Wednesday, May 25, 2011

Making Sense of Medicaid Block Grant Proposals

Changing Medicaid from its historical open ended federal funding into a block grant is a hot topic these days, both in Washington DC and in many state capitols, including Pennsylvania.  Medicaid is the main source of health care and long term care services for millions of seniors, as well as younger disabled persons and children. Converting Medicaid funding to a block grant could have an enormous impact on the health and welfare of Pennsylvania families.  

The Medicaid program is our ultimate safety net for low income people who cannot afford health care. Currently, there are more than 2 million Pennsylvania enrollees (50 million nationwide) most of whom are seniors, the disabled, and children. Nationally, the federal government is expected to spend $275 billion on Medicaid in 2011, with states contributing somewhat less. That is a lot of money and it is being suggested by some that changing Medicaid to a block grant can limit the program’s costs in the future. 

This article will explore just what the politicians and conservative think tanks are talking about when they suggest that federal Medicaid support to the states be converted to block grants.    
  
What is a Medicaid Block Grant
Each state administers its own Medicaid program. But in Pennsylvania and most other states a majority of the funding for Medicaid comes from the federal government. Since Medicaid began in 1966, it has been an open-ended entitlement program. The states are required to cover certain federally designated individuals and comply with federally mandated standards. States that want to vary from the federally mandated standards can ask for a waiver from the federal rules.  

In return for state compliance the federal government gives the states matching funds to cover the individuals included in the state Medicaid program (both the mandatory groups and various optional groups that state decides should be included). The amount of the match varies from year to year, but in general Pennsylvania receives about 60% of its Medicaid funding from the federal government.

Some individuals, such as seniors who need nursing home care but have no money to pay for it, are guaranteed coverage. The state must cover them without imposing any enrollment caps or waiting lists. As noted, states have the option to expand Medicaid to cover other non-mandated groups with federal funding support.  

Currently the federal matching funding is open-ended. This means that the federal government pays if a state decides to cover a new optional eligibility group, or if a state’s Medicaid rolls increase due to a recession or a natural disaster or an epidemic. The federal government pays no matter how much the state program costs.  For example, in December 2007, Pennsylvania had 1.89 million Medicaid recipients. By June 2010 the recession had caused that number to expand to 2.16 million. Federal matching payments to Pennsylvania increased accordingly.

Block grant funding would dramatically change this arrangement. Instead of being open-ended, federal funds would be capped at a certain level. Under the block grant proposal passed by the Republican US House of Representatives on April 15 (part of the budget proposed by Representative Paul Ryan), Medicaid block grant funding would begin in 2013 with federal funding set at the 2012 level plus annual increases of about 4% annually (to account for inflation and population growth). A significant aspect of the proposal is that states would no longer be subject to mandatory federal standards in determining and awarding eligibility and benefits.  

Since federal funding would be capped, states and their residents and health care providers would bear the risk of any need for increased Medicaid funding due to recession or other factors. Federal matching funds would no longer rise and fall with the amount the state spends. A state would be free to expand its Medicaid program, but it would have to come up with 100 percent of the money to cover any expansion.

Proponents of the conversion of Medicaid to block grant funding suggest that open ending funding encourages states to gorge themselves on federal funds and pass that cost on to taxpayers of other states and future generations. They argue that the current system of easy money leads to fraud and abuse. (Under block grants, states would keep 100 percent of the savings achieved from rooting out fraud and abuse rather than 50% or less under the current program). And proponents of privatization argue that Medicaid crowds out the private health coverage that millions of people currently on Medicaid would be likely to obtain if Medicaid eligibility was tightened and they were forced to pay for health care on their own.  

According to the Congressional Budget Office, the Republican House’s block grant plan would reduce federal Medicaid funding by 35 percent in 2022 and by 49 percent in 2030, compared to the current system. (See, Congressional Budget Office, Reducing the Deficit: Spending and Revenue Options, page 39).

Critics suggest that a shift to block grants will reduce federal funding but will not reduce the underlying cost of providing health care to the old and disabled poor.  They argue that it would just shift costs to states, localities, health care providers, and families.  The opponents warn of potentially dire consequences.

