Medicaid proposal could hurt seniors

Hundreds of thousands of seniors will find it tougher to get government help with nursing home costs under rules Congress is expected to approve as soon as Wednesday.

The rules are designed to keep wealthy seniors from qualifying for Medicaid by transferring money to their children so that they appear poor. But critics say many needy seniors may be denied coverage because they gave a modest gift to a child or a charity as much as five years before they applied for Medicaid. In the worst case, critics say, seniors could find themselves unable to get needed nursing home care.

''People who had no intention of defrauding the government -- people who gave money to their church or helped a family member -- are going to find themselves in trouble," said Kirsten Sloan, chief health lobbyist for AARP.

Medicaid, known as MassHealth in Massachusetts, is the only government program that pays for long-term nursing home stays. It is supposed to cover seniors who are poor or who become impoverished paying for nursing home care. But the National Governors Association and members of Congress, such as Representative Nathan Deal, a Georgia Republican, say that too many middle- and upper-income seniors are abusing the system by ''buying two Mercedes, giving them to their children and . . . reducing themselves to poverty."

They point to soaring Medicaid costs and to a cottage industry of estate-planning and elder-law attorneys who help seniors protect their money. Taxpayers funded $44 billion in nursing home bills nationwide in 2003. In Massachusetts, Medicaid pays the bills for nearly 70 percent of nursing home residents, which cost $1.56 billion last year.

''I don't think it's fair to the taxpayer to subsidize someone who is able to take care of themselves," said Deal.

The US House is scheduled to take a final vote Wednesday on a budget bill, already approved by the Senate, that would tighten rules on who could qualify.

The Congressional Budget Office estimates that the changes would affect more than 125,000 people each year, and save approximately $6.8 billion over 10 years.

Currently, only seniors with $2,000 or less in assets, excluding a house and a car, can qualify for Medicaid. In addition, they must prove that, in the previous three years, they have not tried to defraud Medicaid by giving away assets. The new rules will extend the restriction to five years and limit the value of an excluded house to $500,000. Gifts to a spouse or disabled child are allowed.

If seniors have transferred money improperly, they are denied Medicaid coverage for months or years, depending on how much they transferred. The new rules will toughen that penalty.

Consider the case of a woman who gives her grandson $30,000 for college and two years later suffers a stroke. She is able to pay for some nursing home care, but at a cost of about $7,000 a month treatment exhausts her savings quickly. When she applies for Medicaid, she must prove that the gift to her grandson was not an attempt to qualify for government aid. If it is seen as improper, she will be disqualified from Medicaid for four months.

Neil MacDonald is typical of many moderate-income seniors who will be affected by the new rules. MacDonald worked much of his life as a purchasing manager for Mobil, saving hundreds of thousands of dollars for his retirement and to pass on to his daughter, Sandra.

''You go into a nursing home and they take all the money," says MacDonald, 94, of Framingham, who recently lost two toes to diabetes and is facing a long stay. ''My important mission is to make sure Sandy gets taken care of."

MacDonald's family recently contacted a lawyer for help in figuring out how he can pay for both his nursing home stay and care for Sandra, 64, who is mildly mentally disabled, but probably will not qualify as disabled under the asset transfer rules.

A lawyer at Margolis and Associates, the law firm they approached, said he is seeing a rush of people seeking advice before the new rules take effect.

''We recognize that he has to pay a portion of his nursing home care, but how do we make sure there's enough to pay for Sandra's care for 20 or 30 years?" asked his granddaughter, Paula, who helps manage his money but doesn't expect to inherit any. ''I understand that they don't want people abusing Medicaid. But that's not what we're trying to do."

Sandra has never worked and never lived outside her father's home, and the family has never sought government aid for her. Under the old rules, if MacDonald transferred money to Sandra and needed Medicaid assistance for his own care, he could qualify three years after he gave her the gift. He could probably keep enough money to pay for three years in the nursing home, leaving him unharmed by the penalty.

Under the new rules, MacDonald would have to keep enough for five years, which would leave considerably less for his daughter. A year of nursing home care in Massachusetts averages more than $84,000.

Proponents of the changes say they will ensure that people like MacDonald, who can afford to pay for their care, do so. Both the old and new rules have one safety valve: Seniors facing loss of needed medical care can apply for a hardship waiver.

In 2003, asserting that there was significant fraud in Massachusetts, the Romney administration proposed rules that are similar to the federal changes. But they were never approved by federal officials overseeing Medicaid.

A spokesman for the state's nursing homes said the industry supports efforts to curb fraud, but is worried that patients in nursing homes will run out of money, leaving the homes to foot the bill. Nursing homes can discharge a patient for failing to pay, but only if there is a safe place for them to go, said Scott Plumb, senior vice president of the Massachusetts Extended Care Federation, a nursing home industry group.

Plumb and others recommend that people consider buying private long-term care insurance, which covers nursing home care.

A recent study suggests that as many as one-fifth of seniors whose nursing home stays were paid by Medicaid had transferred cash to a child or others in the four years before they entered the nursing home. But the study, by the Kaiser Family Foundation, found that on average, the amount transferred was $8,202 -- just slightly more than a month's worth of care.

''If you're talking about someone who is wealthy, chances are that person is not clamoring to get into a nursing home," said Sloan of the AARP. ''They're going to get their care at home."