New Medicare Payment Rules for Nursing
Facilities
Written
By: Attorney
Jeffrey A. Marshall
, CELA*
On
May 13th, The Centers for Medicare and Medicaid Services
(CMS) announced proposed new Medicare payment rates and methodologies
for nursing homes that should avoid the kind of payment cuts many
nursing homes had been fearing.
As a result of the CMS changes, nursing homes can
now expect to receive about the same total Medicare payments in fiscal
year 2006, as they will get this fiscal year. Some nursing home
administrators feared a cut of up to 10 percent.
In recent years, CMS temporarily added on to the
daily rate paid for Medicare beneficiaries annually, but they have
decided to do away with these payments.
That add-on amounted to about 10 percent of the revenue that
nursing homes received through Medicare.
To make up for that cut, CMS intends to increase
what it pays for sicker patients who require rehabilitation services or
multiple treatments, and to make other changes in payment.
The proposed regulations introduce 9 new resource utilization
payment categories and implements increases in the case mix index for
all of the resource utilizations groups (RUGs).
These refinements will begin on
January 1, 2006
.
CMS expects these changes in payment methodology to
result in a positive operating margin for the nursing home Medicare
business of about 10% in 2006.
Although Medicare currently pays a rate above the
cost of care for the typical Medicare resident, nursing homes contend
that extra revenue is needed to cover the continually inadequate
payments that the nursing homes receive for their residents receiving
Medicaid.
The proposed regulations deal with a number of
other issues including consolidated billing requirements, the three-day
prior hospitalization requirement, and concurrent therapy.
CMS is also seeking comment on quality-related payment changes
including "pay for performance" elements.
A full copy of the CMS "SNF PPS" proposed rule
for FY 2006 is available on the CMS website at www.cms.hhs.gov/providers/snfpps.
Public comments on the proposed rule changes will be accepted until
July 12, 2005
.
Attorney Marshall can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552
Expansion
of LIFE Program Discussed at Professional Update
Written By: Attorney
Jeffrey A. Marshall
, CELA*
Each
year the Elder Law Firm of Marshall & Associates hosts an update for
professionals who provide services to seniors. This year's
updates were held in
Williamsport
and
Wilkes-Barre
and were attended by more than 300 professionals.
One of the topics covered this year was the
expansion of
Pennsylvania
's Long Term Care Capitated Assistance Program. Patricia Brady,
the Director of Bureau of Long Term Care of the Department of Public
Welfare, provided attendees with this section of the update. We thought
her information was so valuable that we wanted to give a short summary
to those readers of the Elder
Care Law Alert who were unable to attend.
In
Pennsylvania
, the program is referred to "Living Independence for the Elderly"
(LIFE). Nationally, it is known as PACE, but in order to avoid confusion
with our state pharmaceutical programs also called PACE, the state
decided to refer to the program as LIFE. Its goal is to enable frail,
older adults to be able to continue to live in their homes and in the
community as long as feasible.
LIFE serves mostly the dually-eligible population
by integrating Medicare and Medicaid funding. Monthly capitation
payments are made to a LIFE provider which delivers a comprehensive,
all-inclusive package of services to participants. The focal points for
service delivery are adult day health centers. Services include
primary medical care, nursing, therapies, personal care, pharmaceuticals,
monitoring, transportation, meals, and recreational and socialization
activities. Other services may be provided as needed.
Participant eligibility criteria include: (1) age
55 or older; (2) determined to be Nursing Facility Eligible; (3)
determined eligible for Medical Assistance benefits or able to private
pay (4) resides in the area served by LIFE provider; (5) determined by
the LIFE provider to be able to be safely served in the community.
As of May 2005, LIFE centers were operating in
Philadelphia
, Allegheny, and Beaver counties. By July 2006, additional centers
are scheduled to be operational in the following counties:
Cambria
,
Clinton
,
Lackawanna
, Lycoming, Northumberland,
Schuylkill
and
York
.
Attorney Marshall can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552
What if We Die at the Same Time?
Written
By: Marshall &
Associates' Attorney
Tammy A. Weber
What will happen if you and
your spouse die at the same time? This is not really a polite dinner
conversation topic. However, with the natural disasters, terrorist acts,
multi-car pileups and airplane "malfunctions" that have occurred
over the past decade, it is a matter that has become more real than one
of simple paranoia. So . . . are you prepared?
