State tightens Medicaid rules

More scrutiny for asset transfers

People who need to go into a nursing home in North Carolina will face much tougher rules about how they spend their money if they apply for Medicaid coverage for their care.

Already, the state raises questions when people shift their assets to family members, churches or charities within three years of needing nursing home care -- which can easily cost $50,000 a year and quickly drain an older person's remaining nest egg.

But under provisions of the Deficit Reduction Act that are slated to go into effect in January, the state will search back five years for evidence that an older person has tried to shelter assets from Medicaid. The change is aimed at people who can afford to pay for nursing care, but instead give their money away so they'll appear to be poor enough to qualify for the federal insurance program.

"People don't want to pay for the cost of nursing home care; people do want to preserve some of their assets," said Liz Scott, director of Adult Economic Services in Wake County Human Services. "The government has to ask, If the person has the means to pay, shouldn't they pay?"

But several advocates for older people said the law -- and complicated rules about exemptions -- mean older North Carolinians may suffer hardships for decisions made years earlier. How many people will be affected by the new rules is not known, but North Carolina has room for about 47,000 nursing home patients, according to the Cecil G. Sheps Center for Health Services Research. Nationally, about 70 percent have their bills paid by Medicaid.

"I think families for the most part do what they can," said Mary Bethel, an AARP lobbyist and former state social services worker. "You're putting the burden on people -- you're assuming that they're guilty when they transfer assets."

Studies have shown that reports of wealthy people spending down their nest eggs to qualify for Medicaid are often overblown. In Senate testimony in 2005, Georgetown University professor Judith Feder cited statistics that showed most nursing home residents pay in full or in part for some portion of their their care, even though a majority of older people can't afford to pay for extended stays in long-term care.

Marjorie Morris, chief of the state's Medicaid eligibility unit, said the state doesn't keep numbers of how many people have tried to shelter finances from Medicaid, but said "it's not very many."

The new policies would work like this: A woman gave her son $10,000 in 2003, then becomes ill next year and applies to Medicaid to pay for her nursing home care.

Under the law, Medicaid will insist that she or someone responsible for her try to get the money back. Medicaid will also consider whether the woman had a history of making similar gifts.

If the money isn't recovered and there's no hardship exemption, Medicaid will refuse to pay for the first $10,000 of her care.

"If you are a senior of any kind of means, they are going to start advising you more strenuously not to make gifts to your church or a nonprofit because five years from now you could go into an institution," said Rob Schofield, a staffer with the liberal think tank N.C. Policy Watch. "It really bespeaks the need for some more comprehensive solution on how we pay for seniors in long-term care."

The state held a public hearing Monday about the proposed rule changes. But few in the public attended, because little notice was given for the meeting. Public comment on the rules will continue until Nov. 7.

If the proposed rules are adopted, potential Medicaid recipients who have transferred assets during the previous five years have 24 days, at most, to prove to a county department of social services that:

* Depriving them of nursing home or in-home care would endanger their life or health, as certified in writing by a physician;

* No alternative sources are available for health care or food, and;

* Whoever transferred the money or other assets made all reasonable efforts to get them back, including hiring an attorney and trying to nullify a resulting mortgage or other agreement.

North Carolina's proposed rules are harsher than those of other states, according to Ed Dale, an AARP staffer in Washington. He said he has concerns about how the new rule changes will be viewed by older people, many of whom made decisions based on the old rules in which the government didn't question gifts made more than three years ago.

"Twenty-five percent of the people in this population have some serious cognitive impairment," Dale said. "When this population gets this sort of notice that they are going to be cut off, what's going to be their ability to deal with it or understand it?" he said.

Morris said the rules are designed to prevent people with significant assets from gaming the system.

"What happens is Mom, Dad, whoever, deeds the house over to their child or children and then [the parent] needs long-term care," Morris said. Such transfers won't be allowed five years prior to the application for Medicaid. If such a transfer occurs, Medicaid will count it as an asset unless the applicant can prove otherwise. Generally, people can have only $2,000 in assets -- except for a home and a car -- in order to qualify for Medicaid.