ElderWeb

The Social Security Administration has revised the rules for counting the value of personal property when determining eligibility for Supplemental Security Income (SSI). The new rules will make it easier to qualify by clarifying that there will be no limit on the dollar value of personal property or a vehicle used by the recipient or a member of his or her household. The rule also states that gifts of clothing will no longer count as income. The changes to SSI eligibility impact Medicaid because anyone who qualifies for SSI is automatically eligible for Medicaid as well.

The explanation of the rule change was printed in the Federal Register February 7, 2005 (Volume 70, Number 24):

"We are revising our regulations that explain how we determine an individual's income and resources under the supplemental security income (SSI) program in order to achieve three program simplifications. First, we are eliminating clothing from the definition of income and from the definition of in-kind support and maintenance. As a result, we generally will not count gifts of clothing as income when we decide whether a person can receive SSI benefits or when we compute the amount of the benefits. Second, we are changing our resource-counting rules in the SSI program by eliminating the dollar value limit for the exclusion of household goods and personal effects."

"As a result, we will not count household goods and personal effects as resources when we decide whether a person can receive SSI benefits. Third, we are changing our rules for excluding an automobile in determining the resources of an SSI applicant or recipient. We will exclude one automobile (the 'first' automobile) from resources if it is used for transportation for the individual or a member of the individual's household, without consideration of its value. These changes will simplify our rules, making them less cumbersome to administer and easier for the public to understand and follow. Our experience of nearly 30 years of processing SSI claims indicates that these simplifications will have minimal effect on the outcome of SSI eligibility determinations."

DATES: These regulations are effective on March 9, 2005.

PRESS RELEASE

Spending Pressures Continue Despite Revenue Growth
Recovery Continues, but Rise in Medicaid Costs Outstrip Growth in Revenue

WASHINGTON--Despite the gradual improvement in the nation's economy, states, increasingly burdened by rising health care and Medicaid costs, continue to recover slowly from the worst fiscal crisis in the last six decades, according to the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO).

In a report released today, The Fiscal Survey of States, NGA and NASBO found that revenue collections are now narrowly exceeding budgeted estimates in nearly all states in fiscal 2004. However, state spending pressures, specifically costs associated with health care, remain especially significant. Moreover, Medicaid continues to grow at high rates with no relief in sight.

"It's important to remember that we have just come through a tremendously difficult fiscal period, one in which we are only now beginning to see relief," said NGA Executive Director Raymond C. Scheppach. "The light at the end of the tunnel is beginning to appear; unfortunately, it's a long tunnel. Are states better off than they were a couple years ago? Certainly. Are they where they want to be or where they should be? No way, and that is attributable to the rising health care costs."

During fiscal 2005, Medicaid is estimated to grow as high as 12.1 percent due in part to the expiring federal fiscal relief. Long term growth of Medicaid is expected to be a hefty 8 to 9 percent--well above expected state revenue growth. In fact, according to NASBO's State Expenditure Report, estimates for fiscal 2004 revealed that for the first time ever, Medicaid is now a larger component of total state spending than elementary and secondary education combined.

While state finances are showing signs of improvement, state expenditures have increased slightly after being flat for a two-year period. State spending is expected to grow at 3.0 percent and 4.5 percent respectively in 2004 and 2005, below the 6.3 annual average since 1979, when the Fiscal Survey began tracking budget data.

"While there is relative improvement from the fiscal malaise of the past few years, our findings show that states' fiscal situations will remain difficult for the foreseeable future," said Scott Pattison, executive director of NASBO. "Medicaid spending continues to be driving state budgets. The bottom line is that the pressure from Medicaid and other skyrocketing health care costs makes it difficult for states to completely recover from these difficult fiscal times."

To control rising Medicaid costs, states have employed aggressive actions over the past four years. According to a recent Kaiser Family Foundation study, all 50 states implemented at least one new Medicaid cost containment strategy in fiscal 2004. Despite states' best efforts, Kaiser Foundation says, 35 states experienced Medicaid shortfalls in fiscal 2003 and 34 states anticipated shortfalls in fiscal 2004.