If you have minor
children, have you found a trusted, capable person to provide for them?
Is that choice of guardian designated in your will? If not, a judge who
doesn't know your family will likely decide who will be the caretaker
and nurturer of your children. The judge will also decide who watches
over the funds that will be needed to provide for their care.
If this is your second
marriage, does your will effectively deal with the complications that
can arise?
Many married couples have
simple "mirror image" wills that contain a clause that deals with
death in a common disaster. The wills say, "Everything goes to my
spouse if he/she survives me by at least 30 days. If he/she does not
survive me, then everything goes to my children."
This type of clause may
be fine if all of the children belong to both parents. However, this
standard clause may create problems for a blended family where either
the husband or wife has children from a prior marriage.
Often, a spouse in a blended family situation wants their
surviving spouse to have use of money and property for their lifetime;
but, when the survivor dies, wants the money and property to go to their
own children. So, it can make a big difference which of the spouses is
presumed to have died first. It
can also make a big difference depending upon the amount of assets that
each spouse holds and the way in which they hold title to those assets.
What if your will doesn't mention a common
disaster?
What if your will doesn't require your spouse to
survive for a period of days?
What if you have no will?
In
Pennsylvania
there are statutes that apply in these circumstances.
Pennsylvania's Uniform Simultaneous Death Act (20 Pa. C.S.A.
§§ 8501-8505) provides that if you have not stated otherwise in your
legal papers (will, living trust, deed or insurance contract), and there
is not sufficient evidence that you and other persons (such as your
spouse or other beneficiary) have died other than simultaneously, your
property is disposed of as if you had survived.
In other words, if you and your spouse's order of death cannot
be determined, each spouse's property will be disposed of as if that
person was the survivor.
All of the issues that would flow from a potential
simultaneous death can be addressed if the proper planning is done with
a qualified estate planning attorney.
Attorney Weber can be contacted at tweber@paelderlaw.com
or at 1-800-401-4552
Governor
Proposes Legislation Implementing Medicaid Cuts -
Part
3: Treatment of Life Estates
Written By:
Jeffrey A. Marshall
, Certified Elder Law Attorney*
This
is Part 3 of a series of articles which summarize some of the changes
proposed by Governor Rendell to the rules governing qualification for
Medicaid-financed long-term care services for seniors. The Governor's
proposals have been introduced as House Bill 1500.
A copy of the entire legislative proposal is available on the
Elder Law Firm of Marshall & Associates website at http://www.paelderlaw.com/images/medicaid.pdf.
This issue of the Elder
Care Law Alert discusses the proposed changes to the treatment of
life estates in determining eligibility for Medical Assistance.
These complex changes are found at Section 441.7(a) of the
legislation.
Section 441.7(a) affects the
treatment of certain life estates in determining eligibility for Medical
Assistance.
Background.
A life estate is a form of co-ownership in real or personal
property. One person (the "life tenant") has the right to the
current possession and use of the property for his or her lifetime.
At death, the life tenant's interest in the property terminates.
For
example, a life estate form of ownership may be used by parents to give
their home to their children, but with the parents retaining the sole
right to the use and enjoyment of the property during their remaining
lifetimes. In this
situation, the parents (the "life tenants") and are said to
have a "life estate." The children (the "remaindermen")
are said to own a "remainder interest" in the property. This
type of co-ownership is common in
Pennsylvania
, especially with residences
and farms, although other classes of real and personal property may be
titled in this manner.
The
creation and extinguishment of life estates have implications for
Medicaid recipients. Two issues of significance are transfer penalties
and Medicaid estate recovery.
Transfer
Penalties.
With the traditional "life estate" deed, the transfer
to the remainderman is vested, which means it cannot later be revoked by
the person who made the transfer. Unless the transfer is exempt, a
Medicaid transfer penalty applies when a remainder interest is conveyed.
