Because of minor technical amendments, the bill has to go back to the House before final enactment.  The bill is expected to become law sometime in January.

The bill, the Deficit Reduction Omnibus Reconciliation Act of 2005 ("Deficit Reduction Act), cuts funding for the poor, the sick, students, and seniors needing fuel assistance. The cuts to these programs will help pay for more tax cuts. The merit of additional tax cuts aside, many Senior Advocacy groups were appalled by the Act's provisions (see article below).  

Section 6011 of the Act focuses on asset transfers.  Since few individuals have insurance that covers long term care, seniors may transfer assets to their spouse and other family members to protect those assets from being lost to the cost of care.

The Deficit Reduction Act, however, seeks to make asset transfers more difficult through a multitude of new provisions, including:

- Lengthening the Look-Back Period.

The general look-back period on transfers of assets will be lengthened to 60 months for income and assets disposed of by an individual or spouse after the Act's date of enactment.

- Change in Beginning Date for Period of Ineligibility

Transfers of assets to a non-exempt recipient create a "penalty period" during which the transferor and spouse are ineligible for Medicaid long-term care assistance. The Act  will change the way the penalty start date is calculated.  The penalty will start on the latter of: 

(1)  the first day of a month during or before which assets have been transferred for less than fair market value, or

(2) the date on which the individual is eligible for medical assistance under the state plan and is receiving certain long-term care services, 

- Limit on Home Equity

Currently, home equity is not considered to be available to pay for a Medicaid applicant's care.  Applicants are not required to borrow against their homes.  For the first time, the Deficit Reduction Act will place a $500,000 ceiling on this home equity exemption. 

- Treatment of Annuities

The state would be designated as the remainder beneficiary under annuities owned by a Medicaid long-term care applicant and/or spouse.

- Reduction of Community Spouse Protections 

States, like Pennsylvania , would no longer be allowed to let low-income community spouses keep additional financial resources to avoid later spousal impoverishment.  

The Deficit Reduction Act contains numerous other provisions. A few are reasonable approaches to closing "loopholes" while others are more complicated and ambiguous provisions likely to engender confusion and litigation.  All are intended to ensure that persons who are unfortunate enough to encounter a long-term illness spend their income and assets to pay for the cost of their care. 

The change in the transfer penalty start date seems to be particularly bad policy. Under the Deficit Reduction Act, a senior who makes a relatively small gift to a family member or church may be unable to pay if nursing home or home care is needed three or four years later.  Because the Medicaid ineligibility penalty period on transfers will not begin until a nursing home resident is out of funds, there will be a period of time during which neither the nursing home resident nor Medicaid can pay for needed care.  Nursing homes will be especially hard hit.  As cash flow problems mount quality of care will likely suffer. For this reason, the Elderlawanswers website has dubbed the bill "The Nursing Home Bankruptcy Act of 2005."

The penalty start date change is particularly significant in Pennsylvania .  Under Act 43 of 2005, children are liable for the financial support of their indigent parents.  Nursing homes, stuck with residents who have no means to pay for care and who do not qualify for Medicaid due to the Deficit Reduction Act, will likely be forced to seek reimbursement from the children of the indigent residents.   Litigation between nursing homes and the children of residents is likely to flourish. Nursing homes will sue children who will counter-sue for sub-standard care. 

Due to a technical amendment made by Democrats, the bill that the Senate passed was modified from the House version. Before the bill can become law, both chambers must pass identical bills, which are then signed by the President. Since the chambers now have slightly different bills, the House of Representatives must again pass the bill. The House is not formally scheduled to reconvene until January 31^st - a late date which was set to give Tom Delay extra time to resolve his legal problems.  However, this date could be moved up. 

There is still a small chance that the bill will not be re-approved by the house, but this seems unlikely. The old rules still apply until the Deficit Reduction Act is enacted (passed by both Houses in identical form and signed by the President).  As noted above, it is most likely that this will occur sometime between early January and early February, although the exact date is unclear.  This gives consumers who wish to make transfers a brief additional opportunity to do so.  

Unfortunately, the Deficit Reduction Act does nothing to address our country's growing long-term care crisis.   N one of its provisions, alone or in combination, will do much to cut government spending or provide older Americans with affordable ways to pay for long-term care. The Act seems to be yet another example of Congress passing laws that don't seem to make good public policy sense and that diminish the ability of seniors to live a modest and safe life.  As described by Georgetown University Dean Judith Feder:

"Policy "solutions" that focus only on making Medicaid "meaner" or limiting public obligations for long-term care financing do our nation a disservice. Although individuals and families will always bear significant care-giving and financial responsibility, equitably meeting long-term care needs of people of all ages and incomes-throughout the nation-inevitably requires new federal policy and a significant investment of federal funds. . . .

 

Indeed, the whole focus on reducing public spending and promoting private insurance ignores the public responsibility to address for all Americans what should be our fundamental policy choice: do we want to live in a society in which we assure affordable access to long-term care for people who need it or in a society in which we leave people in need to manage as best they can on their own?

 

There is little question that to address both current and future long-term care needs requires not a decreased but an increased commitment of public resources-and, to be adequate and effective in all states-federal resources. Expanded public financing for long-term care could take a variety of forms and by no means need eliminate private contributions. One option, modeled on Social Security, would be to provide everyone access to a "basic" or "limited" long-term care benefit, supplemented by private insurance purchases for the better-off and enhanced public protection for the low income population. Another option would be establishment of a public "floor" of asset protection-a national program assuring everyone access to affordable quality long-term care-at home as well as in the nursing home-without having to give up all their life savings as Medicaid requires today. The asset floor could be set to allow people who worked hard all their lives to keep their homes and modest assets, while allowing the better off to purchase private long-term care insurance to protect greater assets. Either public/private combination could not only better protect people in need; it could also provide substantial relief to states to focus on health insurance, education and other pressing needs-relief that governors have explicitly requested by calling on the federal government to bear the costs of Medicare/Medicaid "dual eligibles". Because Medicaid serves the neediest population and, in the current budgetary environment is at risk, my highest priority for expenditure of the next federal dollar would be responding to this call (along with supporting more home care and better quality care) with more federal dollars to Medicaid."

 

Judith Feder, Ph.D. Professor and Dean Georgetown Public Policy Institute

Georgetown University Testimony before the Committee on Finance , U.S. Senate on Medicaid Waste, Fraud and Abuse: Threatening the Health Care Safety Net, June 29, 2005 .

Regrettably both of our Pennsylvania Senators voted for passage of the Deficit Reduction Act.  Senator Arlen Specter was quoted as saying "It's a bill to hold one's nose and let it go through." ( Washington Post, December 20, 2005 ).  Senator Rick Santorum, on the other hand, expressed pride at his part in the law's passage.  "The bottom line is, we stood firm and we made tough choices," said Sen. Rick Santorum (R-Pa.), praising what he called "a very important and proud day." ( Washington Post, December 22, 2005 ). 

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