Monday, January 24, 2011

A letter to the Governor – How to Reduce State Expenditures on Nursing Home Care.

Dear Governor Corbett:

These are tough financial times for Pennsylvania. I know your budget team is looking hard for ways to limit expenditures.

I’d like to suggest a way that the Commonwealth can save many millions of dollars over the next year, and each year thereafter. The savings will come by reducing the amount that Pennsylvania pays for our nursing home residents. Remarkably, I think our state can save this money without reducing the care being providing. The amount and quality of care will actually increase. Providers will benefit as well by receiving higher reimbursement rates.      

Your administration can achieve these “Win, Win, Win” results by taking the steps needed to ensure that current Medicare regulations are properly implemented and the federal government pays its fair and correct share of the cost of nursing home care.  

Here is a little background.

The Erroneous Medicare Improvement Standard

Medicare will pay for up to 100 days of nursing facility care if Medicare eligibility rules are met. To qualify the Medicare beneficiary must have a related 3 day inpatient hospital stay and require “skilled care” in the nursing facility.  If the requirements are met, Medicare (with help from Medicare supplement insurance after day 20) will pay for the resident’s nursing home care, including the cost of room and meals.  
Skilled care means care that requires the involvement of skilled nursing or rehabilitative staff in order to be given safely and effectively.  It is furnished by, or under the supervision of skilled personnel like registered nurses, licensed practical nurses, physical therapists, occupational therapists, speech-language pathologists or audiologists.

Medicare does not pay for nursing home costs if “custodial care” is the only kind of care the resident needs. Custodial care (e.g. help with dressing, eating or bathing) is provided by someone who is not medically skilled.  If a resident who initially requires skilled care later needs only custodial care, Medicare will stop paying.  

The initial determination of whether a resident needs skilled care and thus qualifies for Medicare is made by the nursing facility. Unfortunately, Pennsylvania nursing home residents who should qualify are often denied Medicare coverage because our nursing homes are using an erroneous standard in determining Medicare eligibility.

Nursing facility residents should qualify for Medicare if skilled treatment is needed either (1) to improve their level of functioning, or (2) to maintain the level of recovery they have already attained. However, nursing homes have been failing to submit Medicare claims for residents in the 2nd “maintenance” category. 

Here is an example of how this works.

On June 3rd, Wanda was admitted to Manor Care Nursing Home following hip replacement surgery. She received physical and occupational therapy and her care was covered by Medicare. Recovery was slow and she was making only minimal progress with ambulation. On July 10 the nursing home determined that Wanda no longer needed skilled care because she would no longer materially improve with additional skilled therapy. In the common vernacular of nursing facilities, the nursing home decided that she had “plateaued.” As a result, Wanda lost her Medicare coverage.

The imposition by the nursing facility of this mandatory “improvement” requirement for continued Medicare eligibility was incorrect.  Papciak v. Sebelius, (U.S. Dist. Ct., W.D. Pa., No. 09-1354, Sept. 28, 2010). However, this is the normal course in Pennsylvania nursing homes. If a resident is no longer materially improving, they are denied Medicare. Nursing homes don’t follow and may be unaware that the law provides that even if the resident is not improving, Medicare is still authorized so long as skilled services are necessary for the establishment of a safe and effective maintenance program. While material improvement is sufficient to authorize Medicare, it is not required.

The Medicare Regulations are clear on the point:

[t]he restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.” 42 C.F.R § 409.32(c).

Because of the misapplication of the improvement standard, Pennsylvania nursing facility residents who are entitled to Medicare are being denied it. While many would likely qualify for Medicare for the entire 100 days, the average length of Medicare coverage for residents of skilled nursing facilities is only 35 days.

The too early termination of Medicare coverage has a negative financial impact on the Commonwealth since it means that residents are forced onto Medicaid sooner. It is harmful to residents because they are denied therapy that is needed to prevent further deterioration or preserve current capabilities. And it hurts nursing facilities by transitioning residents from higher paying Medicare status to lower paying Medicaid.   

Two recent federal court cases have held that the application of this “improvement” standard is incorrect.  One of these cases, Papciak v. Sebelius, which was decided in September 2010, was a result of the efforts of the elder law clinic run by Martha Mannix at the University of Pittsburgh School of Law. The 2nd case, Anderson v. Sebelius was decided by a federal district court in Vermont a month later. Here are links to several discussions of these important cases.

