiver requests, filed by other states, have languished for years at the Center for Medicaid and Medicare Services (CMS). Health and Human Services Commissioner John A. Stephen, who believes his waiver request will be acted upon as soon as January of 2006, notes that it differs from prior requests in that it attempts to balance stricter scrutiny of applicants with a new incentive for personal responsibility for personal care costs – namely, long-term care insurance. “What we are reflecting is a policy shift, at the national and local level, from the culture of entitlement to the culture of personal responsibility,” Stephen said, in a recent Bar News interview, which also included DHHS staff attorney Lisabritt Solsky. Stephen points out that the New Hampshire waiver request is in line with recommendations made by the National Governor’s Association in August of this year; and that, unlike earlier waiver requests from other states, has full legislative and gubernatorial support. “We are trying to balance a number of competing issues, and in this instance, we are only trying to address one area of the really huge, national problem of healthcare for seniors,” Stephen said. “We have tried to go back to the basic purpose of Medicaid, which is to help the truly needy.” “This is not a middle class issue,” Stephen said. “Medicaid was never intended to be a program for the middle class. For Medicaid to sustain itself, and remain available for the truly needy, changes must be made – particularly with the baby boomers coming along.” Waivers Discussed Pursuant to the legislative directive, DHHS has asked for three separate waivers of the Social Security Act: (1) waive Section 1917 (c)(1)(B) to allow the agency to look-back 60 months (rather than 36) for basic transfers or assets to individuals for less than fair market value; (2) waive Section 1917(c) (1)(D) to allow the agency to begin the transfer penalty on the date of application or the first date the applicant would otherwise be eligible, whichever is later; and (3) waive Section 1917 (b)(1)(C)(ii) to allow the exemption of individuals with qualifying Long-Term Care Insurance from estate recovery and the resource ceiling, dollar-for-dollar. The driving force behind the request, according to Stephen, is the fiscal reality that state and federal governments simply cannot afford to pay for the long term care costs of every American who is willing to spend down assets to qualify for Medicaid. Arguing this point in the waiver request, Stephen wrote: “[I]t is reasonable and fair to expect individuals who have adequate resources to use their own assets to pay for medical care. The Medicaid Program was established to pay medical costs for the needy; not to pay medical costs for individuals who have artificially and intentionally impoverished themselves in order to qualify for Medicaid services. “It is anticipated that the changes proposed for this Demonstration Project will lead to a significant reduction in estate planning, which shifts the costs of medical care to the state and federal governments, and ultimately the taxpayers. Even though certain changes proposed here may not result in immediate, significant savings, the changes are part of a comprehensive package designed to reduce opportunities for artificial impoverishment (thereby resulting in significant savings over the long term and enhanced program integrity), and to achieve a change in societal attitude from one of Medicaid entitlement for long-term care (LTC) costs to Medicaid as a safety net for the indigent. “Estate planning literally diverts millions of dollars that could be used to pay for LTC services and discourages individuals from seeking and purchasing LTC insurance, or employing other methods to meet their needs for a continued quality of life.” Look-Back Period Current law allows DHHS to look backwards 36 months prior to the month of application for Medicaid for all transfers, except for transfers into trusts (in which case the look-back period is now 60 months). If the waiver request is approved, the look-back period, effective for all transfers made after March 15, 2005, would become 60 months. Transfer Penalty Current law begins the transfer penalty period in the month in which the transfer is made. If an individual transfers assets and remains out of a nursing home during the penalty period, Medicaid eligibility can begin as soon as the individual enters the nursing home. Under the Waiver Request, the penalty period would begin when the individual applies for and is determined otherwise eligible for Medicaid, or when the agency becomes aware of the transfer, whichever is later. Under the new law, then, an individual might transfer assets in 2006, not need or apply for Medicaid until 2010, and at that application point, in 2010, the penalty period would begin. “This provision will make it harder for individuals to calculatingly transfer assets while awaiting the expiration of the penalty period prior to seeking nursing home assistance,” Solsky said. Not Designed To Create Fear Stephen insists that this portion of the waiver request represents a policy decision to penalize people who transfer assets that could be used for services received. “One of my concerns is that a certain segment of the Bar is creating fear in seniors about this penalty,” Stephens said. “The law will still retain various hardship provisions, and we have no intent to penalize the truly needy. But we do need to be able to address the growing practice of artificial impoverishment.” Not all Medicaid planning would be barred by the waiver request. “The Social Security Act is a complex statute, with many exceptions,” said Solsky. “It is hard to generalize about the effect of these provisions, but we do believe that there will continue to be instances in which it is appropriate to do Medicaid planning.” One example would involve a disparate-aged couple, who could still be counseled to transfer assets from the older spouse to the younger in order to accelerate the older spouse’s Medicaid eligibility, while protecting the younger spouse’s financial independence. Long-Term Care Insurance Current law in New Hampshire provides no incentives to purchase long-term care insurance. The waiver request would effectively allow consumers to buy their way into Medicaid eligibility by purchasing enough long-term care insurance to cover the estimated nursing home stay. More specifically, the waiver request would exempt an applicant from resource threshold and estate recoveries if the applicant had purchased “conforming long-term care insurance policies (at a minimum 36 months of nursing home payment at the average private pay rate for county nursing facilities with an annual benefit inflation factor of at least five percent and coverage for home and community based care equivalent).” At present there is no established figure for the “average private pay rate for county nursing facilities,” and it is not clear that policies actually exist that will meet the waiver request criteria, or that such policies would be less expensive than the cost of nursing home care itself. “The other two portions of the waiver request are directed at current Medicaid applicants,” Solsky said. “But the LTC insurance section is directed at the future. Specifically at the baby boomers – who are still generally young enough to be able to buy LTC insurance at financially reasonable rates.” Stephen acknowledges that conforming insurance policies are not yet widely available, but has begun talks with the state insurance commission. “We need to get the waiver approved first, and then implement the regulations to support it,” Stephen said. “When we get to the rulemaking stage, I would like very much to hear from attorneys in the field.” In the meantime, Stephen said he would welcome invitations to participate in forums for further discussion of the Medicaid reform process. The full text of the waiver request can be found at the DHHS website: www.dhhs.nh.gov. Deborah Fauver is an attorney with Cooper, Deans & Cargill in North Conway. She is a contributing editor to Bar News and writes frequently on subjects related to developments in the law.
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