To compensate for the steep reductions in federal funding, states would either have to contribute far more in their own funds, or, as is much more likely, exercise the new flexibility under the block grant to cap enrollment, substantially scale back eligibility, and curtail benefits for seniors, people with disabilities, children, and other low-income Americans who rely on Medicaid for their health care coverage.… [For example] Because the Ryan plan would require such deep cuts in federal Medicaid funding, it would inevitably result in less coverage for nursing home residents and shift more of the cost of nursing home care to elderly beneficiaries and their families.  A sharp reduction in the quality of nursing home care would be virtually inevitable, due to the large reduction that would occur in the resources made available to pay for such care. Center on Budget and Policy Priorities, May 3, 2011.

Medicaid funding is of great significance to families that include an individual in need of nursing home care since Medicaid is the primary payment source for 62% of Pennsylvania’s nursing home residents.

Implementing Block Grants at the State Level through Waivers

Only Republicans voted in favor of the Medicaid block grant proposal that was approved by the House of Representatives on April 15th and it is generally assumed that the proposal will not pass the Democrat controlled Senate. But block grant like regimes may still be adopted by the states under the waiver rules. On May 31, Washington State Governor Christine Gregoire signed legislation (SB 5596) requiring the state Medicaid office to submit a request for a Medicaid block grant waiver by October 1, 2011.  

One state, Rhode Island, has been experimenting with a variation of a Medicaid block grant for over two years. Since Gary Alexander, the primary steward of Rhode Island’s so-called “Global Medicaid Waiver” is now Governor Corbett’s nominee for Secretary of Department of Public Welfare, Pennsylvania will likely be considering a block grant type waiver in the near future.    

The Results in Rhode Island

With Mr. Alexander’s emergence on the Pennsylvania scene, it seems appropriate to review what the Global Medicaid Waiver has accomplished in Rhode Island.  But the fog of politics makes it hard to find an objective analysis of the Rhode Island results. A recent article in the Providence Journal gives a good summary for Pennsylvania policy makers and other stakeholders in the Medicaid system.   