The Illegal Misapplication of the Improvement Standard is costly to Pennsylvania  

In addition to denying our nursing home residents needed care, the misapplication of the improvement standard is costing Pennsylvania millions of dollars each year. In 2008, Medicaid expended nearly $ 4 billion dollars on nursing facility care for Pennsylvania residents.  Federal funds comprise a shifting share of this outlay. The federal share has been high recently due to temporary federal funding, but is likely to fall back below 60% in upcoming years. The other 40+% will fall onto Pennsylvania. This means that state’s share of the annual cost of Medicaid for nursing home care should be in the range of $1.6 billion dollars a year.   

reports that Medicaid, the joint federal and state funded program, pays for over 65 percent of resident days of care in Pennsylvania’s nursing homes. Medicare, funded without cost to Pennsylvania, pays for approximately 12% of care. 

Eliminating the illegal application of the improvement standard will mean that Medicare will pay for more days of a residents nursing home stay. This will delay and reduce the resident's ultimate need for Medicaid. Each 1% reduction in the percentage of care paid by Medicaid should result in approximately $24 million dollars in savings to the state. ($1.6 billion/65 = $24.61 million). A shift of only 4% from Medicaid to Medicare will save Pennsylvania nearly $100 million each year. Additional savings can be realized if proper Medicare eligibility standards are applied in home health and outpatient physical therapy settings as well.  

Pennsylvania needs to act now to change the improvement standard mindset into which nursing facility personnel have been misled.  The change won’t be as easy as it might seem. Although the law is clear, Medicare claims are processed by private subcontractors. It is the subcontractors who are the source of the requirement for improvement in patient condition. Nursing Home personnel who make the initial coverage decisions can be expected to continue to take their instructions from these subcontractors even though those instructions are erroneous.

To encourage the use of correct Medicare eligibility standards, Pennsylvania should institute a program to educate personnel at skilled nursing facilities. The Commonwealth should engage in random audits of the eligibility decisions being made by nursing facilities. And it should be prepared to bring suit if necessary against CMS subcontractors who continue to propound the illegal standard.


To the extent that a nursing home stay is paid for by Medicare (100% federal dollars), the expenditure of Medicaid dollars (approximately 40% state money) is delayed, reduced, or avoided entirely. Pennsylvania nursing homes have been improperly terminating their residents Medicare coverage thereby forcing residents onto Medicaid sooner than necessary.  The potential savings to Pennsylvania of proper implementation of correct Medicare qualification standards should be huge.  

Here is a chance for Pennsylvania to do well by doing right by its nursing home residents.  It is an opportunity that should not be delayed.


Jeffrey A. Marshall, CELA*
49 East Fourth Street, Suite 200
Williamsport, PA 17701

*Certified as an Elder Law Attorney by the National Elder Law Foundation

Saturday, January 15, 2011

Gary Alexander to be new Secretary of Public Welfare in Pennsylvania

By Jeffrey A. Marshall, CELA* 

Governor Elect Tom Corbett has announced that he will nominate Gary Alexander to become the new head of Pennsylvania’s Department of Public Welfare. 

Mr. Alexander is a lawyer. He received his bachelor’s degree in political science from Northeastern University and his J.D. from Suffolk University School of Law. He and his wife of 14 years have two children.The approval of his nomination by the Pennsylvania Senate appears highly likely. 

Mr. Alexander previously headed the Rhode Island Office of Health and Human Services where he oversaw that State’s innovative and controversial Global Medicaid Waiver Program. Under that Waiver, approved by the federal Bush Administration, Rhode Island agreed to a cap on federal funds in return for unparalleled flexibility in designing its Medicaid program and spending those funds. 

The Global Waiver allows the state to limit federal Medicaid entitlements in favor of state determined priorities.  The premise was that an unfettered Rhode Island could cut costs by pursing strategies such as reducing institutionalization through expanding home and community based care. 

Readers who would like more information about Rhode Island’s Medicaid Waiver can find it at the following links:

A recent column by Mr. Alexander: Medicaid Waivers and the Rhode Island Model

An overview from Rhode Island’s Medicaid Gamble

·       The Poverty Institute   

      CMS documentation on the Rhode Island Waiver

The final story has yet to be written on the Global Medicaid Waiver that [Rhode Island Governor] Carcieri won from the Bush administration, in its final days. . . .

