Bush Medicaid Proposal Criticized

The Bush administration and the nation's governors want to close loopholes that allow middle- and upper-class senior citizens to stash assets in order to qualify for Medicaid-paid nursing home care. But consumer advocates say some of the changes could disqualify innocent seniors who help their grandchildren pay for college or give to their churches, then need care later on.

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The average nursing home today costs more than $70,000 a year. Medicaid, the health program for the poor, picks up nearly half the nation's bill for nursing home care. As lawmakers begin to cut $10 billion from Medicaid, they're trying to make it harder for wealthier seniors to qualify. But consumer advocates say those changes could mean that people who legitimately give to charity could be denied nursing home care. NPR's Julie Rovner reports.

JULIE ROVNER reporting:

You only have to look as far as your local newspaper to find lawyers or financial advisers who specialize in what's euphemistically called Medicaid planning. It's a way some middle- and upper-income Americans make themselves appear poor so they can qualify for Medicaid nursing home coverage. There are already rules against this, but there's a growing consensus that those rules need to be tightened. Among those who want changes are the nation's governors. Arkansas Republican Governor Mike Huckabee is chairman of the National Governors Association.

Governor MIKE HUCKABEE (Chairman, National Governors Association): There is a growing problem in that many people are creative enough to divest themselves of assets and wealth in order to more rapidly access Medicaid benefits in the long-term-care area. We'd like to close those loopholes, to make it so that the people who are really needy are really getting the services they need.

ROVNER: The Bush administration agrees. In fact, Health and Human Services Secretary Mike Leavitt singled it out in his very first public speech last February.

(Soundbite from vintage speech)

Secretary MIKE LEAVITT (Health and Human Services): Medicaid simply cannot become an inheritance protection plan. There's an entire industry that has grown up around helping them shift their costs from themselves to the taxpayer.

ROVNER: But John Rother of the senior group, AARP says lawmakers are overstating the magnitude of the asset transfer problem, and he says the remedies they're proposing are not likely to catch those who abuse the system but could punish innocent people instead.

Mr. JOHN ROTHER (AARP): Well, an innocent person in this case is someone who's given money to a grandchild to help them go to college or given money to the church or to disaster relief. And then they become ill and a few years later they find themselves applying for nursing home coverage under Medicaid because they've had to spend down all their remaining assets. And then they find out they're not eligible for coverage because of the fact that they gave money to a family member or to a church.

ROVNER: Here's how it works now. If a senior transfers assets within three years of applying for Medicare-paid nursing home care, he or she can be denied coverage for a certain period. If the assets that are disposed of would have paid for three months of nursing home care, for example, Medicaid would be denied for three months. But--and this is important--the penalty is retroactive to the date the asset is transferred. So if you needed Medicaid a year later, your three-month waiting period would have expired and you'd qualify. The bill now pending in the House would change that in two ways. First, it would extend the period where a person could be penalized from three years to five years. More importantly, the period of ineligibility would start when a senior applies for Medicaid, not back to the date the asset was transferred.

Take a situation where a grandmother gives her granddaughter $15,000 to help pay for college. Three years later, she has a stroke and needs nursing home care she can't afford. Vincent Russo is past president of the National Association of Elder Law Attorneys. He describes what would happen next. [POST-BROADCAST CORRECTION: Vincent Russo is past president of the National Academy of Elder Law Attorneys.]

Mr. VINCENT RUSSO (Past President, National Academy of Elder Law Attorneys): So when she applies for Medicaid for that care in the nursing home, Medicaid's going to be denied, and she's going to be told, `Now you have to come up with three months of nursing home care.' Let's say the nursing home costs $5,000 a month, so she needs $15,000 during that three-month period. She can't get the money back from the college. If she has no other assets to pay for it, how's she going to make the payments?

ROVNER: Russo says what's likely to happen is that seniors who can't take care of themselves will be sent home anyway or else stranded in hospitals that may not be able to get paid, either. The Elder Law Attorneys group has proposed tightening the asset transfer rules in ways they say would only affect those actually abusing the system. Some of those changes are included in the Senate version of the budget-cutting bill. Julie Rovner, NPR News, Washington.

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