By Philip Marcelo, The Providence Journal State House Bureau, May 16, 2011
A Medicaid agreement reached nearly two years ago between Rhode Island and the federal government continues to be praised as a model for other states and the country, even as Rhode Island’s new governor questions how much it has actually saved.
Republican governors in New Jersey and Kansas cite Rhode Island’s Medicaid agreement, known as the “global waiver,” as a model for Medicaid reforms they say are needed to close budget deficits. So, too, do Republican-dominated state legislatures in Minnesota and Texas, according to national policy analysts.
Leading conservative thinkers argue that the Rhode Island waiver shows how governments can save money by converting federal Medicaid spending into a block grant — a key piece of the federal budget recently passed by the U.S. House of Representatives.
But Rhode Island’s role in the debate over the nation’s primary health-insurance program for the elderly, poor and disabled comes as Governor Chafee, an independent, continues to cast doubts as to whether the agreement has actually produced the promised savings.
“I have not found those numbers to be true. It is significantly lower,” Steven M. Costantino, a former Democratic state lawmaker who is now Chafee’s secretary of Health and Human Services, says about recent assertions.
Gary Alexander, Costantino’s predecessor under the former governor, touted approximately $100 million in savings to date in a recent report for the Galen Institute, a conservative think tank.
John R. Graham, a policy expert at the Pacific Research Institute, another conservative think tank, asserted in a Journal op-ed piece in April that the state saved nearly $1.3 billion through the first 18 months of the five-year agreement. (That figure represents the difference between actual and budgeted Medicaid spending for Rhode Island in that period.)
The Chafee administration, meanwhile, says it has been able to confirm the state has saved at least $44 million in general revenue costs through the waiver. Those savings come from shifting Medicaid costs to the federal government, according to Frederick J. Sneesby, communications officer for the state Department of Health and Human Services.
Costantino says his office has been working on an analysis to clarify what he sees as myths associated with the waiver. He also said the administration may enlist an independent group to conduct its own study in an effort to remove the politics from the discussion.
“To say that something is working in Rhode Island that isn’t a block grant, and that is achieving savings that aren’t substantiated at this point, is not a correct leap in judging the Medicaid block grant/waiver discussion,” he says. “There has been a lot of politicizing of it and that has been really unfair. At this point, there is not a 100-percent answer on this question, unfortunately. And there might never be.”
Ex-Gov. Donald L. Carcieri, a Republican, obtained the global waiver — formally known as the “Global Consumer Choice Compact Waiver” — in January 2009, in the waning days of the Bush White House.
The agreement waived many of the strict regulations that came with the federal government’s portion of Medicaid, giving Rhode Island greater flexibility in designing its Medicaid program. In exchange, the Ocean State promised to live under a $12-billion spending cap between 2009 and 2013.
How much was expected to be saved is unclear. The Carcieri administration offered no five-year projected savings figures, according to Chafee officials.
But, bolstered by recent conservative analysis on the waiver’s savings to date, Republican state leaders have expressed interest in similar agreements.
New Jersey Gov. Chris Christie, for example, has suggested he could pare nearly $540 million from the state’s approximately $4.4 billion Medicaid program through a global waiver like Rhode Island’s that caps the state’s federal Medicaid allotment.
Kansas Gov. Sam Brownback has written to the Obama administration expressing hope that the two sides could develop a global waiver to establish “a more efficient, effective and sustainable Medicaid program” for the state.
Global-waiver supporters believe that such agreements can dramatically rein in federal and state Medicaid spending.
Under the current system, states are encouraged to increase Medicaid spending because they receive an unlimited match from the federal government for every dollar they spend toward Medicaid, they say.
“It’s about breaking that incentive for the state politician to spend more and more,” said Graham, of the Pacific Research Institute. “States are destroying themselves by doing this.”
But other policy experts urge caution in looking to Rhode Island as a model, particularly for federal-level reforms like what the House budget proposes.
The Rhode Island waiver did not reduce the amount of federal funds the state would have otherwise received for Medicaid, notes Judith Solomon, an analyst for the Center on Budget and Policy Priorities. In a March study, Solomon said the $12-billion cap set for Rhode Island in the waiver was “far above” the state’s $10.8 billion anticipated spending level over the five-year period.
The waiver also allowed the state to shift certain state health costs to the federal government. The House budget proposal, she said recently, “is a very different animal.”
Costantino, Chafee’s Health and Human Services Secretary, agrees, although he does still think there is value in the waiver:
“Did the global Medicaid waiver get the state to start thinking about rebalancing systems? Yes. Because otherwise I’m not sure we would have went in that direction. Could we have done some of the things in the waiver without the waiver? In many of the cases, yes.”
How closely these proposals in New Jersey, Kansas and elsewhere come to mirroring Rhode Island’s is unclear at this point.
Republican politicians have offered few specifics, and no state has yet submitted a formal application to the federal government to begin the waiver process. “They just seem to be saying global waiver, and that magically saves money,” said Solomon, of the Center on Budget and Policy Priorities. “It’s hard to know what they mean until there is a concrete proposal.”
Graham, of the Pacific Research Institute, does not believe any state will introduce any such application this legislative session. President Obama’s secretary of Health and Human Services, Kathleen Sebelius, he noted, does not appear to be a strong supporter of such comprehensive Medicaid waivers.
However, he said he does not believe the public debate over Rhode Island’s precedent-setting waiver will disappear.
“What you’re going to see is campaigning and ‘bully-pulpiting’ from Republican governors and their secretaries of health and human services,” he said. “So long as [Rhode Island] is perceived as successful, that puts gas in the tank to campaign for other states to have a more general waiver.”
Here’s hoping our state legislators are able to find a path through all the noise generated by ideological bias and move forward in a sensible and pragmatic direction on the issue Medicaid block grants.  The future health and welfare of Pennsylvania and its citizens may depend on their wisdom. 