"The growth rate on Medicaid is rapidly reaching its breaking point. While the federal fiscal relief package that ended in June was a welcome reprieve for states, it was only a temporary band-aid for a much more serious ailment," Scheppach said. "States are employing a variety of cost containment strategies, but serious structural changes to Medicaid are necessary if they are to meet the needs of the nation's burgeoning senior population in the years to come."

In a sign that the national economy is continuing to improve, 15 states reduced their enacted budgets in fiscal 2004 by more than $2 billion, down from 40 states in fiscal 2003 that cut previously enacted budgets by nearly $12 billion. Three states report negative growth budgets in fiscal 2005, down significantly from fiscal 2003 when 21 states enacted negative growth budgets.

Following numerous years in which states did not meet growth expectations, revenue collections in fiscal 2004 narrowly exceeded budget estimates in 35 states. Ten states met their expected revenue targets, and only five states reported revenue estimates below original projections for the last fiscal year. In fiscal 2005, 24 states enacted tax and fee changes accounting for about $3.5 billion with more than $888.4 million coming from cigarette and tobacco taxes, and $710.6 million coming from sales taxes.

"After several years during which collections failed to meet targets, seemingly no matter how low states set their sights, a measure of revenue stability has returned. As economic recovery continues, state tax collections have become more robust," the report says. "However, from a budget perspective the margin of revenue security is narrow, even more so considering the spending pressures states are under, and states still face fundamental challenges regarding how they collect taxes and on what."

Against a backdrop of soaring health care costs and sluggish revenue growth, states are employing a variety of budget-balancing efforts. "Even though the overall fiscal situation seems to be getting better in many states, most are still keeping expenditures reigned in, especially considering pent-up demand that resulted from the recent fiscal crisis," the report says.

In addition to spending and revenue, year-end balances are another bellwether of the fiscal health of states. And, according the report, the total balances in the last few years "remain below what are generally considered an adequate financial cushion." The total balances for fiscal 2003 were $16.4 billion or 3.2 percent of expenditures, $25.3 billion or 4.8 percent of expenditures in fiscal 2004, and $18.6 billion or 3.4 percent of expenditures in fiscal 2005.

The Fiscal Survey of States assembles data self-reported by states on their general fund budgets. General fund budgets are the current operational plans states use to finance most broad-based state programs and services and thus are the most important element in determining states' overall fiscal health. General funds constitute about one-half of state expenditures. States also make expenditures from other dedicated state funds (such as for education or transportation), from bonds and federal grants-in-aid.

NASBO conducted the field survey between July and November 2004 and governors' state budget officers completed the surveys. Fiscal 2003 data represent actual figures, fiscal 2004 figures are preliminary, and fiscal 2005 data reflect appropriated budgets.

The Ohio Commission to Reform Medicaid recommends numerous program cuts to help balance the state budget, including the follow suggestions:

* Allow nursing home reimbursement to be set by administrative action rather than statute and cut reimbursement to nursing home providers by 3%
* Expand estate recovery by broadening the list of assets that can be recovered
* Implement "cash and counseling" voucher programs and other programs that allow consumers to participate in savings if they use less expensive programs
* Reduce the number of drugs that Medicaid will cover
* Step up pre-admission screening efforts to divert people away from nursing homes.

View report at: http://www.ohiomedicaidreform.com/

For more information, contact:
Joe Sutherland or Colleen Chapman,
301-652-1558

Model Program that Improves Quality of Life for Elderly Medicaid Beneficiaries and Those with Disabilities Expands to 11 New States

Evaluation of Original Three-State Cash & Counseling Program Found Participants Much More Satisfied with Services Received When They Direct Their Own Care. Expanded Program will Give Thousands More the Opportunity to Exercise Choice and Control Over the Supportive Services They Receive

BOSTON (October 7, 2004) '“ Funders of the original three-state Cash & Counseling program announced today that 11 new states will receive three-year grants of approximately $250,000 each to replicate and expand the successful program, which allows people eligible to receive supportive services through Medicaid to direct their own care and live more independently. The program is funded by The Robert Wood Johnson Foundation (RWJF) and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) and the Administration on Aging (AOA) within the U.S. Department of Health and Human Services (HHS).