The penalty is not based upon the full market value of the
property. It is determined
by reducing the full value of the property by the value of the life
estate. First the life
estate is valued based on the actuarial life expectancy of the grantor
according to Social Security Administration tables. The value of the
life estate is then subtracted from the full value of the asset
transferred to determine the portion of the asset that was transferred
for less than fair value. The transfer penalty is based on the value
that was transferred without compensation.
Medicaid
Estate Recovery.
Properties owned in the "life estate" form of ownership
may avoid Medicaid estate recovery at the death of the life tenant.
Under
Pennsylvania
's current law, estate recovery
is limited to the probate estate of the deceased recipient of Medical
Assistance (MA) benefits.
When the
life tenant (e.g. the parent) dies, the life estate ends.
The remaindermen's interest in the property is freed of the
life estate without any action being required. Since the interest of the
life tenant is extinguished at death and never becomes an asset of the
decedent's probate estate, Medicaid estate recovery does not apply.
Owning assets in this manner is a common way to limit the
potential loss of a home to estate recovery.
Disadvantages
of Traditional Life Estate Ownership. Using a life estate ownership arrangement to avoid estate recovery has
a number of drawbacks. If
the property is sold, the remaindermen will be entitled to a portion of
the proceeds of the sale. The
ability of the life tenants to rely on the interest in the property to
provide for their future financial security is also reduced.
For example, the life tenants could no longer apply for a reverse
mortgage.
There may
also be negative tax consequences. Unless
the remaindermen reside at the property, their interest in the property
will not qualify for the residential sale exclusion of capital gains
under IRC Section 121. The existence of the remainder interest may also
create problems in the event that the remainderman dies or runs into
financial or marital difficulties.
Perhaps
the most significant disadvantage of the conveyance of a remainder
interest by an individual or couple in need of Medicaid financed long
term care is that, in most cases, the conveyance will create a period of
ineligibility for Medicaid benefits.
The
Revocable Remainder.
Elder law
attorneys came up with a planning tool to help seniors receive the
advantages of the life estate form of ownership while limiting the
disadvantages. The idea was for the senior(s) to convey a remainder
interest in their property but, to retain rights to the property that
overcome the disadvantages.
Some elder
law attorneys began to refer to this type of ownership as a LERP (Life
Estate with Retained Powers) and this name caught on statewide. The
Department of Public Welfare translated LERP into "Life Estate with
Revocation Powers". The difference may seem subtle but it is
significant. In other states
deeds creating this kind of interest are sometimes called
"lady-bird" deeds.
For
purposes of Medicaid, LERPs have been used to obtain the estate recovery
avoidance benefits of life estate ownership without incurring a Medicaid
transfer penalty. The basic concept is that nothing of value has been
transferred if a parent who deeds a home to the children retains the
power to revoke the transfer and reclaim full ownership. This
concept is supported by the Federal Government's State Medicaid Manual
which states that:
Some States allow life estates with powers, wherein the owner of the
property creates a life estate for himself or herself, retaining the
power to sell the property, with a remainder interest to someone else,
e.g., a child. Since the life estate holder retains the power to sell
the property, its value as a resource is its full equity value. In this
situation, the individual has not transferred anything of value, because
he or she can terminate the life estate at any time and restore full
ownership to himself or herself. Instead, the full value of the asset in
question is treated as a countable resource to the individual (assuming,
of course, that it is not an otherwise excluded resource). [Transmittal
64 to the State Medicaid Manual]
Thus,
under the federal Medicaid guidelines, a parent can engage in a LERP
conveyance of a home to the children without incurring a Medicaid
transfer penalty. The
property continues to be treated as a resource of the parents, which is
excluded if it is the home. If the parent dies without exercising the
retained powers, the property passes to the children outside of probate
and outside of Medicaid estate recovery.
Over the
past 10 years, the Pennsylvania Department of Public Welfare (DPW) has
struggled to articulate a position on LERPs that preserves the home as
an asset subject to estate recovery while recognizing that no transfer
of value took place when the LERP was created.
Although there are no reported cases in
Pennsylvania
, it does appear that the LERP exploits a "loophole" in the
state and federal Medicaid laws. Section
441.7(a) is an attempt to close that loophole.
