January 20, 2004
Ms. Jean Close
Division of Integrated Health Systems
Disability and Elderly Health Program Group
Center for Medicaid and State Operations
Centers for Medicare and Medicaid Services
7500 Security Boulevard, Mail Stop S2-14-26
Baltimore, MD 21244-1850
Dear Ms. Close
We are contacting you on behalf of the undersigned individuals and organizations to urge you not to approve the 1115 Medicaid waiver request submitted by the Commonwealth of Massachusetts to your agency on August 28, 2003. We are concerned that the waiver, entitled "Massachusetts Proposal for Demonstration Affecting Assets of Institutionalized Individuals", will be harmful to institutionalized individuals and their spouses. Furthermore, we do not believe it furthers the goals and objectives of the federal Medicaid statute. Accordingly, we urge you not to approve it.
The waiver seeks through a variety of mechanisms to change the way in which the state imposes penalties on nursing home residents who transfer assets for less than fair market value prior to applying for MassHealth. If approved, the proposal will penalize innocent elders who make well-intended gifts to family members years in advance of entering a nursing home. It will create an absolute barrier to nursing home care for residents who have entered a nursing home and spent down their resources only to discover that they are ineligible for MassHealth. Just as critically, it will allow the state to interpose its judgment as to what are "necessary" and what are "frivolous" expenditures of excess assets. The language of the waiver suggests that the true target of the proposal is estate-planning attorneys and their clients, yet ironically the individuals who will be most often penalized under the waiver are those who have not consulted an attorney.
Following are some of our specific concerns about the waiver proposal:
The Proposal Increases the "Look-Back" Period for Transfers
The waiver proposal increases the look-back period for transfers of real estate to 60 months, with the exception that the first $300,000 of equity in a primary residence will continue to be subject to the current 36 month look-back period. Transfers into irrevocable trusts will be subject to a look-back period of 120 months.
Concerns:
There are many legitimate reasons why an individual transfers real estate or establishes a trust. These reasons may relate to the desire to benefit other family members in need, to minimize taxes, to minimize the costs of probate and estate administration and to facilitate the management of assets in the event of incapacity. Transfers thus often have little or nothing to do with future MassHealth eligibility. Such planning is generally considered a prudent act to order one's affairs in later years and is viewed favorably by society.
The waiver proposal does not acknowledge the legitimacy of any estate planning, regardless of its purpose. Rather, it adopts a very expansive approach to identifying a narrow range of estate planning mechanisms that relate solely to Medicaid institutional rules. All transfers within a very long period of time will be subject to a potential penalty.
Increasing the length of the look-back period increases the likelihood that the transfers were made for reasons other than MassHealth eligibility. It is the rare individual who plans for nursing home care ten years in advance of the need. Furthermore, most elders are ignorant of the rules governing MassHealth eligibility and coverage. Polls have repeatedly shown that most elders believe Medicare will pay for their long-term care. It is patently unfair to impose such an unrealistic lookback requirement on eligibility for nursing home care.
Although under current and proposed rules an individual can avoid a transfer penalty if he or she demonstrates the transfer was for a purpose solely other than that of establishing MassHealth eligibility, the burden of proof is on the individual. In practice the standard is nearly impossible to meet. It will require individuals who may be frail and confused to document motives and purpose from a remote period in time. If they cannot do so they will be subject to penalty. It is reasonable to assume that most individuals who are so penalized will risk losing access to critically needed medical care unless they can meet the hardship waiver criteria or can cure the transfer, both of which are likely to be unachievable.
The Proposal Changes the Penalty Start Date for All Transfers
The proposal changes the start date for the running of a penalty period of ineligibility to the later of: 1) the date of entry into a nursing home; 2) the date the person would have been eligible for Medicaid coverage of long term institutionalized care had the transfer not occurred; or 3) the date of the transfer, whichever is later.
Concerns:
Under current rules a penalty period of ineligibility for nursing home care is calculated to begin as of the date of the transfer. The length of the penalty period is related to the value of the transferred asset such that the end of the penalty period can be determined in advance.
Under the proposed rules, it is by definition not possible for individuals to retain sufficient assets to pay for their care because the penalty period does not begin to run until all assets are spent. The penalty period will not begin to run until the later of the date the individual enters the nursing home, the date of eligibility had the transfer not occurred, or the date of transfer, whichever is later. This guarantees that an individual will need the level of medical care provided by a nursing home at the time the penalty renders the individual ineligible. For such an individual, qualifying for a hardship waiver is the only way out. The individual who innocently transferred assets, has no payment source for nursing home care and cannot be cared for in the community will have to demonstrate that "his or her life will be endangered or that he or she would be deprived of food, shelter, clothing or other necessities such that he or she would be at risk of serious deprivation. " Waiver Request, p.19. Not only does this requirement fly in the face of the Medicaid Act and its purposes, it is extremely harsh.
The proposal states as its rationale for this provision that "'¦unless the transfer occurs close to the time in which the Medicaid application is filed, the individual may not feel any effect of the penalty period because the penalty period may expire prior to the date of application". This desire to punish recipients by denying them needed health care is inappropriate and will put recipients at risk of unnecessary hospitalization or inadequate care in the community. We disagree with the assumption that under current law "the individual may not feel any effect of the penalty period." The penalty period resulting from a transfer causes the individual to either pay privately for care or delay care until the penalty lapses. The current statutory scheme appropriately balances the goal of discouraging elders from transferring assets with the goal of covering elders in need.
