Nursing Homes in a Budget Pinch

February 17-23, 2006

by Jeremy Harrell

Recent changes to federal Medicaid laws hold the potential to hit Long Island nursing homes in the wallet, experts said.

"The nursing home industry won’t realize this until there are cases before them, and then there will be an uproar," said Vincent J. Russo, managing shareholder of Vincent J. Russo & Associates in Woodbury and chairman of the National Association of Elder Law Attorneys’ Medicaid task force. "They’re going to be outraged."

The changes stem from the Deficit Reduction Act of 2005, a federal budget bill signed by President Bush on Feb. 9. The law trims $4.7 billion in Medicaid spending over the next five years, in part by instituting new eligibility requirements for nursing home patients.

Formerly, when seniors applied for Medicaid, the government "looked back" over the previous three years to examine gifts to families or churches, known as transfers. If large transfers fell within the three-year period, then applicants paid time penalties before becoming eligible for long term Medicaid assistance. A gift of $15,000 to help a grandchild go to college, for instance, resulted in a two-month ineligibility period for Medicaid assistance under the old rules, Russo said.

The new rule extends the "look back" period five years, upsetting the long- standing standards of estate planning. Also, under the old rules, when a gift made an applicant temporarily ineligible for Medicaid, the penalty period for ineligibility started on the date of the gift. Under the new rules, the penalty period begins when an individual applies for Medicaid and is already receiving nursing home care.

The combination of the two means that many seniors entering nursing homes won’t be able to pay for the first several months, said Jennifer Cona, a partner with Cona Elder Law in Melville. The broad administrative changes will also delay reimbursement by at least one year while Medicaid caseworkers figure out the new rules, dealing more trouble to nursing homes.

"What are they supposed to run on, fumes?" she asked. "They have no idea. They don’t see it yet, but when it hits, they’re going to get hit hard."

The new federal rules won’t take effect in New York until the state Legislature approves enabling legislation, which could take as long as a year, Cona said. Still, regardless when state lawmakers take action, the rules will be retroactive to Feb.8, 2006.

Theresa Santmann, owner of Little Flower Nursing Home in East Islip, said nursing homes already operate under a "convoluted method of reimbursement," and it’s "anybody’s guess" how the new look back procedures are going to play out.

"It’s going to be impossible to tell the fallout for nursing homes until the law has been in effect for a few years," Santmann said.

In some ways, the nursing home industry got what it asked for. Providers didn’t oppose the changes to the look back rules because nursing homes traditionally prefer to receive private party payments rather than public Medicaid funds, said Robert Murphy, executive vice president for government affairs for the New York State Health Facilities Association, a nursing home trade group.

Murphy acknowledged that the new rules could cause headaches for seniors who can’t pay for their nursing home care. And those headaches could easily become nursing homes’ responsibility.

"Now I’m left on the hook," Murphy said. "We don’t want to end up with a situation where we have a patient who has no payment ability.