Additional Reading

Here are some other perspectives on the Medicaid block grant issue from across the political spectrum: 









A New Vision for Medicaid (Douglas Holtz-Eakin - American Action Forum)

Protecting the Rights of Low-Income Older Adults (National Senior Citizens Law Center)

Saturday, May 21, 2011

Over age 65 and a Veteran? Don't miss out on VA Pension Benefits

Most of Pennsylvania’s 1.12 million veterans are eligible for at least some benefits through the Department of Veterans Affairs (VA) although many are unaware of the benefits that are available to them. VA can provide significant assistance in helping veterans  meet their daily living, health-care and long-term care needs. 

As an elder law attorney who is both a Veteran and over age 65, I know that one benefit that is often overlooked by Veterans in my age bracket is VA Pension.  I see Pension as a way that our Government says “thank you” to Veterans who have served in time of war and now are older and in need of some financial assistance. This article is intended to give you some basic information so that you can determine if you, or perhaps someone in your family, might be able to benefit from this wonderful assistance program.     

What is VA Pension for veterans?

Pension is a benefit paid to wartime veterans who have limited or no income, and who are age 65 or older, or, if under 65, who are permanently and totally disabled.   Veterans who are more seriously disabled may qualify for Aid and Attendance or Housebound benefits.    These are benefits that are paid in addition to the basic pension rate.

 
Who is eligible?
Generally, you may be eligible if:
  • you were discharged from service under conditions other than dishonorable,

AND
  • you served at least 90 days of active military service 1 day of which was during a war time period.   If you entered active duty after September 7, 1980, generally you must have served at least 24 months or the full period for which called or ordered to active duty (There are exceptions to this rule),

AND

AND
  • you are age 65 or older, OR, you are permanently and totally disabled, not due to your own willful misconduct.
As you can see, there are a number of criteria that may affect your eligibility to pension benefits.    If you are unsure if you meet all criteria, VA encourages you to go ahead and file an application, particularly if your countable income appears to be near the maximum.   VA will determine if you are eligible and notify you.    If you do not initially qualify, you may reapply if you have un-reimbursed medical expenses during the twelve month period after VA receives your claim that bring your countable income below the yearly income limit.   (These are expense you have paid for medical services or products for which you will not be reimbursed by Medicare or private medical insurance.)\

What is countable income for veterans pension eligibility purposes?
This includes income received by the veteran and his or her dependents, if any, from most sources.   It includes earnings, disability and retirement payments, interest and dividends, and net income from farming or business.

What about net worth?
Net worth means the net value of the assets of the veteran and his or her dependents.   It includes such assets as bank accounts, stocks, bonds, mutual funds and any property other than the veteran's residence and a reasonable lot area.    There is no set limit on how much net worth a veteran and his dependents can have, but net worth cannot be excessive.    The decision as to whether a claimant's net worth is excessive depends on the facts of each individual case.   All net worth should be reported and VA will determine if a claimant's assets are sufficiently large that the claimant could live off these assets for a reasonable period of time.  VA's needs-based programs are not intended to protect substantial assets or build up an estate for the benefit of heirs.

Are there any exclusions to income or deductions that may be made to reduce countable income?
Yes, there are exclusions.    The following are examples of what may be excluded:
  • Public assistance such as Supplemental Security Income is not considered income.
  • Many other specific sources of income are not considered income, however, all income should be reported.   VA will exclude any income that the law allows.
  • A portion of unreimbursed medical expenses paid by the claimant after VA receives the claimant's pension claim may be deducted.   (These are expense you have paid for medical services or products for which you will not be reimbursed by Medicare or private medical insurance.)
  • Certain other expenses, such as a veteran's education expenses, and in some cases, a portion of the educational expenses of a child over 18 are deductible.

How Does VA calculate your pension?
Your annual pension is calculated by first totaling all your countable income.   Then any deductions are subtracted from that total.    The remaining countable income is deducted from the appropriate annual pension limit which is determined by the number of your dependents, if any, and whether or not you are entitled to housebound or aid and attendance benefits.   This amount is then divided by 12 and rounded down to the nearest dollar.   This gives you the amount of your monthly payment.   Click here to see an example of the pension calculation.


