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Friday, August 19, 2005

Article on Medicaid's Uncertain Future

This is a very good article about the future of Medicaid.








Congress recently passed a Budget Resolution that cuts $10 billion from the federal Medicaid program over the next five years.  The Budget Resolution is a goal, not a law.  No particulars were included as to where these cuts would be made.


Michael  Leavitt,  the  Secretary  of  Health and Human Services, is in the process  of  appointing  a  Commission  to  study  this  issue  and  to  make recommendations   to   Congress   by    mid   September.      Another   group particularly interested in the outcome of this issue is the National Governors Association (NGA).  States pay for almost 50% of Medicaid costs, and these expenditures are straining state budgets.  Many states have enacted tax cuts over the past few years.  On June 1, 2005, the NGA Executive Committee adopted  a  Policy  Position  entitled,   “EC-16”  Medicaid  Reform  Policy. Portions of the policy are likely to be recommended by the Commission for inclusion in any new Medicaid statute.  Important points of the NGA Policy Position include the following:


    Transfers of Assets.  “Medicaid reform must include changes that increase the penalties for inappropriate transfers, restrict the type of assets that can be transferred….  This means that transfer-of-assets strategies are likely to be severely curtailed.  Therefore, Oast & Hook is encouraging all of its clients  to make immediately all transfers recommended by the firm.  If transfers were scheduled to be made on a gradual basis, then the transfer schedule should be reconsidered. Even asset transfers from IRAs must be looked at in this new light. Oast & Hook encourages  its clients  to contact the firm with any questions  regarding  the  transfer  of  assets  for  Medicaid  eligibility purposes.


    Reverse Mortgages.  The Governors are recommending that Congress require homeowners to pay for their care from reverse mortgages before they are permitted to apply for Medicaid.


    Family  Contribution.    The  Governors  are  encouraging  Congress  to  adopt  “policies  that encourage individuals and their families to self-finance care rather than rely on Medicaid.”  This may mean that adult children may be required  to contribute toward  the care of an unhealthy parent.


    Cost Sharing.  The Governors are urging Congress to adopt changes in Medicaid’s cost-sharing rules to establish “enforceable premiums, deductibles, or co-pays.”  This appears to require the persons receiving Medicaid to pay a greater portion of their care.


    Individual Health Care Tax Credits.  The Governors are suggesting that Congress make a tax credit  available  for  low-income  persons  who  would  then  have  their  employers  deduct  an additional payment, which combined with the tax credit would be used to purchase medical insurance.  The irony of offering a tax credit to a low-income person and then requiring the person to purchase medical insurance was apparently lost on the Governors.


    Corporate  Welfare.    The  Governors  point  out  that  many  large  multi-national  corporations provide health care to their retirees.  This puts those companies at a competitive disadvantage with the rest of the industrial world since other countries have universal health care and large companies in those countries do not need to pay for employee or retiree health care.  The Governors  are  suggesting  that  Congress  shift  some  of  this  cost  from  the  corporations  to  a

“reinsurance mechanism.”


In conclusion, those who have begun Medicaid asset protection planning should quickly conclude those plans while the opportunity still exists.  The future is murky, at best.


Thomas D. Begley Jr. is an attorney with the New Jersey law firm of Begley and Bookbinder, and he concentrates his practice in the areas of elder law and disability law.