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for Medicaid mess

It’s wrong to blame attorneys
for Medicaid mess

Congress’ latest approach to the vexing problem of financing long-term care is a variant on Shakespeare’s line from “Henry VI: Part II” that first, “let’s kill all the lawyers.” One section of the budget reconciliation measure working its way through Congress would make it a crime to provide certain advice for a fee about Medicaid eligibility when the consequent actions of the client would not themselves be a crime.
A year ago Congress enacted a statute on this same topic that was quickly dubbed, “Send granny to jail.” While its language was far from clear, and the statute had serious constitutional flaws, what it attempted to do was make it a federal crime to transfer assets in order to get Medicaid coverage for nursing-home care, if that transfer resulted in the imposition of a period of ineligibility for such coverage.
This was both overkill and largely a waste of time, since transferring assets in order to become Medicaid-eligible already resulted in a more than dollar- for-dollar loss of eligibility.
Under the Medicaid program, a transfer of $48,520 for less than full consideration in September 1996 would have resulted in a 10-month disqualification from nursing-home coverage from Oct. 1, 1996, through July 31, 1997. So, other than people trying to speed up the Medicaid-eligibility determination process by applying early (in this example, prior to Aug. 1, 1997), few people were likely to get snared by this statute.
The current proposal has similar practical limitations. Attorneys and other advisers will counsel their clients in no uncertain terms that they cannot apply for Medicaid coverage for nursing-home bills covering any time prior to the expiration of this so-called “penalty period.” Given that, why should we be concerned about this statute?
First, it sets a dangerous precedent and probably violates the First Amendment. Could Congress make it a crime for someone not receiving federal funds to provide information and counseling about obtaining an abortion, even though obtaining the abortion were legal? How about making it a crime to provide tax advice when the consequent transactions are not crimes?
Second, the law could have a chilling effect on all sorts of other transactions. For example, husbands and wives frequently waive their “elective share” of one-third of each other’s estate, especially in second marriages where each wishes to leave the entire estate to his or her own children. Medicaid says this is a transfer of assets, measured not from the date the waivers were signed but from the subsequent date the first spouse dies. Does an attorney risk prosecution by assisting couples in this standard estate- planning technique years before either spouse dies?
The Medicaid consequences of some other transactions are simply unknown, so the statute puts the attorney in an ethical bind. If the attorney does “cutting-edge” planning that will most benefit the client, the attorney may have committed a crime. For example, if you contribute highly appreciated stock to a charitable remainder trust sponsored by your alma mater–a well- recognized and sanctioned way to avoid capital-gains taxation and obtain a large charitable deduction–it is not clear whether Medicaid will treat all, some or none of that as a transfer disqualifying you from Medicaid. Indeed, in any purchase of an annuity where there is a secondary beneficiary, it is unclear how Medicaid would value a variable annuity as opposed to one with a fixed return. Financial planners and accountants had better watch out, too. Perhaps the most serious problem with this proposal is that it demonstrates Congress continues to posture while avoiding the need to deal with the real issues of how long-term care gets financed. Creating one more hurdle for those for whom Medicaid planning may be the only rational option will do nothing to address this difficult public- policy problem.
These legislative decisions are being made in a public-policy vacuum. Even baseline data on the question of who is served by Medicaid for nursing-home care is hard to come by. No one really knows to what extent property is transferred to accelerate Medicaid eligibility for nursing-home care. There is no societal consensus about the financial circumstances in which an individual should be expected to pay for the entire cost of his or her own care, part of the cost or should not be expected to pay at all. Without such information and a much more robust discussion of these issues, policy can be made only on the margins while the more difficult questions of substance are ignored.
Meanwhile, as Congress declines to address the underlying issue, it diverts public attention by blaming attorneys for helping clients cope with the Medicaid program, which the courts have repeatedly described as “unintelligible to the uninitiated.” Given a program of such complexity, is it any wonder that affected families seek legal counsel in order to negotiate it? Rather than blaming the attorneys required by the current ill-conceived Medicaid program, Congress would do better by simplifying and rethinking it in a serious way.
(Rene Reixach is an attorney with Woods, Oviatt, Gilman, Sturman & Clarke LLP, where he concentrates his practice in health law. He formerly was executive director of the Finger Lakes Health Systems Agency.)

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