An independent evaluation of the original Cash & Counseling program by Mathematica Policy Research Inc. found that, in all three participating states, when Medicaid beneficiaries of various ages and disabilities were given the opportunity to direct their own supportive services and hire their own caregivers, their quality of life improved, satisfaction with services increased, unmet needs for care were reduced, and access to home care increased ¾ without compromising beneficiaries'™ health or safety (relative to randomly assigned control groups that received services from agencies).

And while impacts on the use and costs of Medicaid services are not yet available for all three Cash & Counseling programs, results from one (whose evaluation was completed earlier than the others) show that by the second year of enrollment, the consumer-directed option cost no more than agency care, due to lower spending for nursing home and other Medicaid services.

'œWe'™re thrilled to be able to expand this program to 11 new states because it was so obviously a winner for participants in Arkansas, Florida, and New Jersey,' said Risa Lavizzo-Mourey, MD, MBA, president and CEO of RWJF.

'œThis is wonderful news for elderly and younger people with disabilities,' said HHS Secretary Tommy G. Thompson. 'œThis successful model program will allow caregivers and beneficiaries to live independently and with the freedom they desire.'

Under the new Cash & Counseling program, 11 states received approximately $250,000 to replicate the program, and two of those states received an additional $100,000 to expand the model.

The 11 new Cash & Counseling State Programs are:

Alabama Department of Senior Services, $250,000
Iowa Department of Human Services, $250,000
Kentucky Department for Medicaid Services, $250,000
Michigan Department of Community Health, $250,000
Minnesota Department of Human Services, $350,000
New Mexico Aging and Long Term Service Department, $349, 153
Pennsylvania Governor'™s Office of Health Care Reform, $250,000
Rhode Island Department of Human Services, $250,000
Vermont Department of Aging and Independent Living, $249,416
Washington Department of Social and Health Services, $250,000
West Virginia Bureau of Senior Services, $250,000

Traditionally, state Medicaid programs have contracted with home care agencies to provide personal assistance services ¾ such as bathing, dressing, grooming, preparing meals, and housekeeping ¾ to the elderly and younger people with disabilities. Although those who are eligible for services may be able to choose among available agencies, frequently their decision-making power ends there. They often have little say in who provides the services or even when or how they are provided.

The experimental Cash & Counseling program was launched in 1995 to give Medicaid beneficiaries choice and control over their personal care needs. It provides a self-directed, individualized budget to recipients of Medicaid personal care services. Participants use the money to hire their own caregivers or purchase items ¾ such as chair lifts or touch lamps ¾ that help them live independently. Each person'™s budget is comparable to the value of services that he or she would have received from an agency. Consulting and bookkeeping services are available to help participants weigh their options and keep up with required paperwork.

'œProviding more choice and control to people who are capable of managing these very personal daily activities makes a tremendous difference in improving their quality of life,' said Kevin Mahoney, PhD, director of the Cash & Counseling program and a professor of social work at Boston College. 'œWith 11 new states launching programs, we hope we'™re that much closer to the day when every state will make this voluntary option available to Medicaid beneficiaries who have disabilities.'

Unlike the three original demonstration programs, the new round of Cash & Counseling programs will not include control groups. Grantee states will need to secure 1915(c) or 1115 waivers from the Centers for Medicare and Medicaid Services (CMS) in order to implement a participant-directed individual budget model for Medicaid.

The Boston College Graduate School of Social Work will serve as the National Program Office for the new program. The program is sponsored jointly by RWJF, ASPE, and the AOA. In addition, CMS reviews states'™ Section 1115 demonstration or 1915 (c) waiver applications and provides continuing oversight and technical assistance in the waiver process.

More information on Cash & Counseling is available online at www.cashandcounseling.org or through RWJF'™s Website at www.rwjf.org.