The proposal does not address the issue of who will pay for a nursing home resident's care if the resident is disqualified from eligibility due to a transfer of assets. The implication is that the individuals receiving the transferred assets will return the assets or use them to pay for care privately. This assumption ignores the basic reality that many gifts made to family members are made to assist family members in need and will not be available to pay for the elder's care during the penalty period. As a result, the resident in many cases will be denied MassHealth and have no means of paying the nursing home privately.
The proposal will therefore result in greater costs to the Commonwealth and will unduly burden providers. Individuals who have spent down their assets, usually on nursing home care, before applying for MassHealth will not be able to qualify for benefits. As a result, the nursing home will have the choice of writing off the resident's cost of care or evicting the resident. If the resident is frail and in need of much care, the most likely discharge will be to a hospital at increased cost to the health care system. This will put an additional financial strain on both hospitals and nursing homes at a time when the MassHealth reimbursement rates are well below the cost of care.
The Proposal Controls the Spending of "Excess Assets"
The proposal requires that assets transferred after the spousal assessment or after the applicant has been denied MassHealth due to excess assets will be deemed to be transfers for less than fair market value unless they are spent on the following items:
1) medical care; 2) "necessary" living expenses; 3) "necessary" home maintenance - but not home improvements; 4) an annuity that names the Commonwealth as a beneficiary or an annuity that provides the community spouse with a monthly income of no more than the MMMNA when combined with other sources of income; and 5) a long-term care insurance policy for the applicant or spouse which meets standards set by the Division of Medical Assistance. DMA will further limit the spending of assets by: 1) penalizing transfers of "non-countable" assets with a fair market value greater than $20,000; 2) penalizing "suspicious" successive transfers of assets; and 3) treating an equity loan payable by a community spouse as a transfer for less than fair market value unless the funds are used for necessary home maintenance, medically necessary health care or necessary living expenses.
Concern:
The DMA has already substantially reduced the amount of assets a community spouse may retain through a variety of measures in the FY04 State Budget. Now it is proposing to control the manner in which couples are able to spend their excess assets to benefit the community spouse. Under this proposal, DMA will function as the arbiter of what constitutes a "necessary" living expense and what constitutes "home maintenance" versus "home improvement". These terms are sufficiently vague and subjective that any purchase of living expenses or home repairs will have to be reviewed and approved by DMA prior to the expenditure. It will be impossible to know in advance what will pass the moral judgment of DMA, and individuals seeking to safely and sensibly plan for their elder years will be subject to micromanagement of their affairs by a state bureaucracy. In addition to imposing a substantial administrative burden on the recipient and his or her spouse, it will impose an equally onerous burden on DMA.
Furthermore, this proposal fundamentally alters the rationale of the federal anti-transfer rules. Current law only allows transfers for less than fair market value to be penalized. The proposal would expand the penalty to transfers which are for fair market value but are considered "unnecessary". The use of this highly subjective standard is so vague and discretionary that it offends basic due process standards. Furthermore, it restricts expenditures by and on behalf of the community spouse who is not an applicant for MassHealth. This does not comport with either the purposes of the Medicaid Act or the purpose of 1115 waivers.
These are just some of our concerns about the provisions of the proposed waiver. Our objections to it have been seconded by the entire Massachusetts Congressional delegation as well as other members of Congress. In a letter to CMS the Congressional delegation points out that "Estate planning is by definition performed in advance in order to allow an orderly conveyance of the estate." The letter goes on to say that "While ten years seems a reasonable time for planning of one's estate it is an excessive period to presume intent to defraud and appears to be driven not by overwhelming evidence of abusive sheltering of assets, but rather by a desire to penalize the majority of recipients for the fraudulent behavior of a few".
Nor has the waiver proposal been enthusiastically embraced by the Massachusetts Legislature. Although authorizing legislation was passed in the FY04 State Budget, attempts to repeal the provision have been consistently building, culminating with the inclusion of a repeal provision in the Senate's FY04 Supplemental Budget in November of this year. Legislative authorization of the waiver proposal may be repealed in the next legislative session.
The purpose of 1115 waivers is stated in CMS' policies and procedures as follows: "The Department seeks proposals which preserve and enhance beneficiary access to quality services". 59 Fed. Reg. 49249 (September 27, 1994). We do not believe that this waiver proposal is designed to enhance access to quality care; rather, it explicitly attempts to punish individuals by withholding care. In addition, the proposal attempts to waive provisions of the federal statute which are not waivable under the authority of Section 1115. Waivable provisions are contained in section 1396a of 42 U.S.C., while transfer of asset rules are contained in section 1396p of 42 U.S.C. Any attempt to implement this waiver or similar proposals by other states will surely be subject to litigation.
Finally, we do not believe there has been an adequate process for public input on the waiver proposal. When legislative language authorizing the waiver was first proposed there were legislative hearings on the bill. However, the language was much broader and contained much less detail than the actual waiver proposal. At a minimum, we ask that you not approve any version of a waiver until public hearings and opportunity for comment on the waiver document are provided by DMA.
For all of the above stated reasons, we respectfully request that this waiver request not be granted.
Sincerely,
Neal Winston, President
National Academy of Elder Law Attorneys, Massachusetts Chapter
AARP - Massachusetts
Alzheimer's Association Massachusetts Chapter
Bay State Visiting Nurse Association
Boston Center for Independent Living
Elder Services of the Merrimack Valley
Health Care for All
Massachusetts Association of Older Americans
Massachusetts Councils on Aging
Massachusetts Home Care Association
Massachusetts Human Services Coalition
Massachusetts Law Reform Institute
Massachusetts Senior Action Council
Medicare Advocacy Project o/b/o Mass Senior Action Council
National Association of Social Workers Massachusetts Chapter
Neighborhood Legal Services
Waltham Council on Aging
Waltham Geriatric Task Force
Women's Bar Association of Massachusetts
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