THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, September 17, 1995 TAG: 9509160258
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DEBRA GORDON, STAFF WRITER
LENGTH: Long : 182 lines
A survivor of the Great Depression, Florine Parks knew how to squeeze a penny. She'd heat water on her wood stove to avoid turning on the gas. Ride the bus every day to her job as a seamstress in a Portsmouth factory. Cut her own hair.
The result of her thrifty ways was a paid-for house in Portsmouth and a $50,000 nest egg, both of which she planned to leave to her family.
Instead, the house has been sold and the nest egg nearly depleted. Both have gone to pay Parks' $3,000-a-month bill at Maryview Nursing Care Center in Suffolk, where she's lived for the past year, a victim of Alzheimer's disease.
If she outlives her assets, Parks will be eligible for Medicaid. But taking benefits from a government insurance program for the poor is something the 80-year-old woman would hate, says her daughter, Peggy Howell. ``Even when she could have qualified for food stamps, she wouldn't apply.''
Her family, however, has no choice. Parks' own savings are almost gone, and Medicaid is the only health-insurance plan in the country that pays for nursing-home care.
The late congressman Claude D. Pepper, an outspoken advocate for the elderly, once said, ``The single greatest fear of our senior citizens and of all Americans is that a long-term catastrophic illness may strike and, because of the absence of public or private coverage, they will become destitute.''
For millions of Americans, that fear often becomes reality as nursing-home residents impoverish themselves so they can qualify for Medicaid.
The joint state-federal program of Medicaid wasn't originally intended to pay for long-term care for vast numbers of old people. It was designed to provide health care for the poor.
But now nearly 80 percent of the 30,000 Virginians in the state's nursing homes are on Medicaid.
Private health insurance doesn't pay for nursing-home care. Medicare, the government health-insurance program for the elderly, pays for only very short stays to recover from surgery or illness.
And the relatives of the frail elderly usually can't foot the bill, either. Many are raising children and coping with day care or college costs. Finding an extra $36,000 a year to pay for mom's nursing home is nearly impossible.
Relying on Medicaid to pay the bills is a solution that works well for no one. Not for nursing-home residents, not for their families and certainly not for the state or federal governments. Not even for the nursing homes themselves, who complain about the low reimbursement rates they receive under the program.
Virginia has seen its Medicaid expenditures for nursing-home care increase 55 percent in four years, from $243 million in 1989 to $378 million in 1993.
That figure will continue to grow over the next three decades, a period when the state's 65-and-older population is expected to double.
``States are going to have to come up with innovative programs to address the growing elderly population,'' said Del. Bob Purkey, R-Va. Beach, who has sponsored several bills dealing with long-term care.
In the past, loopholes in the laws governing Medicaid eligibility enabled people to give away or hide their assets from the government's oversight.
But those have nearly all been eliminated over the past decade as federal and state governments try to rein in costs for long-term care.
A study published in 1993 in the Millbank Memorial Fund Quarterly, a health care policy publication, concluded that only a small minority of those who are at risk of entering a nursing home have an incentive to transfer assets. ``Most have too little wealth to warrant hiring an attorney to arrange an asset transfer,'' the study said.
``I don't see the cases with wealthy people trying to protect their assets,'' said Kevin Rack, a Virginia Beach attorney who specializes in elder law. ``I typically see what I call the `upper poor.' They have a modest home, a CD (certificate of deposit) with their life savings of maybe $50,000 to $100,000, a pension and Social Security.''
Here's what he tells them:
Say you are a widower who has just had a stroke and you have to go into a nursing home. You have $100,000 in the bank. You'd like to give some of it to your children rather than all of it to the nursing home. So you cut your kids a check for $70,000, using the remaining $30,000 to pay for 10 months of nursing-home care. When that money is gone, you apply for Medicaid.
The plan won't work. Because you transferred that $70,000 when you entered the home, you're not eligible for Medicaid for another 17 months - one month for every $2,554 you gave away - minus any time you've already spent in the nursing home, up to a maximum of 36 months.
Which could mean that you'd have to ask your kids for the money back to pay for your stay, assuming they still have it.