National Association of State Budget Officers and the National Governors Association recently released a survey of the financial problems of the states and the ways they are compensating for the financial shortfalls. The report says this is the "the most dire fiscal situation since World War II". Even more worrisome is the fact that most states are using up all their easy options this year, but will probably be in as bad or worse financial shape next year, even if the economy suddenly explodes, because increases and decreases in state revenues lag actual changes in the economy.

There are important implications for the Medicaid program, which is the only "long term care insurance" that most Americans have. This huge and growing program cannot escape scrutiny when state budgets falter, a problem which will only get worse as a larger and larger percentage of the population grows older. States will have no choice but to continue to cut payments and eligibility to keep their budgets balanced. It won't be very pleasant for the poor elderly who are dependent on the system, and it should serve as a warning for anyone who thinks they can avoid planning ahead because they expect the government to pay for their long term care costs in the future.

Most states are making cuts in Medicaid in two ways:

• Making programs harder to access and more expensive for recipients:
  • Reducing optional benefits/eligibility;
  • Requiring prior authorization pharmaceuticals;
  • Increasing cost-sharing requirements, including instituting premiums;
  • Adding statutory authority for additional estate recovery;
• Getting revenue/savings from providers (reducing their profit and perhaps driving them out of the program):
  • Increasing fraud and abuse efforts;
  • Contracting for services;
  • Reducing prescription drug costs by revising the ingredient cost reimbursement rates;
  • Reducing provider rates;
  • Negotiating additional drug rebate payments;
  • Eliminating special grants to rural hospitals;
  • Entering in multi-agency purchasing arrangements for volume discount savings.
  • Adding/increasing provider taxes;

For example, like nearly every other state, California is facing a severe budget crisis. In December 2002 Governor Gray Davis announced a proposal to cut $10 BILLION from the state's budget. Among other cuts are the following:

• $2.5 million to be cut from the Department of Aging, including cuts in the program that provides meals to poor and homebound seniors. Part of the savings will come from the elimination of the Respite Registry Program, the Foster Grandparent Program, the Senior Companion Program, and state support for the Brown Bag Program which provides surplus fruits, vegetables, and other unsold food products to low-income elderly persons.
• $90 million to be derived by cutting reimbursement rates by 10% for all Medicaid providers, including long term care providers.

The Kaiser Commission on Medicaid and the Uninsured published a survey in September 2002 of the impact that state budget problems are having on Medicaid. Analyzing the results, 30 states reported that long term care was either a significant factor in the growth in expenditures or was a target of budget cuts in FY 2002 or FY 2003. These numbers are probably understated, since other states, like California, continue to announce Medicaid cuts.

Financial problems in many states may jeopardize programs that cover long term care costs for many older adults. The states finance about half of the cost of Medicaid, a joint federal-state program which pays some or all of the cost of care for about 70% of all nursing home residents. Also at risk are state programs to offset the cost of prescription drugs for older adults that lack insurance coverage, many of which are so new they have not yet been fully implemented. The Wall Street Journal and the National Conference of State Legislatures report that many states are considering making cuts in both these programs to offset their budget woes.

States are facing financial problems they have not seen in years. The National Conference of State Legislatures (NCSL) reports that at least 28 states have implemented or are considering budget cuts or holdbacks to address fiscal problems, including 14 states that have implemented hiring freezes, cancellations of capital projects and travel restrictions, and 7 states that will convene or have convened in special sessions to address budget problems. Altogether, 44 states are generating revenue below forecasted levels, and 19 states are seeing expenditures higher than forecasted levels. Things could get much worse than this, since much of the information the NCSL has accumulated shows financial deterioration that happened prior to September 11, and does not yet include the economic effects of the terrorist attacks.

Virtually no one believes that income tax increases are a viable alternative to build up state coffers, so most states will be forced to make cuts in expenditures, and Medicaid is unlikely to escape unscathed. Medicaid is a significant portion of many state budgets, and the NCSL reports that at least 11 states already need to make supplemental Medicaid appropriations, while many other states have seen Medicaid costs exceed budgeted amounts and may need to react to those cost overruns. Earlier in the year, states reported that Medicaid spending grew by 14% on average, even though it originally had been budgeted to grow by 6.4%. Preliminary FY 2002 budgets estimated that Medicaid will grow 8.7%, about half as fast as it is currently growing, but still nearly twice as fast as other big budget items like K-12 education (3.7%), higher education (3.6%) and corrections (3%).