What are Aid and Attendance and Housebound benefits?
  • Aid and Attendance (A&A) is a benefit paid in addition to monthly pension.   This benefit may not be paid without eligibility to pension.   A veteran may be eligible for A&A when:
    1. The veteran requires the aid of another person in order to perform personal functions required in everyday living, such as bathing, feeding, dressing, attending to the wants of nature, adjusting prosthetic devices, or protecting himself/herself from the hazards of his/her daily environment, OR,
    2. The veteran is bedridden, in that his/her disability or disabilities requires that he/she remain in bed apart from any prescribed course of convalescence or treatment, OR,
    3. The veteran is a patient in a nursing home due to mental or physical incapacity, OR,
    4. The veteran is blind, or so nearly blind as to have corrected visual acuity of 5/200 or less, in both eyes, or concentric contraction of the visual field to 5 degrees or less.
  • Housebound is paid in addition to monthly pension.    Like A&A, Housebound benefits may not be paid without eligibility to pension.   A veteran may be eligible for Housebound benefits when:
    1. The veteran has a single permanent disability evaluated as 100-percent disabling AND, due to such disability, he/she is permanently and substantially confined to his/her immediate premises, OR,
    2. The veteran has a single permanent disability evaluated as 100-percent disabling AND, another disability, or disabilities, evaluated as 60 percent or more disabling.
A veteran cannot receive both Aid and Attendance and Housebound benefits at the same time.
How to Apply for Aid and Attendance and Housebound:
  • You may apply for Aid and Attendance or Housebound benefits by writing to the VA regional office having jurisdiction of the claim.   That would be the office where you filed a claim for pension benefits.  If the regional office of jurisdiction is not known, you may file the request with any VA regional office.
  • You should include copies of any evidence, preferably a report from an attending physician validating the need for Aid and Attendance or Housebound type care.
  • The report should be in sufficient detail to determine whether there is disease or injury producing physical or mental impairment, loss of coordination, or conditions affecting the ability to dress and undress, to feed oneself, to attend to sanitary needs, and to keep oneself ordinarily clean and presentable.
  • In addition, it is necessary to determine whether the claimant is confined to the home or immediate premises.
  • Whether the claim is for Aid and Attendance or Housebound, the report should indicate how well the individual gets around, where the individual goes, and what he or she is able to do during a typical day.

If I am already receiving monthly payments or a service-connected disability can I get a VA pension too?
You cannot receive a VA non-service connected pension and service-connected compensation at the same time.    However, if you apply for pension and are awarded payments, VA will pay you whichever benefit is the greater amount.

How do I apply for veterans non-service connected pension?

  • You may download and fill out VA Form 21-526, Veteran's Application for Compensation and/or Pension.   Make sure you download all parts of the application as well as the instructions for filling out the forms.   If available, attach copies of dependency records (marriage & children's birth certificates).

    You must send the completed application and any copies of other documents to the VA regional office that serves your area of residence.   Please click here to find the office of jurisdiction.
  • You may also contact a Veterans Service Officer (VSO) from a veterans service organization.    Please call the toll free number, 1-800-827-1000, for the location of the nearest VSO nearest you.   You may also look to the VA web site for a list of the nationally recognized Veterans Service Organizations.
If you have any questions, please call the VA toll free number, 1-800-827-1000, or you may contact VA electronically via the Internet at https://iris.va.gov

Source: United States Department of Veterans Affairs

Note: It is important to note that  unreimbursed medical expenses are deductible and may serve to reduce the Veteran's countable income for purposes of the determining the amount of the Pension award.A Veteran who would not previously have qualified for an award may now qualify if the Veteran or spouse has increased medical and long term care expenses.


A certified elder law attorney who is knowledgeable about VA Pension benefits can help advise the older Veteran or surviving spouse about how to qualify for this program and coordinate these benefits with other planning goals.  Each office of Marshall, Parker and Associates has at least one certified elder law attorney on staff who has been accredited by the VA. An up to date list of all lawyers who have been accredited by the VA is available at this link or by typing the following URL into your browser: 
http://www.va.gov/ogc/apps/accreditation/index.asp

Tuesday, May 17, 2011

Penalty Start dates, Partial Cures, and Reverse Half-A-Loaf

Let’s say that two years ago your mom gave you $70,000. You used $40,000 to make down payment on a home, and put the other $30,000 in a bank account. 