As for the waiver itself, Carcieri acknowledges it has not yet produced the $60 million in annual savings he anticipated from the state’s newly won freedom to use its Medicaid dollars to pay for less-expensive alternatives to nursing homes. An interim report indicates the number of nursing home patients has indeed dropped 12 percent since Jan. 1, 2009, but the state’s $308-million nursing home bill rose 6.9 percent. The cost of providing home care and other “community-based services” went up 45 percent during the same span. 

Carcieri says “these things take time.” Had it not been for the new opportunities provided by the waiver, nursing home costs “would have tripled,” said his spokeswoman, Amy Kempe.

So, it is probably accurate to say that the jury is still out on the Rhode Island Global Waiver. The program has yet to produce the kinds of savings initially predicted by its proponents.  But, in fairness, its results have undoubtedly been impacted by the recent Great Recession. The past two years were not a good test period.

At this point, we can only speculate on the Corbett/Alexander plans for Pennsylvania’s Medicaid program. Much has changed in the few years since Rhode Island received federal approval of its Global Waiver. The Obama administration may be less receptive to this kind of proposal than was President Bush. And the new Health Care Reform law is now set to provide health insurance coverage to many otherwise uninsured through an expansion of Medicaid.      

I do expect that, in an era where the political password is “austerity,” Mr. Alexander will be tasked with reducing the escalation in the state’s share of Medicaid costs without jeopardizing the health of the program’s vulnerable beneficiaries – our children, the disabled, and seniors. 

This won’t be easy. Medicaid is big business in Pennsylvania. Any new initiatives will face a gauntlet of interested stakeholders including health insurers, nursing homes, hospitals, health professionals, unions, and other interest groups, all of whom have a strong voice in Harrisburg. And the public believes in Medicaid. 80% of the public thinks that it is the government’s responsibility to help pay for health and long term care services for people with disabilities and chronic health conditions who cannot afford to pay for it themselves, according to The Kaiser Family Foundation , National Survey of the Public's Views About Medicaid (June 2005)

I join with other Pennsylvania Elder Law Attorneys in welcoming Mr. Alexander to Pennsylvania and wishing him well as he embarks upon his difficult new position. We will be anxious to meet him and learn of his plans for the future of Pennsylvania’s Medicaid safety net.   

*Jeffrey A. Marshall is Certified as an Elder Law Attorney by the National Elder Law Foundation, under authorization of the Pennsylvania Supreme Court. 

Monday, January 10, 2011

2011 offers Estate and Elder Planning Opportunities

By Jeffrey A. Marshall, CELA*

The Central Penn Business Journal recently asked me for my predictions for 2011 with regard to estate and elder law planning. Here is my response.  

I’m anticipating a very busy year for lawyers who focus on estate planning and elder law.

The federal rules governing the taxation of gifts and estates have been completely rewritten. Clients with land or business interests or other forms of wealth will want to revisit their plans for lifetime and testamentary gifts. Unfortunately, the new estate and gift tax laws are written to sunset on December 31, 2012, so our client’s window of opportunity may be limited. This means that estate planning lawyers are likely to be reviewing and revising many client plans over the next two years.

My office represents a lot of landowners with interests in the Marcellus shale. These clients will continue to need sophisticated legal representation in regard to issues such as pipeline leases, the creation of business entities like family partnerships, and estate planning. 

Expert estate and lifetime planning assistance from a certified elder law attorney will be particularly important for seniors.  Pennsylvania’s $4 billion budget deficit could result in serious cutbacks this year in senior support services. New rules are taking effect under health reform that impact seniors, mostly positively. And recent federal cases give nursing home residents new opportunities to qualify for more extended Medicare benefits.

The Magazine then asked what advice I was currently giving to business owners?

In my 38 years of practicing law, I have never seen a better time for business owners to engage in estate planning. The new Tax Relief Act includes estate and gift tax provisions that provide business owners with a remarkable opportunity to make tax free lifetime gifts to younger generations. The $5 million dollar exemptions set for gift and generation skipping taxes can be leveraged to protect even more substantial wealth from being subjected to later death taxes. Business owners should revisit and update their plans during this two year widow. 

Married business owners need to understand the estate and gift tax portability provisions in the new law. Failing to claim the unused credit on the death of the first spouse can be a million dollar mistake.