Part of the reason for the increase in Medicaid spending is the huge increase in health care costs in general. Another factor is the increase in unemployment, which is adding new people to the Medicaid roles. The Wall Street Journal reports that many states are considering a variety of ways to reduce Medicaid costs, including imposing co-payments or premiums for Medicaid beneficiaries, changing the income level it takes to qualify for the program, eliminating or reducing some benefits like dental, vision or prescription drug benefits, or reducing or delaying payments to health care providers.

After many years of cash surpluses, many states are anticipating reduced cash flows in the next few years. Programs which take up a significant portion of those budgets are likely to be scrutinized closely as legislators try to find ways to reduce cash outlays. Education spending accounts for about 20% of most state budgets, but is generally considered to be "untouchable". Medicaid spending represents 20% or more of most state budgets and is definitely NOT considered untouchable.

Long term care costs, especially nursing home costs, are the largest component of Medicaid expenditures. Expect to see many states trying to reduce Medicaid expenditures in the future by restricting payments for long term care services in some way. They could do this either by reducing the rates paid to providers, or by restricting access to Medicaid programs. Anyone who is counting on Medicaid to pay for their long term care costs should keep a close eye on the actions of state legislators in the few years.

HR 1436, Nurse Reinvestment Act of 2001 has been introduced by Rep Lois Capps, and is co-sponsored by 84 other representatives. Among other things, the bill proposes to address the nursing shortage by increasing the federal Medicaid match to help pay for nurse training programs, establishing a "National Nurse Service Corps," that would pay for the nursing education of candidates who commit to working in a nursing facility or other health care facility with staff shortages, and establishing federal grants to allow nursing facility employees to pursue gerontology degrees or certificates.

Sen. Russell Feingold (D-WI) tried to add an amendment to the income tax relief bill which would have made Medicaid estate recovery optional for the states. Calling it a "100 percent death tax" for poor older people, he suggested paying for the cost of this provision by scaling back the proposed reduction in the estate tax. As the law currently stands, states are required to recover the cost of Medicaid services from the estate of deceased beneficiaries by taking measures like putting liens on their homes.

As reported in the Congressional Record, he said "The average annual cost of nursing home care is about $40,000 or about $110 per day. That cost poses an enormous burden on many elderly or disabled individuals, many of whom are forced to spend down a lifetime's savings before they become poor enough to qualify for Medicaid. After having spent down those savings, a home may be the only thing they have left to leave to their children...and there is strong anecdotal evidence that many forgo needed care in order to avoid losing their homes and personal property to the estate recovery program."

He continued, "The estate recovery program does little to offset the cost of Medicaid, accounting for only one-tenth of one percent of the funding for the program according to data from the Congressional Research Service. The estate recovery program can work a real hardship on surviving spouses. After surviving the chronic illness of their loved one, and spending down their life's savings, they then must cope with a lien on their home. As the Congressional Research Service notes, though claims on an individual's estate cannot be acted upon until after the death of the surviving spouse, liens placed on houses can affect an individual's financial credit, preventing that spouse from mortgaging property, getting a bank loan, or taking out a new credit card in order to pay for essential living expenses such as home repairs like a new furnace or a leaking roof."

Senator Max Baucus (D-MT) responded "Medicaid spend-down is a large problem. All who have studied this know it needs to be dealt with. This amendment was offered in committee and defeated in committee. It is not germane to this bill. This is a tax bill, not a Medicaid bill. I urge Senators not to support it." The amendment was voted down by a vote of 41 to 58.

The Medi-Cal Policy Institute has issed a new report, "Understanding Medi-Cal Long Term Care." It answers questions like:
- What is Medi-Cal?
- Who is eligible for Medi-Cal long-term care?
- How is long-term care funded and administered?
- Which services are covered by Medi-Cal?
- What policy issues lie ahead?