Now, your mom is in a nursing home and she has spent all of her savings paying for her care. You apply for Medicaid Medical Assistance (MA) benefits to pay for mom’s care.  But the County Assistance Office (CAO) tells you that mom won’t qualify for MA because of the money she gave you within the last five years. 

The CAO caseworker patiently explains that a penalty period of ineligibility is imposed when an applicant for Medicaid Long Term Care benefits makes an uncompensated transfer of assets and applies for MA within 5 years.  The penalty period resulting from an uncompensated transfer of assets does not begin on the date of the transfer. Instead, it starts to run only after the applicant has met all other functional and financial requirements for Medicaid eligibility and is ineligible solely due to the transfer.

The penalty is that the applicant is denied eligibility for Medicaid long-term care benefits for a period of time. The duration of the ineligibility period is based upon the uncompensated value transferred and the average cost of nursing facility services (currently $259.76 a day). Mom’s gift of $70,000 makes her ineligible for benefits for 269 days (70,000/259.76 = 269).

Since mom is ineligible for MA you use the $30,000 you have left from mom’s gift to pay the nursing home for her care.  Using this money, combined with mom’s retirement income, you are able to pay for mom’s care for 170 days.  What now?  There are still 99 days left on the original penalty period.  

Or are there? 

Haven’t you really refunded $30,000 of mom’s initial gift to you? Doesn’t that mean she really only gave you $40,000, and that the penalty period should be reduced to 154 days (40,000/259.76=154)?  Haven’t those 154 days already gone by while you were privately paying 170 days for mom?  Shouldn’t mom now be eligible for MA benefits?

This question is very troubling to State Medicaid Agencies.  It makes logical sense that mom should now be eligible for MA.  And most State Agencies follow this logic. But, for some State Medicaid Agencies it just doesn’t seem right that you don’t have to repay the other $40,000 that mom gave you. So they have struggled to come up some way to force you to pay back the remaining $40,000, whether you still have the money or not.   

This messy area of Medicaid law has resulted in some informal guidance being issued by one regional office of CMS (the Government Agency that regulates Medicaid). But recently a New Jersey Court (either unaware of or ignoring the CMS guidance) has held that partial refunds of gifted funds change the start date for the imposition of the penalty period.       

New Jersey and a few other State Medicaid Agencies want to treat returned resources as if they were still available to the nursing home resident during the time they were gone.  Treating returned funds as “available” would mean the resident/applicant was over the resource limit for Medicaid and would thus delay the running of the penalty start date.  In the scenario described above, the penalty period would not be running while you were privately paying for mom’s care. In some situations, the total ineligibility period for the resident could be even longer than if no funds had been returned.  

Is this legal? The answer is No according to representatives of the Federal Government’s Agency that oversees Medicaid. But some states are continuing to use this constructive availability theory treatment anyway.  See, for example, the recent New Jersey case of S.S. v. Division of Medical Assistance (Decided April 28, 2011). But the New Jersey case is at odds with the view of federal regulators who hold the trump card in interpreting how States can implement the Medicaid rules.   

Richard R. McGreal is Associate Regional Administrator for the Medicaid Division of the CMS Boston Regional Office.  In the fall of 2010 he responded to inquiries from the Connecticut State Medicaid office and provided informal written interpretative guidance on State’s treatment of partial returns with respect to the application of a penalty period for a disqualifying transfer of assets. 

The Connecticut Medicaid Agency had issued proposed regulations that required returned assets to be counted as having been available from the date of the transfer.  It requested CMS review of the legality of this treatment.

Administrator McGreal’s letter of October 28, 2010 points out that the partial return/partial cure section of the CMS State Medicaid Manual (SMM) pre-dates the DRA change to the rules on the penalty start date. (The rules prior to the DRA did not take into account whether the individual was receiving long-term care services, or whether the individual was even eligible for Medicaid at the time of transfer.) The DRA did not address the availability of the transferred-then-returned funds.

