Comments For Consideration by the Elder Law Section of the Minnesota State Bar Association

Prepared by Ad Hoc Committee of Legal Aid Attorneys and Private Bar Members

Dated April 18, 2003

The following are comments to the March 31, 2003, Minnesota Asset Transfer Limit §1115 Waiver Request. The format of this memo is to state the specific waiver components, using the numbering system of the Department of Human Service’s Waiver Request, followed by the Committee’s comments to each, along with general comments.

Minnesota is seeking exemptions from 42 U.S.C. §1396p as follows :

2.21 To Prohibit the Transfer of Excluded Assets.

• Excluded assets are not relevant for eligibility. Therefore, there is no reason to preclude their transfer. No savings is realized because the tracking system that must be put in place for non-liquid assets is unreasonable and unmanageable from the recipient’s perspective and administratively unwieldy from the government perspective. Because of the difficulty in tracing gifts of excluded assets, this prohibition would lead to selective enforcement. It creates a constructive trust over all personal tangible property.

2.22 Complete Ineligibility for MA

• The Waiver Request is contrary to the purpose of the Medicaid program, which is to provide medical assistance to those aged, blind, or disabled individuals whose income and resources are inadequate to meet the costs. The Waiver Request is based on two faulty assumptions:

2.23 72-Month Lookback

• The waiver proposal suggests that the elderly can predict their medical and financial circumstances six years into the future. It punishes unwitting elders who have helped their families with commonly made gifts and then experience unforeseeable medical events such as stroke or Alzheimer's disease.

• It prohibits persons from living their lives for fear that they will be unreasonably penalized at a later time if they require nursing home care. It prohibits persons who receive gifts from knowing if the gift is final. It clouds title to real property. The conveyance of real property by any person of any age cannot be secure for six years, because it will not be known until that period has passed whether the conveyor will need long-term care services. Thus, the buyers cannot be sure of their ownership or whether the conveyance will stand.

• The waiver proposal undermines American values of supporting one’s family, religious organizations, and charities by prohibiting even modest gifts. Examples include pledges and monthly gifts to religious organizations, other charitable gifts, giving Grandma’s wedding ring to her namesake, graduation, birthday, and wedding presents, gifts of used cars and furniture, and assistance to the grandchildren for college tuition, to name a few.

• The harsh penalty of the proposed waiver would be applied to all those who are unable to recover the funds immediately or the value of property alleged to have been "improperly" transferred up to six years prior to the Medicaid application. Most transferees will have no legal obligation to refund the transfer (e.g., charitable and religious donations, campaign contributions, etc.). In other cases, transferees will be financially unable to make any refund or there will be no transferee from whom to recover. Again, this will lead to selective enforcement.

• The waiver will create unacceptable new obstacles for vulnerable, frail elderly and disabled persons to get care, because the waiver will require record keeping and documentation that is far beyond the normal practices of the elderly, especially poor and chronically ill elders. Therefore, low-income elders would be denied admission to or would be discharged from a nursing home because of inadequate record keeping.

2.24 Penalty Period Beginning

• All of those affected by this waiver will unquestionably need long-term nursing home or home health care, yet be unable to pay for that care. Thus, the health and safety of older and disabled citizens will be seriously jeopardized.

• Those who need nursing home care would not be able to gain entry. Nursing homes can legally deny admission when there is no payment source.

• In cases where nursing home admission has already occurred and the penalty is applied, nursing homes will be required to provide uncompensated care for the duration of the penalty period or until hospitalization.

• Those in a hospital at the time of denial would be unable to leave since nursing homes and home care agencies will deny admission if there is no payment source. Hospitals will become the default providers of care as access to nursing homes is barred during the penalty period.

• Hospitals will be forced to hold patients at a higher cost of care or to dump patients into the community without sufficient care.

• The waiver request asks that new penalties apply to transfers on or after July 1, 2003, even though the law may well not be enacted by that date. Retroactive effective dates breed disrespect and contempt for the law as persons who have been acting in compliance with the law are accused of acting outside the law.

• The waiver request provides that the period of ineligibility is to begin in the month a person applies and is otherwise eligible for Medical Assistance, and states this will apply to persons apply for Medical Assistance on or after July 1, 2003, without limiting it to transfers on or after July 1, 2003. This makes the provision retroactive to transfers made on or after July 1, 2000. There is no ability to comply with a law that affects actions already taken in good faith and in compliance with the law at the time they were taken. This in effect makes this a "gotcha" bill.

2.25 Penalty Period Divisor

• Using the average monthly payment for care by DHS to calculate the period of ineligibility is self-serving and fails to reflect accurately the true cost incurred by individuals who are paying privately for their nursing home care. The actual cost for nursing home care, certainly in the metropolitan area, is from $4,000 to $7,000 per month.