The Florida Legislature is considering budget changes for Medicaid long term care programs. Among the changes requested by the Agency for Health Care Administration is a new program incorporating competitive bidding or capitation into the program used to reimburse nursing homes for Medicaid services, which is projected to provide $23 million in savings. Other reductions in spending include the elimination of the "Intermediate" category of nursing home service and the transfer of residents in this program to assisted living facilities, and an additional $23 million to buy more community services to allow elder Floridians to stay in their own homes.

To reduce the spiraling cost of the Medicaid budget, eligibility for Medicaid for people age 65 or older would be limited to those with incomes of no more than 87.5% of the Federal Poverty Guidelines, down from the current cap at 100% of the poverty level. The state would also no longer pay the Medicare Part B deductibles and coinsurance for people who are eligible for both Medicare and Medicaid, and they plan to create a restricted drug formulary to limit the prescription medications which would be covered by Medicaid.

The U.S. Department of Health and Human Services (HHS) announced it is proposing new rules to help enable more low-income Americans qualify for Medicaid coverage. The proposed change addresses problems created by existing rules that limit Medicaid eligibility for certain individuals to outdated, extremely low income levels that were used in the old Aid to Families with Dependent Children (AFDC) program, prior to welfare reform. The proposal is aimed at assisting those whose income is slightly above traditional Medicaid income limits, but who are strapped with overwhelming medical bills.

Under current "medically needy" rules, a state can offer Medicaid coverage to such persons once they have spent so much of their income on medical bills that what is left over meets the states' medically needy income standard. In more than 40% of the states that standard is significantly below the poverty level. Under the proposed rule, a state could disregard portions of a person's income -- such as the income necessary to pay for food, clothing or housing -- if their income is too high to qualify them for Medicaid under current rules.

The proposed rule is of special significance for the elderly and people with disabilities. Under current rules, people in institutions can qualify for Medicaid coverage at higher levels of income than if they lived in the community. This "institutional bias" acts as a barrier to living in the community for many persons with disabilities. The proposed change would allow states the flexibility to change their own rules so that elderly or people with a disability would not have to lose their health coverage if they move into a community setting instead of a nursing home.

"This proposal has important potential to open doors to community living for thousands of Americans who are able to live at home and do not want to be confined in nursing homes," said HHS Secretary Donna E. Shalala. "It can enable people to obtain the services they need to live in their own home despite a chronic illness or disability, and lead fuller lives of their own choosing."

The Sacramento Bee reported that the state of California is suing Susan Gollas for $120,000 to recoup the cost of caring for her father, Sadao Yorita. Susan placed him in a nursing home when she was no longer able to care for him at home. She found that he qualified for Medi-Cal, since he didn't have the resources to pay for his own care. However, Gollas said she wasn't aware that she would have to pay back the state when her father applied for Medi-Cal. She said she will be forced to sell the 20-acre family farm she inherited from him and now works with her husband, Mario, and their three children.

Many people are unaware that federal law requires states to pursue repayment of nursing home costs from the estates of Medicaid recipients. The program in California collected about $40 million last year from more than 2,400 estates. County welfare offices give Medi-Cal applicants for long-term care printed information explaining that the costs will eventually be recovered, but the regulations are complex and advocates say an estate planner or attorney may be needed to help some understand the consequences. Some of those who are surprised the most have very modest estates, and may not have the education or resources to get professional help.

One thing the article did not mention is that the Federal guidelines provide that states should not recover costs if they cause "undue hardship," for example in the event that the estate is the only income-producing asset for the surviving family. It specifically mentions family farms as an example. Hopefully, Ms. Gollas will retain professional help to protect her family farm, but this story illustrates the fact that many people are unaware of all the consequences of relying on Medicaid for nursing home costs.

The full text of the Elderly Case Management Service Manual has been posted online by the Virginia Department of Medical Assistance Services.