Administrator McGreal writes:

“It would be inappropriate to read these older SMM provisions in combination with the DRA in such a way that the State would have the option of starting a new, later penalty period based on an adjustment to the individual’s eligibility determination. This is, in effect, what we believe could potentially result from the State’s proposed regulation. . . .

Under some circumstances [Connecticut’s proposed approach] could result in the extension of the expiration date beyond the original penalty period had the assets not been returned. This result is not permissible.”  

McGreal then goes on to suggest “some alternative approaches to managing partial cures that we believe would be permissible under current Federal law, but which do not include extending the original expiration date.”

One permissible alternative would be for the State to choose not to recognize these partial returns and simply continue the penalty period uninterrupted and unaltered from the original calculation, absent full cure.

A second permissible alternative would be to shorten the original penalty period from the back end so that the period ends sooner, which approach is often referred to as the “reverse half a loaf” strategy.   

While noting that CMS is not advocating any particular approach, McGreal does point out that permitting reverse half a loaf may be aligned with State goals because it “would create some incentive for securing at least a partial return of the transferred assets even if a full return is not possible.”

It seems likely that the New Jersey case will be overturned if it ends up on appeal to Federal Court. Whatever its eventual outcome, States are going to have to decide between the two alternatives set out in the McGreal letter, or come up with some other acceptable method of treating partial refunds. 

Hopefully, States will see the wisdom of Administrator McGreal’s suggestion that the reverse half a loaf treatment makes sense.  Otherwise, children and other donees will lose some incentive to pay back gifted funds and nursing homes are likely to be stuck with residents for whom no source of payment is available.

The McGreal letter is available here.      

Monday, May 16, 2011

Getting Medicare to Pay for more of your Nursing Home stay

If you are in a skilled nursing facility after a hospital stay and you meet certain other conditions, Original Medicare Part A (hospital insurance) can help pay for up to 100 days of your stay.  (If you get your health care from a Medicare Advantage Plan (like an HMO or PPO) you must get at least the same coverage as provided by Original Medicare as described in this article.)

Medicare Part A Hospital insurance pays for all covered services for the first 20 days. For the next 80 days, it pays for all covered services, except for a daily co-insurance amount.

It is important to understand that Medicare does not pay for “custodial care” when that is the highest level of care that is required by a nursing home resident. The resident must be receiving “skilled care” to qualify for Medicare payment. Thus, the determination of whether a skilled nursing facility resident requires custodial care vs. skilled care is crucial to obtaining Mediare coverage. If a resident does not qualify for Medicare, they must find another source of payment for nursing home costs, such as private payment resources or Medicaid.

What is Custodial Care

Medicare does not cover custodial care if it is the only kind of care you need. Custodial care is care that does not rise to the level of skilled care. It is care that helps you with usual daily activities like getting in and out of bed, eating, bathing,dressing, and using the bathroom. It may also include care that most people do themselves, like using eye drops, oxygen, andtaking care of colostomy or bladder catheters. Custodial care is often given in a nursing facility.

What is Skilled Care

Skilled care is health care given when you need skilled nursing or rehabilitation staff to manage, observe, and evaluate your care.

Section 409.32 of the Medicare Regulations define skilled care as follows:

§ 409.32 Criteria for skilled services and the need for skilled services.

(a) To be considered a skilled service, the service must be so inherently complex that it can be safely and effectively performed only by, or under the supervision of, professional or technical personnel.

(b) A condition that does not ordinarily require skilled services may require them because of special medical complications. Under those circumstances, a service that is usually nonskilled (such as those listed in §409.33(d)) may be considered skilled because it must be performed or supervised by skilled nursing or rehabilitation personnel. For example, a plaster cast on a leg does not usually require skilled care. However, if the patient has a preexisting acute skin condition or needs traction, skilled personnel may be needed to adjust traction or watch for complications. In situations of this type, the complications, and the skilled services they require, must be documented by physicians' orders and nursing or therapy notes.

