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This week, the United States Senate is considering a 145-page Republican proposal called the “Better Care Reconciliation Act of 2017” that includes provisions to repeal “Obama Care.” The Senate Republican Policy Committee has published a section-by-section summary of the proposal. The proposal is full of changes in tax law, health insurance law, public assistance programs for nearly-impoverished people, and Medicaid law affecting nursing home residents. This article describes how some parts of the proposal may help middle income families and explains why two of the proposal’s provisions will hurt many aged nursing home residents and their families.
Health Savings Account (HSA) Relief
Obama Care forced many self-employed people and small businesses employees to purchase high-deductible health insurance through health insurance exchanges. In many cases, those people can spend $7,000 per year or more on medical expenses without reaching their deductibles, and so their health insurance provides little or no actual benefit to them through the year.
High-deductible insurance customers can set up health savings accounts (HSAs) to make tax-free health expense payments, but the HSA law caps HSA funding far below those exorbitant health insurance deductibles.
The Senate proposal would eliminate HSA account funding caps and allow married couples to pool their money in a single HSA in 2018. Specifically, the proposal would increase a taxpayer’s annual HSA funding “to the sum of the annual deductible plus the maximum out-of-pocket expenses permitted under a high deductible health plan.”
Other Proposal Benefits
The Senate proposal would also eliminate many harsh effects of Obama Care with such relief as (text in quotation marks appears in the Republican proposal summary):
- Reduction of the dollar amount limits placed on subsidy repayment for people who received an excess advance premium tax credit.
- Reduction of the percentage of income low-income people must pay on health insurance premiums before insurance credits kick in.
- Repeals the penalty people must pay for failing to purchase health insurance.
- Postpones the 40% excise tax on high-cost employer health plans until 2026.
- “Repeals the exclusion of over-the-counter medicines from the allowable uses of tax-advantaged health accounts, effective beginning in taxable year 2017.”
- “Repeals the tax increase for purchasing nonqualified medical expenses with tax-advantaged health accounts, effective for distributions made beginning in 2017.”
- “Repeals the $2,500 limit on contributions to flexible spending accounts, effective beginning in plan year 2018.”
- “Repeals the tax on prescription drugs, effective calendar year 2018.”
- “Repeals the 2.3 percent excise tax on medical devices, effective for sales beginning in calendar year 2017.”
- “Repeals the increase in the amount of income that must be spent on medical expenses before a deduction is allowed, lowering it from Obamacare’s 10 percent to 7.5 percent, effective beginning in taxable year 2017.”
Bad News for Nursing Home Residents
Two proposal provisions would create serious problems for nursing home residents and their families – Section 128, under the Republican summary’s heading, “Reducing State Medicaid Costs,” and 130, under the Republican summary’s heading, “Eligibility Redeterminations.”
Section 128 “Reducing State Medicaid Costs” = Repeal of Retroactive Medicaid Coverage
The Republican proposal summary says Section 128 of the proposal, “Limits retroactive enrollment in Medicaid to the month in which the applicant applied, beginning October 1, 2017.” That simple sounding change will shift a financial burden of as much as $19,317 onto the backs of many nursing home residents and their families.
The $77,268 average annual cost of Indiana nursing home care forces most nursing home residents to apply for Medicaid assistance. Nursing home residents’ family members must often take time off of work to dig into the residents’ personal and financial records to satisfy Medicaid’s financial eligibility requirements.
It often takes many hours to complete a records search because Medicaid can require a person to produce bank accounts and other financial records from as far back as 5 years before the Medicaid application date. Unfortunately, federal law requires the state to determine Medicaid eligibility within 45 days after the Medicaid application date, which leads some caseworkers to threaten Medicaid applicants with eligibility denial if they do not deliver financial records quickly.
Current federal law provides retroactive Medicaid eligibility to nursing home residents that qualified financially for Medicaid assistance as early as 3 months before the Medicaid application date. This 3-month retroactive Medicaid coverage eases the burden on families that have trouble getting organized for Medicaid application.
The 3-month retroactive Medicaid coverage rule allows nursing homes to receive retroactive payment for services that they provide to Medicaid-eligible residents before Medicaid application. Nursing home officials and residents’ families can work together to prepare for Medicaid application without feeling pressured to apply for Medicaid hastily.
The Senate proposal’s retroactive Medicaid coverage repeal will influence many nursing homes to push Medicaid applications too fast and make mistakes that will cost nursing homes dearly. Imagine, for example, a nursing home resident that gave $50,000 to his family 4 years and 11 months before his nursing home admission. The resident would qualify for Medicaid if he or his family could pay for his care privately for another month, but the old gift would disqualify him from Medicaid for more than 7 months if he would apply for Medicaid immediately. If the resident cannot pay nursing home fees for the entire 7 months, the nursing home will be stuck with either discharging the resident for nonpayment or providing free nursing home care to the resident the Medicaid disqualification ends.
Section 130 “Eligibility Redeterminations” = Overwhelming Caseworkers & Families
Current federal law requires states to reevaluate nursing home residents’ Medicaid eligibility each year. The Senate proposal would allow states to increase eligibility redetermination frequency from annual inquiries to semiannual inquiries. The increased redetermination frequency will increase administrative and financial burdens on nursing home residents’ families.
A Medicaid caseworker usually sends a written Medicaid redetermination notice to the nursing home and the nursing home resident’s lawyer or family members near the anniversary of the initial Medicaid application. In most cases, the nursing home resident’s representatives simply complete a questionnaire and send copies of the resident’s bank records to the caseworker.
High Medicaid application volume and Medicaid personnel turnover promotes caseworker errors. Overloaded caseworkers often overlook records that Medicaid recipients provided in the initial application process and mistakenly begin unlawful benefits termination procedures against nursing home residents.
Consider, as a common example, a nursing home resident’s farmland that is exempt from Medicaid resource limits because the farm produces crop income that helps pay nursing home expenses. Caseworker operating on a tight deadline sometimes forget to look for the state’s copy of farm leases in the Medicaid files and threaten to terminate nursing home residents’ Medicaid benefits for failure to offer farmland for lease. We were able to correct this kind of error in an actual case of earlier this year, but it costs the nursing home resident’s family a few thousand dollars in legal services to convince the state of its error.
An increase in Medicaid redetermination frequency will overwhelm nursing home resident’s families and increase Medicaid caseworkers’ error rates. Semiannual redeterminations will require nursing home residents’ families to respond to more erratic Medicaid redetermination inquiries, but many families will have trouble responding to erroneous inquiries effectively.
Many Americans feel that we need to overhaul our broken health insurance system. The Better Care Reconciliation Act of 2017 may be a step in the right direction if it does not step on America’s financially vulnerable nursing home residents and their families.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association.
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