Issue: December, 2006
Author: Kelly S. Davis, Catherine R. Rogers, and Susan L. Feinman
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Medicaid: From the Frying Pan Into the Fire
In a ceremony that drew little attention except from elder law attorneys and groups that serve or represent their clients, on February 8, 2006, President Bush signed the Deficit Reduction Act of 2005 (DRA) into law....maybe. The DRA dramatically changed Medicaid eligibility rules so onerously that it has been called the “Put Granny on the Street” law. Among the most dramatic changes under the DRA are:
LOOK-BACK PERIOD - Under pre-DRA law and current state law (Wyo. Stat. §42-2-202(a)), the states looked back 36 months from the Medicaid application date for all transfers made for less than fair market value (“such transfers”). The states also looked back 60 months for such transfers made to or from a trust. The DRA applies the 60 month look-back rule to all such transfers.
TRANSFER PENALTY PERIOD - Under pre-DRA law and current state law (Wyo. Stat. §42-2-202(b)), the penalty periods generated by such transfers begin with the first day of the first month in which each transfer was made and which does not occur in any other ineligibility period. As long as the individual had sufficient assets to pay for long term care during the penalty period, he could make such transfers and wait until the penalty period expired before applying for Medicaid.
Under the DRA, the penalty period does not begin until the individual is receiving long term care and is qualified for Medicaid but for the penalty. Under the DRA, when the individual who made such a transfer enters the nursing home, he will be confronted by the penalty period but he will not have the assets to pay for his care during the penalty period. If he made any other such transfers during the 60 month look-back period, the penalty periods from those transfers will extend the overall penalty period.
PARTIAL MONTH PENALTIES - Under pre-DRA law, penalty periods were calculated by rounding down to the nearest whole month. Under the DRA, penalty periods are calculated to two decimal places, which are then used to determine the number of days of the penalty period’s last month.
PERSONAL RESIDENCE EXEMPTION - Under pre-DRA law, the personal residence was treated as an exempt asset, regardless of its value, if either the spouse or a disabled or minor child continued to live there or a written statement was provided that the Medicaid applicant intended to return home. Under the DRA, any equity in the personal residence in excess of $500,000 is considered an available asset regardless of whether the Medicaid applicant intends to return home.
LIFE ESTATE PURCHASE - Under the DRA, the Medicaid applicant’s purchase of a life estate in another individual’s home will not be treated as such a transfer provided the Medicaid applicant resides in the home for one year.
ANNUITIES - In order to qualify as an exempt asset under the DRA, annuities must be irrevocable, nonassignable, actuarially sound, provide equal periodic payments and name the state as the remainder beneficiary.
HARDSHIP WAIVERS - The DRA requires states to establish procedures for granting hardship waivers in cases where the denial of Medicaid benefits would deprive the individual of food, clothing, shelter, the necessities of life or medical care such that the Medicaid applicant’s health or life would be endangered.
The DRA directs the states to bring their Medicaid statutes into conformity with the new federal law. Although currently all Wyoming statutes and regulations concerning Medicaid eligibility provide for the application of pre-DRA law, the Wyoming Department of Health (“Health”) has purportedly implemented certain Medicaid eligibility provisions of the DRA through Medical Policy Alerts (“Alert”). This action by Health exposes both Health and the Wyoming Department of Family Services (“DFS”) to claims of arbitrary and capricious agency action.
Wyoming’s Medicaid program is formally known as the Wyoming Medical Assistance and Services Act (the “Act”). Wyo. Stat. §42-4-101 et seq. Health is responsible for administering the Act and DFS is empowered by Wyo. Stat. §42-4-106(a) to accept and process applications for medical assistance and to make benefit eligibility determinations.
Although Wyo. Stat. 42-4-104 (a)(iv) directs Health to engage in rulemaking regarding the Act according to Wyoming’s Administrative Procedure Act, Health never adopted rules concerning eligibility under the Act. DFS promulgated rules for “Medical Programs – General,” which provide for the look-back and penalty periods of pre-DRA law.
To date, the Legislature has not convened an emergency session to amend statutes nor has Health or DFS engaged in rulemaking to bring Wyoming law into compliance with the DRA. The Legislature anticipated that Wyoming’s Welfare Act might conflict with new federal enactments, providing that if any provision of that title comes to conflict with new federal enactments, Health shall “[f]ollow the state rather than the federal law to the extent possible without incurring federal sanctions.” Wyo. Stat. §42-1-102 (a)(i). Similarly, Congress anticipated that it would take time for the States to conform their laws and regulations to the DRA. For states in which legislative amendments are required for its Medicaid program to comply with the DRA, the legislative amendments must become effective no later than “the first day of the first calendar quarter beginning after the close of the first regular session of the State legislature that begins after the date of the enactment” of the DRA. Wyoming’s 2006 legislative session was a budget session, and the 2007 session will be a general session. The DRA therefore requires that Wyoming amend its statutes to comply with the DRA by April 1, 2007.
