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Serving Philadelphia, Delaware County, Montgomery County, Bucks County and Chester County since 1996.
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Deficit Reduction Act
New Law Targets Medicaid for Nursing Home Costs
On February 8, President Bush enacted into law the Deficit Reduction Act which is a new federal law designed to shift
more of the burden of paying for nursing home care onto seniors and their families.
One unintended effect of this new law might also shift some of the burden to nursing homes themselves.
Most nursing home residents rely on Medicaid to some extent to pay for part of the costs of their care.
Before the Deficit Reduction Act, seniors who transferred assets within three years of applying for Medicaid for nursing home
care (“the three year look-back period”) were ineligible for Medicaid for a period of time, called the penalty period,
beginning on the date of the transfer.
The Deficit Reduction Act extends the “three year look-back period” to a “five year look-back period” and switches
the start of the Medicaid penalty period from the date of the transfer to the date of the Medicaid application.
In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be
no money to pay the nursing home for however long the penalty period lasts.
The effect of this change would mean that a senior who makes any kind of gift will be ineligible for Medicaid for a period
of time that will begin to run only after they would otherwise be financially and medically qualified for Medicaid
for nursing home care. This penalty would also apply to spouses of seniors who make gifts.
Confusing? You bet it is!
Let me give you some concrete examples.
A grandparent who helps pay for a grandchild’s education will be disadvantaged by this law if they get sick and need
to go into a nursing home within five years of making the gift.
The same will be true for parents who help children with medical expenses or other financial difficulties and even for
seniors who make contributions to religious or charitable organizations.
This new law assumes that seniors can predict their medical and financial circumstances five years into the future.
It punishes unwitting seniors who have helped their families with commonly made gifts and then experience unforeseen medical events.
If people in these situations have not kept enough money to pay for the nursing home (upwards of $7500 per month) during
the period of Medicaid ineligibility, who will pay the nursing home?
Nursing homes are worried that they could be stuck providing uncompensated care.
The Congressional Budget Office estimates that the Deficit Reduction Act will affect approximately 15% of nursing home residents
each year.
It’s no surprise that the nursing home industry strongly opposed its passage.
In analyzing the new law, the American Health Care Association, an organization representing health care providers,
said it leaves the nursing home, not the government, to collect from individuals who have no funds to pay privately and are
not eligible for Medicaid.
Some have dubbed the Deficit Reduction Act as the “Nursing Home Bankruptcy Act”.
Another unintended effect may be that seniors would be unable to move from a hospital to a nursing home because nursing homes
can deny admission if there is no payment source.
Hospitals could then be stuck providing uncompensated care.
One possibility that will come as a shock to many families is that nursing homes may look to a resident’s children for payment.
Under Pennsylvania legislation passed last summer, children may be held liable for the financial support of their indigent parents.
Criminal penalties could also apply to children who fail to support indigent parents.
The Deficit Reduction Act could trigger a wave of nursing home lawsuits against the children of their residents.
I can foresee a common scenario where nursing homes will sue children who would likely countersue on some basis
such as substandard care.
It could get very ugly, and I guess the government intends to just stand back and watch.
The new five-year look-back period and the new transfer penalty are not the only provisions of the Deficit Reduction Act that
would be harmful to seniors.
For example, under prior law, home equity was not considered available to pay for nursing home care.
Now, there is a ceiling placed on this home equity exemption.
Also, there are restrictions on allowing a nursing home resident’s spouse to keep financial resources in order to avoid
impoverishment.
Under prior Medicaid law, there were safeguards that prevented families of seniors needing nursing home care from going broke
and allowed nursing home residents and their spouses to maintain a decent standard of living and quality of life.
The Deficit Reduction Act chips away at these safeguards.
A fair question to ask is how much is all this pain and suffering of seniors and their families saving the government
on Medicaid costs.
A recent study by an impartial source (The Georgetown University Long-Term Care Financing Project) concluded, after an
extensive study of the Medicaid program, that the provisions of the new law will result in a reduction of less than
two-tenths of one percent in the projected federal Medicaid budget.
Does Congress think that it is an acceptable trade off to put our senior population in jeopardy for two-tenths of one
percent?
Because of the complexity of the new law, seniors, even those already in a nursing home, should consult with a qualified
elder law attorney to review their options.
All is not lost.
There are still ways to escape the new law’s draconian effects if the proper planning is done as soon as possible.
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