Under laws passed by Congress last year, states can increase the maximum ineligibility period from the time of transferring assets from 36 months to 48 months or even higher.
If you own a house when you go into a nursing home, the house must be sold and the proceeds used to pay for your care before you can qualify for Medicaid. The only exception is if you have a disabled or minor child still living in the house, or such a child to which to transfer the house.
You also could transfer the house to someone who has been a care giver for at least two years. But you must do it before applying for Medicaid.
``Timing is everything,'' Rack said.
Even if you set up a trust to shelter assets for your children, and you have been living off the interest, you'll have to liquidate it and spend the principal before qualifying for Medicaid. That may involve having the court terminate the trust.
As for the rest of your assets, you can keep a life-insurance policy with $1,500 in cash value, maintain $2,000 in savings and prepay for your funeral. Anything else - other savings, stocks, trusts, life-insurance policies and other property - must be spent on nursing-home care.
If you are going into a nursing home, you can't buy your kids a car. Or donate the money to charity. You can spend it only on the nursing-home bill or on personal items for your room, such as a new television or a bureau.
Any monthly income from Social Security or pensions goes straight to the nursing home. A resident gets $35 a month to pay for personal items such as toiletries.
``It's not a situation that lends itself to abuse,'' Rack said.
Most people in nursing homes aren't married.
But for those who are, and who still have a spouse living in the community, the rules change somewhat.
Say a resident's wife still lives at home. She can continue living in the house, keep her engagement and wedding rings, a car and the contents of the house.
But the house itself soon might be on the line. Last year, the state House of Delegates passed a bill that would put a lien on the house when the nursing-home resident qualifies for Medicaid. If the wife sells the house, the state would be entitled to part or all of the proceeds as reimbursement for the amount it spent on the husband's nursing-home bill. That bill is stalled in a Senate subcommittee.
While the wife is living in the community, she can keep from $14,964 to $74,820 in joint assets, Rack said. If the couple have planned carefully, the remainder could be spent on such things as paying off the mortgage, purchasing a car and prepaying for both funerals and cemetery plots, something Rack and other estate planners often recommend.
The wife also can retain $1,254 a month in income from Social Security, pensions or work. That amount could be increased to $1,871 per month if she appealed to the Department of Medical Assistance Services.
``Everything else has to be spent down,'' Rack said.
``Your best option,'' he said, ``is to buy long-term care insurance. You don't want to be dependent on Medicaid to begin with. We don't know what the Medicaid benefits are going to be 10, 15 or 20 years from now. Or if the transfer rules will have changed further.''
State officials know they can't continue to fund long-term care through Medicaid. The cost is just getting too large.
A year ago, Del. Purkey sponsored a bill to provide tax credits for families who care for aging relatives at home instead of putting them into a nursing home. It makes more sense, Purkey said, to give someone a monthly tax credit of $1,000 or $1,200 rather than pay the average $2,400 a month it costs the state to keep someone in a nursing home.
The bill passed, and the state Taxation Department is now figuring out how to implement the law.
The General Assembly this year will take up another Purkey bill that would create long-term health care accounts, like Individual Retirement Accounts. The measure calls for such accounts to be created when a Virginian enters the work force.
For an actuarially determined length of time, an employee would contribute a portion of his or her income into an account. The person's employer would match the amount, for which it would receive a tax credit. Once the person reaches age 65, the money would be available to pay for health care costs. If it's not used, it would become part of the person's estate and would be taxed as such.
``It's a nice additional way of encouraging savings,'' Purkey said - ``encouraging'' here meaning ``requiring.''
Another option under discussion is making long-term care insurance premiums tax deductible. The federal government is considering similar legislation, which is expected to pass this fall.
``In the long run,'' said Del. Eric Cantor, R-Henrico, who is involved in long-term care issues, ``we're going to have to come up with some innovative ways to allow citizens to start saving early so it doesn't all come down on them in the later years.'' ILLUSTRATION: Graphic
KEN WRIGHT/Staff
[For complete graphic, please see microfilm]
KEYWORDS: MEDICAL INSURANCE NURSING HOMES by CNB