The
Provisions of Section 441.7(a)
Section
441.7(a) specifies that an applicant for or recipient of Medicaid
"who owns a life estate in property with retained rights to revoke,
amend or redesignate the remainderman must exercise those rights as
directed" by DPW. Acceptance of Medicaid constitutes an assignment
to DPW "of any right to revoke, amend or redesignate the
remainderman of a life estate in property."
Section
441.7(a) would apply to retained interests held by an individual who
applies or reapplies for Medicaid even if the life estate was created
prior to the new law's effective date (Section 441.7(e)).
However, the extent to which its provisions will affect
individuals who are already on Medicaid and who never reapply is not
entirely clear. A reasonable reading of this section of HB 1500 is that
current Medicaid recipients who have a life estate property with
retained powers might not have to exercise any powers to change the
remaindermen unless they someday need to reapply.
HB 1500
does not define the term "life estate" nor does it incorporate
a definition found elsewhere in the law.
This, and a number of other issues may need to be clarified by
implementing regulations if the legislation is enacted.
Conclusion.
Section 441.7(a) would allow DPW to require applicants for Medicaid to
exercise any powers they retain in life estate ownership arrangements in
a manner that would limit Medicaid costs.
For example, a Medicaid applicant could be required to exercise a
power to revoke a remainder interest and return a home to the sole
ownership of the applicant where it could later be subject to estate
recovery.
In
general, the LERP is widely accepted as a federally authorized
"loophole" in the Medicaid rules. It is unlikely that there
will be significant opposition to closing it.
Attorney Marshall can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552
Marshall &
Associates' Staff Present at Alzheimer's Disease & Down Syndrome
Conference
Written
By: Melissa Bottorf, Director of Public
Ed
ucation
Attorney
Kevin Grebas and Planning Specialist Perry Landon will be presenters at
the Alzheimer's Disease & Down Syndrome Conference at Convention
Hall in Pittston on
Friday, June 10th, 2005
. This
day-long conference is presented by the Alzheimer's Association in
cooperation with College Misericordia and the Luzerne/Wyoming MH/MR and
is designed for professional staff and families who are involved in
providing, managing and supervising individuals with Down Syndrome,
mental retardation and developmental disabilities.
It is the first
conference of it's kind held in
Northeastern Pennsylvania
to address the special needs of individuals
with a dual diagnosis of Down Syndrome and Alzheimer's Disease.
Marshall & Associates' session will cover the importance of
alerting families to the need for advance planning and health care
directives. They will also
discuss how Geriatric Care Managers can be an invaluable ally for
individuals and families dealing with a dual-diagnosis.
Other presenters include Jim Siberski, a national expert on
issues related to aging and mental illness, Bill Schlacter, a Board
Certified Geriatric Pharmacist and
Erica
Hood, the Alzheimer's Association Director
of Program Services.
The cost for the
conference is $35 and includes lunch and handouts.
CEUs will be offered for Social Work and Personal Care Home
Administrators for an additional fee.
For more information or to register, please contact the
Alzheimer's Association at 1-800-773-6677.
Melissa can be contacted at mbottorf@paelderlaw.com
or at 1-800-401-4552
In the
Community.
The professional staff of Marshall and Associates will be presenting to
the following groups and organizations over the next couple of weeks.
Many of these events are open to the public.
If you would like more information or would like to schedule
someone to speak at your group, please contact Melissa at 321-9008 or at
mbottorf@paelderlaw.com
-Attorney Tammy Weber and Planning Specialist
Suzanne Starr will be at the
Catawissa
Senior
Center
on June 2nd.
They will speak about Ways
to Pay for Long Term Care at
10:30 AM
.
-The Ladies
Auxiliary at the Presbyterian Home at
Williamsport
will meet on June 7th
at
1:30 PM
. Attorney Parker will speak
about Essential
Estate Planning
-Attorney Matthew Parker will be talking about the General
Principles of Estate Administration at Lock Haven University on June 7th at
10:30AM
.
-Planning Specialist Perry Landon will be making a
presentation about Paying for Long Term Care on June 15th at
1:00PM
for the 39+ Group.
Back
issues of The
Elder Care Law Alerts
are available on our website.
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*Attorneys
Marshall and Parker are certified
as Elder Law Attorneys by the National Elder Law Foundation under
authorization from the Pennsylvania Supreme Court.