(c) The 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. For example, a terminal cancer patient may need some of the skilled services described in §409.33. [42 C.F.R. §409.32, emphasis added]


Generally, skilled care is available only for a short time after a hospitalization. Custodial care may be needed for a much longer period of time. Examples of skilled care include intravenous injections and physical therapy. Care that can be given by non-professional staff is not considered skilled care. Skilled care requires the involvement of skilled nursing or rehabilitative staff in order to be given safely and effectively.

Skilled nursing and rehabilitation staff includes:

• registered nurses;

• licensed practical and vocational nurses;

• physical and occupational therapists;

• speech-language pathologists; and

• audiologists.

Who makes the Level of Care Determination

The initial decision as to whether a resident needs skilled care is made by the staff at the nursing facility. While facilities may vary somewhat in the procedures used in making Medicare eligibility determinations, the following is typical.

Professional staff such as therapists and nurses, along with appropriate adminstrative staff will meet to discuss residents who are receiving Medicare Part A benefits. (The medical director of the facility is not normally present or involved in these meetings, but will typically sign off on the decision made by the staff.) If the professional staff determines that the resident is no longer going to be progressing (improving), the decision will be made to cut the resident from Medicare.

For example, a resident’s physical therapist may make the decision that the resident is no longer improving (has “plateaued”). Based on the therapist’s determination, the decision will be made to cut the resident’s Medicare benefits the following week. Administrative staff of the facility will then notify the resident’s representatives of the decision to cut Medicare. They will be told that the resident has a right to appeal the decision and given the number for the Quality Insights Organization (QIO) to call if they want to exercise this right. The verbal notification to the resident/representative is usually given at least 4 days before the cut is to occur. A written notification is sent or delivered confirming the cut.

The endemic problem with the above procedure is that the professional staff and administrators are employing an incorrect standard (the “improvement standard”) to determine whether the resident should continue to qualify for Medicare. As a result, many nursing home residents are cut from Part A benefits prematurely.

Nursing Homes mistakenly deny Medicare coverage for their residents.

The misconception that a resident must be progressing in order to qualify for continued Medicare coverage is a “Medicare tradition that has become virtually an urban myth among the providers and contractors who are largely responsible for making Medicare coverage decisions. The myth is that coverage of skilled care requires a beneficiary to be improving. The myth denies Medicare coverage to a beneficiary who has “plateaued,” is “medically stable,” or needs services for “maintenance only.” All of these shorthand terms essentially impose an improper requirement that results in termination of Medicare coverage for beneficiaries who have chronic conditions and who, sadly, are probably most in need of the care that is being denied them.”[1]

The proper rule, as noted above, is that “[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).

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.

Two recent federal court cases have held that the application of the “improvement” standard is incorrect. Papciak v. Sebelius, 742 F. Supp. 2d 765 (Western District, PA, September 28, 2010, dealt with skilled nursing facility services and Anderson v. Sebelius, 2010 U.S. Dist. LEXIS 113550 (USDC Vermont, October 25, 2010), dealt with home health services. In addition, On November 17, 2010 CMS published a final rule to update various aspects of the Medicare Home Health regulations which disavows the use of the improvement standard. Federal Register: November 17, 2010 (Volume 75, Number 221), Page 70371-70486.

Despite the regulation and the federal court cases, nursing facilities in Pennsylvania continue to impose the “improvement standard: as a matter of course. 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 premature termination of Medicare coverage is harmful to residents because they are denied therapy that is needed to prevent further deterioration or preserve their current capabilities. And it hurts nursing facilities by transitioning residents from higher paying Medicare status to lower paying Medicaid. However, nursing facilities are cautious because of their fear that a facility decision to continue Medicare will later be rejected by CMS. This could leave the facility with no recourse to recover the cost of the care it provided.

This is an area where informed advocacy by the resident’s family and a certified elder law attorney can improve the resident’s care while deferring the need for private payment.


[1]How the 'Improvement Standard' Improperly Denies Coverage to Medicare Patients with Chronic Conditions,” Clearinghouse Review, Vol. 43, No. 9-10, Jan-Feb. 2010.