Notwithstanding the DRA’s “safe harbor” provisions and Wyoming’s directive that state law be followed until new state legislation is adopted, Health has issued two separate Alerts purporting to immediately implement certain provisions of the DRA. In a July 14, 2006 Alert, Health directs DFS to apply the DRA’s 60 month look-back period, penalty period start date, partial month penalty and home equity provisions to Medicaid applications received on or after August 1, 2006. On August 11, 2006, Health re-issued this same Alert with some “Q&A” examples.
An agency’s failure to follow statutes exposes the agency to scrutiny. If DFS complies with Health’s Alerts, it will be making eligibility determinations in disregard of its own administrative rules, which is, in Wyoming, per se arbitrary and capricious. Bowen v. State, Wyoming Real Estate Com’n, 900 P.2d 1140, 1142 (Wyo. 1995). An agency is wholly without power to modify, dilute or change in any way the statutory provisions from which it derives its authority and an agency’s action is null and void if it exceeds its authority or when it proceeds in a manner unauthorized by law. Platte Development Co. v. EQC, 966 P.2d 972, 975 (Wyo. 1998).
Within days of the DRA being signed into law, it was discovered that a typographical error had caused each house of Congress to pass a different version of the bill. The Clerk of the U.S. House of Representatives has stated that the bill did not pass the House of Representatives at all. Three lawsuits have challenged the DRA’s constitutionality because it did not pass both houses of Congress in the same form. Zeigler v. Gonzales, No. 1:06-CV-00080-CG-M, is pending before the U.S. District Court for the Southern District of Alabama. Honorable John Conyers, Jr., et al. v. George W. Bush, et al., No. 2:06–CV-11972, was dismissed by the U.S. District Court for the Eastern District of Michigan and it is not known at this time if the Plaintiffs will appeal. Public Citizen v. Clerk, Civil Action No. 06-0523, is pending before the U.S. Court of Appeals for the District of Columbia Circuit.
Three other lawsuits have challenged the constitutionality of specific provisions of the DRA. Cokeville Regional Medical Center, et al. v. Leavitt, Civil Action No. 04-1053, deals with Medicare reimbursement to hospitals and is pending before the U.S. Court of Appeals for the District of Columbia Circuit. OneSimpleLoan, et.al. v. U.S. Secretary of Education, No. 06 Civ. 2979, deals with student loan reconsolidation procedures and is pending before the U.S. Court of Appeals for the Second Circuit. California v. Leavitt, No. Civ. S-99-0355 (E.D. Calif.) is pending before the U.S. Court of Appeals for the Second Circuit.
If the DRA overcomes all constitutional challenges, it will certainly be more costly for families, especially for middle class families, to pay for long term care without adequate planning. The Medicaid provisions of the DRA were not well thought out and are not “user friendly.” They raise many questions as to their interpretation and application. They raise the specter of the impoverished community spouse, as intimidated seniors may not plan and, as a result, may spend all of their assets on long term care, thinking it is the only way to access Medicaid for the institutionalized spouse. Finally, they put long term care facilities in a difficult position, as they may have to decide between caring for impoverished but Medicaid ineligible residents free of charge until Medicaid benefits are available and truly putting Grannys on the street.
Kelly S. Davis is an elder law attorney with a statewide practice from offices in Cheyenne, Wyoming. With over 27 years experience in dealing with the legal issues and concerns of the elderly, the disabled and their families, Mr. Davis’ practice focuses on elder law, Medicaid eligibility, disability and estate planning. Mr. Davis is a graduate of the University of Oklahoma (BA English, 1976) and the University of Wyoming College of Law (JD, 1979). He is a member of the Wyoming State Bar's Elder Law and Disability Section, the National Academy of Elder Law Attorneys (NAELA), and is a charter member of the Academy of Special Needs Planners.
Catherine R. Rogers practices elder law, estate planning and estate administration from her office in Cheyenne. Catherine earned her B.A. from Wesleyan University in Middletown, CT in 1991 and her J.D. from the University of Wyoming College of Law in 1997. She is a member of the Laramie County (President, 2004-2005) and American Bar Associations; Wyoming State Bar; National Academy of Elder Law Attorneys; and S.E. Wyoming Estate Planning Council (Board Member 2003 – present). Catherine also serves as a Laramie County Circuit Court Magistrate and as a member of the Board of Directors of the Wyoming Guardianship Corporation.
Susan L. Feinman is currently an attorney in the law office of Thomas N. Long, P.C. in Cheyenne, Wyoming, where she practices elder law, estate planning and administration and family law. Before moving into private practice, Susan spent ten years directing a senior law program for the State of Wyoming. She is a member of the National Academy of Elder Law Attorneys, American Bar Association, Wyoming State Bar, Laramie County Bar Association and the Southeast Wyoming Estate Planning Council. Susan has a bachelor’s degree in psychology from Brooklyn College of the City University of New York, a master’s degree in anthropology from the University of Wyoming and a doctor of jurisprudence degree from the University of Wyoming College of Law. She has served on a variety of councils, committees and boards and has been an adjunct instructor at Laramie County Community College.
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