* Jeffrey A. Marshall has been Certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation under authority of the Pennsylvania Supreme Court

Thursday, January 6, 2011

Billionaire Milliken’s Death beats the Tax Man

Benjamin Franklin famously noted that "in the world nothing can be said to be certain except death and taxes." But last year the bond between these two certainties was more flexible than usual.

By dying on December 30th Roger Milliken has joined the list of billionaires whose heirs have escaped the federal estate tax. Mr. Milliken, a South Carolina textile tycoon, was a long time player in Republican politics and conservative and libertarian causes. He was a significant supporter of Barry Goldwater in 1964, and backed the Presidential campaigns of Pat Buchanan in 2000 and Duncan Hunter in 2008.  

Mr. Milliken was credited with launching the “Crafted with Pride in the U.S.A.” advertising campaign in the 1980s to protect his business interests and his workers from textile imports.  To his great credit he was an ardent opponent of segregation during the 1960s.  

Had Mr. Milliken lived for another 48 hours, his estate would have been subject to federal tax at the new 2011 rate of 35%.

Monday, January 3, 2011

Vine case casts doubt on Powers of Attorney

 By Jeffrey A. Marshall

A decision by the Pennsylvania Supreme Court could make life more difficult for anyone who has to deal with powers of attorney.

A power of attorney (POA) is a document through which you appoint someone (your “agent”) to act for you when you are unavailable to act on your own behalf. Over the past 30 years POAs have become widely used as incapacity planning devices. The agent can step in when the person who created it (the “principal”) is unavailable because he or she is no longer competent. In this way burdensome, costly and embarrassing guardianship court proceedings can be avoided.     

But to be an effective planning tool, the POA has to be accepted by the bank, broker or other third party to whom it is tendered.  If the bank won’t accept the document the whole system breaks down, and someone will be forced to go to court to get authority to manage the principal’s financial affairs.    

Pennsylvania has long used a carrot and stick approach to encourage banks and other third parties to accept POAs. The stick is that the third party can be held liable for the damages that flow from its refusal to follow the instructions of the agent (20 Pa.C.S. §5608(a)).* The carrot is that, if the institution does follow the instructions of the agent it is immune from liability (20 Pa.C.S. §5608(b)).* Because of these incentives, it has become rare for an institution to refuse to accept a power of attorney that appears to be valid.

This system may break down now as the result of a December 2010 ruling by the Pennsylvania Supreme Court. In Vine v. SERS Board, Pennsylvania’s highest court held that a third party is ONLY entitled to immunity if the POA is legally valid.  For example, if the principal was not competent when he signed the POA, the document is not valid and the statute's immunity protection does not apply. Even though the POA appears to be valid on its face, the third party may bear liability for accepting it and acting in accordance with the instructions of the agent.

It is unclear how a bank or other third party is supposed to determine if a POA that appears to be valid is actually, legally valid. How can it determine if a now incompetent principal was competent when he signed the document?  If the principal was competent when the document was signed, how is the bank to know if it was later revoked? How can the agent prove to the bank that the POA is valid?

It’s a Catch-22 situation for the bank. If it refuses to follow the instruction of the agent and the POA turns out to be valid, the bank is liable for damages. But if it follows the directions of the agent and the POA turns out to be invalid, the bank may also bear liability. Because the bank is in no position to determine whether the POA is valid, it has no reasonable way to choose what to do. There is no easy way, short of court proceedings, to determine whether a POA is valid.   

This appears to be a mess that only the Pennsylvania Legislature can fix. It could clear up the dilemma for banks and agents by amending Section 5608(b) to read  “Any person who acts in good faith reliance on a power of attorney that appears on its face to be valid shall incur no liability as a result of acting in accordance with the instructions of the agent.” Hopefully, the Legislature will act on this matter in 2011.

*The Pennsylvania Statute (Section 5608) states, in relevant part:
(a)  Third party liability.--Any person who is given instructions by an agent in accordance with the terms of a power of attorney shall comply with the instructions. Any person who without reasonable cause fails to comply with those instructions shall be subject to civil liability for any damages resulting from noncompliance. . . .
(b)  Third party immunity.--Any person who acts in good faith reliance on a power of attorney shall incur no liability as a result of acting in accordance with the instructions of the agent.