• The effective date, applying to applications on or after July 1, 2003, means that this will be applied to all transfers on or after July 1, 2000. This is unacceptable as it affects persons who have acted in good faith under the current law.

2.26 Permissible Homestead Transfers to Relatives

• By not allowing the homestead to be transferred to certain relatives, those relatives are prohibited from relocating to more appropriate housing for the lifetime of the Medical Assistance recipient even though it may be necessary for the health and welfare of the relative. For example, an elderly spouse may not be able to live alone in the homestead but cannot use the proceeds from the sale of the property to live in other appropriate housing.

• The caretaker child has earned the equity in the homestead by giving up employment and by providing services to the disabled parent. It guts the public policy intended by Congress and discourages the care of parents by children.

• The rationale is stated as saving MA dollars while recognizing the transferee’s need for housing. This restriction does not recognize the strong possibility that the housing of the transferor may not be appropriate housing for the needs of the transferee. If the transferee must move to housing more suitable and cannot use the equity in the home to finance the different living environment, the transferee may then have to apply for government benefits to support that new environment. In such case, no cost savings is realized.

2.27 Medical Assistance Transfers to Spouses

• A community spouse should be allowed to maintain financial integrity and to use what the MA recipient receives for support throughout their lifetimes. The purpose of estate recovery is to get assets that are left after both spouses have died. To take the money during the lifetime of the married MA recipient unduly penalizes the community spouse.

2.28 Transfers to Trusts

• The rationale for not allowing direct transfers to a disabled child is to allow assets coming to the Medical Assistance recipient to be used for the care of the MA recipient. This does not take into account that a disabled child is very likely to need home health services or nursing home in the future and will need funds to pay for those services. This is merely cost-shifting. The cost of care shifts from the long-term care resident to the disabled relative. No overall cost savings is obtained.

2.29 Permissible Purposes of a Trust

• Allowing the state to enter into established trust and estate law in deciding what purpose is valid, with no standard identified, is arbitrary and capricious and leads to selective enforcement.

General comments

Our opposition to the waiver proposal arises from our concern about the likely negative effects of the proposal:

• The Medical Assistance system is supposed to serve the elderly and disabled clients. It should in part advocate for meeting their needs rather than criminalizing them and abusing them. Where did we lose the concept that we must provide for persons in need?

• The rationale for the waiver request presumes that the rising cost of Medical Assistance is solely because of the transfer of assets. It does not take into account the rising cost of medical care, the increased number of people who require care, or a multitude of other factors that affect costs. It is a faulty premise for saving dollars and blames those persons in need of long-term care services.

• The waiver proposal wrongly claims that it will expand the use of long-term care insurance. The cost of long-term care insurance is not affordable for many elders. It is definitely not available for many individuals who already have serious chronic illnesses. The waiver will not save money nor encourage the sale of long-term care insurance. The persons most affected are those least able to obtain long-term care insurance.

• The waiver proposal has serious effects on the family farm and other business. It forces the farm or business to be sold if the parent becomes ill, rather than to allow it to be passed to the child who has been actively farming the property or working the business, thereby depriving the family of its livelihood.

• The demonstration project claims that this will slow the cost of long-term care. The growth of Medical Assistance long-term care expenditures will be based on innumerable factors, many of which are under the government’s control such as reimbursement rates and the number of persons receiving services. It cannot control other factors such as health care costs, number of persons needing services, kinds of services provided, inflation, etc. The project will not be able to demonstrate whether the limitations on transfers will have any impact on costs because of these other factors.

• The waiver will generate unintended consequences. Rather than stopping asset transfers and encouraging the purchase of long-term care insurance, the proposal will encourage earlier and larger asset transfers by the elderly, discourage responsible decision-making, and ultimately add to Medicaid costs.

In addition, the waiver proposal appears to us to contravene federal law in the following respects:

• The proposed waiver fails to conform to the basic purpose of Section 1115 waivers, since it is devoid of any attempt to expand or improve services or service delivery under a bona fide research or demonstration program. Instead, it is a blatant eligibility restriction intended to cut expenditures.

• Federal law permits waivers of state plan requirements in section 1902 of the Medicaid statute, 42 U.S.C. §1396a. The transfer-of-asset rules created by Congress are not in this section and are not waiveable by CMS. Similar waiver requests by Minnesota and South Dakota were previously denied for this reason by HCFA (now CMS).

• The waiver would permit Minnesota to deny, rather than furnish, medical assistance to those who lack the income and resources to pay for medical care, thus defeating, rather than promoting, Medicaid and waiver objectives.

Given the sweeping and far-reaching implications of these proposals, the notice in the State Register alone is inadequate and does not allow for providing information to and getting feedback from the broader public. Notice should be in understandable format so that the public can appreciate the breadth of the proposed changes. We recommend that public hearings be held throughout the state so that these changes can be discussed in an open forum and that the Waiver Request be published in state and local newspapers with at least a month’s notice of the public hearings.