Arizona Health Care Cost Containment System Administration (AHCCCSA) proposes to revise fee-for-service (FFS) payment rates for long term care nursing facilities and home and community based services (HCBS) for dates of service on and after October 1, 2000. Under this proposal, nursing homes in Arizona will see an increase of about 5% in their reimbursement rates, and Home and Community Based Services (HCBS) providers will see an increase of about 8.8%. Payment rates and ratios are available for review at AHCCCSA, and written comments should be sent to the following address and received no later than 5:00 p.m. on September 29, 2000:

Michael Veit, Contracts and Purchasing Administrator, Arizona Health Care Cost Containment System, 701 E. Jefferson Street, Phoenix, Arizona 85034

The state of New Hampshire owes 79 people $675,000 in Medicaid refunds, but hasn't been able to find them. The refunds are owed to people whose homes or other assets were taken by the state since 1992 to repay state-paid nursing home care for other people, usually a spouse. Money also is owed to the estates of deceased nursing home patients. The state agreed to repay about $6.5 million to 370 families or estates to settle a class-action lawsuit that ended a state practice of filing liens against homes and assets to recoup Medicaid payments.

They have been able to find all but these 79 people, and have run into a hitch. Legal Assistance would like to publish the names of these people, but the State says that publication of their names in the newspaper would violate their privacy, and has refused to do so. The deadline for filing a claim is August 16.

The state is required by law to recoup Medicaid payments in many cases, but some estates are not eligible for refunds. For instance, people who are beneficiaries of a Medicaid recipient?s estate, but not a spouse or co-owner of real estate, probably are not entitled to a refund.

Refunds already paid out ranged from $6 to $120,000.

Medicaid reimbursement is funded by a combination of federal and state funds, with the state designing the program and setting payment rates, under strict federal guidelines, while the federal government "matches" the state contribution. The amount of the match varies from state to state, but generally the federal government will pay $1 for every $1 the state government contributes to the program.

Many states have used a technique called "intergovernmental transfers" for many years to increase the amount of money the federal government will pay for Medicaid nursing home services. Basically, they transfer funds they would already be spending on other state programs and designate them as Medicaid funds, so that the federal government will have to match this contribution. The consensus among most state Medicaid officials is that this is completely legal and allowable under current program guidelines.

The Health Care Financing Administration (HCFA), the federal agency responsible for making Medicaid payments, has announced they intend to modify the program guidelines to disallow this technique. A summary of the draft proposal, obtained by The Associated Press, would change the formula for determining the maximum amount of federal money nursing homes could receive.

State Medicaid officials state that the new proposal could lead to service cuts or nursing homes not being able to afford to take new Medicaid patients. The change would dramatically reduce federal matching funds in many states that have come to rely on the money to shore up struggling county-run nursing facilities, state officials say. Wisconsin, for instance, says it could lose between $60 million and $104 million.

The Health Care Financing Administration (HCFA) has given states permission to include annuities in the definition of the "Estate" which can be recovered from Medicaid beneficiaries who have died. The Omnibus Reconciliation Act of 1993 (OBRA 93) required states to recover the cost of Medicaid services from the estate of beneficiaries who have died, to help recoup the cost of program services. Some Medicaid planners have used annuities to convert "countable assets" into "exempt assets" to help qualify clients for Medicaid nursing home benefits. Although annuity payments are includable in the Medicaid recipient's income, the residual balance in the annuity at the time the beneficiary died has been allowed to go to a designated beneficiary instead of to the state.

A January 24 letter from the HCFA Region IX office to the California Department of Health Services said that states may recover annuity proceeds under a broad definition of "estate" which includes any property or arrangement in which the Medicaid recipient has any "legal title or interest at time of death". HCFA states that recovery cannot begin until the calendar quarter 90 days after an amendment to the State Medicaid Manual, and the state?s Medicaid plan must also be amended to include annuities in its definition of estate. HCFA recommends that the inclusion of annuities as part of the estate be adopted by regulation.

In 1997-1998, the State of Illinois paid over $1 million to nursing home providers for residents who were deceased. Although the payments were eventually corrected, there was concern that the providers effectively got an interest-free loan during the time they held the overpayment. The Office of the Inspector General of the Illinois Department of Public Aid (OIG) investigated the cause of these overpayments, to determine whether the providers were not properly notifying the Department, or if the State had not properly processed the notifications. In their report, they identified many problems, attributable both to the state and to the providers.

Files in both the nursing homes and the DHS offices were missing the appropriate death notification form (IDPA 1156). About 20% of the forms were missing from nursing home files, and 73% were completed past the required date. Only about 40% of the forms investigators located in nursing home files could be found in the DHS files, but investigators were unable to prove whether or not the forms had been filed, since Department staff were unable to even find the case file 24% of the time.

Investigators found many other problems. For example, IDPA notified providers in April 1998 that they must notify the Department within 5 days of the death of a resident. The Department provided a mailing address and said a fax machine would be installed to expedite the reporting of the death of a beneficiary, however, the fax machine was not installed for another year, and it was another six months after that before IDPA notified providers of the fax number.

The Louisiana Department of Health and Human Services has announced emergency cuts in the reimbursement it will pay healthcare providers for services provided to Medicaid recipients. Included in these cuts is a cut in reimbursement for nursing home care of 7%. Other cuts have been made in reimbursement for home health services, durable medical equipment, and outpatient therapy. The state also issued a press release stating that cuts in nursing home reimbursement were necessary because 23-25% of the Medicaid budget goes to services provided to nursing home residents.

Providers in the state asserted that these cuts will greatly impact access to care and the scope and quality of the services delivered. Three hospital and nursing providers filed for relief in federal court, and a temporary restraining order was issued to prevent the state from implementing the cuts. The state responded to this suit by stating that the only way they could avoid cutting reimbursement to providers was to reduce or eliminate some programs now offered to Medicaid recipients.

Medicaid is the primary source of payment for many long term care services. About 70% of the people in nursing homes have their care covered by the Medicaid program, and many states are creating new programs to provide Medicaid-covered long term care services to low-income older people who need significant assistance but who are able to remain in their own homes.

Oversight of the providers that participate in the Medicaid program is a critically important issue in long term care. Yet, while most states require criminal background checks for at least some of the people hired by healthcare providers, only 10 states do any criminal background checks on the providers themselves when they apply for enrollment in the Medicaid system. The Office of the Inspector General (OIG) concluded it is too easy for corrupt providers to enroll and remain in the Medicaid system. A new OIG report says that many states fail to check enough external sources of information when they enroll new Medicaid providers, then compound the problem by failing to do any further verification once a provider is enrolled.

Criminal background checks are not specifically required by federal or state law, but these and many other types of verification ought to be done before allowing a new provider to provide services which will impact hundreds or thousands of individuals, many of whom are frail older adults. The OIG found many other weaknesses in the enrollment system, including:

• 25 states don't contact their own state's Medicaid Fraud Control Unit as a routine part of their enrollment process.
• 9 states don't check to see if the applicant has a previously assigned Medicaid number.
• Only 2 states contact Medicaid agencies in other states as a part of their verification process.
• 5 states would automatically reactivate a Medicaid number if a new claim was received after 1-2 years of inactivity.
• Only 10 states routinely do an on-site inspection of a potential Medicaid provider.
• Only 8 states check to see if the provider's telephone number even works.
• 32 states have no re-enrollment or re-credentialing process after the initial enrollment.

These weaknesses make it far too easy for a corrupt provider to remain in business. If too many problems accumulate under one provider number, a provider could easily re-enroll by applying for a new number in their own state, by applying for enrollment in a different state, or by taking over the inactive account of another provider. These providers perpetrate financial fraud on the taxpayers by receiving payments they are not entitled to. Even worse, they provide healthcare services they may not be qualified to perform, and put themselves in a position to exploit or abuse vulnerable beneficiaries.

The report says that many state agencies agreed that more aggressive procedures would be appropriate, but say that they have inadequate staffing and funding to do them. However, the cost of keeping those providers out of the system in the first place is is a drop in the bucket compared to the dollars spent on fraudulent claims and the expense of finding and prosecuting corrupt providers.