• On Monday, February 7, President Bush will send Congress his 2006 budget. It is expected to request at least $60 billion in Medicaid cuts to help meet the Administration’s target of reducing the federal budget deficit by half by 2009. A substantial proportion of these cuts will directly affect nursing home care. Based on news reports and public remarks by the new Secretary of Health and Human Services, Michael Leavitt, more than 760,000 nursing home residents who are “optional beneficiaries” in the Medicaid program -- more than half of all residents – could lose entitlements and protections they now have under federal law. (The only Medicaid beneficiaries who receive mandatory nursing home benefits are those who are low-income enough to be eligible for Supplemental Security Income. Eighty-five percent of nursing home residents with Medicaid assistance are covered at the option of the state.) Below are  excerpts from a speech Secretary Leavitt made on Tuesday and explain why his remarks, including his call for reducing coverage for optional beneficiaries, concern us. The budget proposal is expected to give states more “flexibility” to cover home and community-based services. This could be a welcome opportunity to end the institutional bias of Medicaid – if the law assures that people can get the type and quality of care they need.   This serious potential reform is being debated in the context of a plan to reduce the federal budget deficit, not in an effort to assure that people who need long-term care get appropriate, high-quality services. Once Congress has the President’s request, committees will begin debating budget cuts and changes to the Medicaid program. The process may move very quickly.

For additional information on the budget and Medicaid threats, see the following websites of  organizations committed to fighting cuts in Medicaid and unwise structural changes in the Medicaid.

Families USA:
http://www.familiesusa.org/
Action Center:
http://www.familiesusa.org/site/PageServer?pagename=Action_Center
State Resources:
http://www.familiesusa.org/site/PageServer?pagename=States_States1

Center for Community Change:
http://www.communitychange.org/
Resources, including State and Local Organizations:
http://www.communitychange.org/issues/education/resources/#stateLocal

Center on Budget and Policy Priorities
http://www.cbpp.org/
State Policy Work:
http://www.cbpp.org/state/index.html

In his first speech as Secretary of Health and Human Services February 1, (entitled “Medicaid: A Time to Act)   Michael Leavitt tried to dispel “myths” that the Administration plans to reduce federal Medicaid spending and laid out “strategies” to lower the program’s costs. However, many of his statements increased NCCNHR’s concerns about the changes the Administration would like to see in Medicaid, which provides coverage to 66 percent of nursing home residents.

Secretary Leavitt: Whether “it’s a lady in a nursing home or a boy in a wheelchair, we have a very special obligation to our neighbors who are elderly, low-income, or have disabilities. . . Mandatory populations need the help. They must receive help. The optional populations, on the other hand, may not need such a comprehensive solution. Most of them are healthy people who just need help paying for health insurance.”

Response:  85 percent of nursing home residents who receive help from Medicaid are optional beneficiaries whom states have elected to include in the program. Most of these residents are eligible for Medicaid only because they cannot afford $50,000 to $70,000 or more a year for long-term care. To receive Medicaid, they use up almost all of their assets and give up virtually all of their income. Optional nursing home beneficiaries are at risk of losing benefits and protections they now automatically receive as part of their Medicaid eligibility.

Secretary Leavitt: The Administration’s “general strategy” to solve Medicaid growth includes creating “enough flexibility in Medicaid that states are able to continue serving optional groups and expand the number of people they serve.”

Response:  This statement appears to imply that Medicaid beneficiaries will continue to receive services, but “flexibility” is the key word. In 2003, Administration officials would not commit to continuing Medicaid protections for the 85 percent of Medicaid residents who are optional beneficiaries. NCCNHR will be reading the President’s budget request carefully to determine whether optional beneficiaries – or any beneficiaries – would retain protections they now have under Medicaid:

Spousal impoverishment protections that ensure that the husband or wife of a nursing home resident can keep enough income and assets to survive. Before the federal spousal impoverishment law was enacted, wives and husbands still living in the community were reduced to the same level of poverty as the spouse in the nursing home. Elderly couples sometimes divorced each other so that the community spouse would have enough resources to live on.

·Prohibitions on states or providers requiring family members to pay for a relative’s care. Most families are responsive to the needs of their loved ones in long-term care, but the adult children of nursing home residents frequently are retired themselves, or sending their own children to college.

Prohibitions on requiring residents to sell their homes if they might return to them or if they have dependents, such as a disabled child, still living in the home.

The requirement that if a state provides coverage for optional groups, it must provide all members of that population in the state the same benefits and protections.

Secretary Leavitt: Many older Americans are taking “advantage of Medicaid loopholes to become eligible for Medicaid by giving away assets to their children. . . We must close these loopholes and focus Medicaid’s resources on helping those who really need it.”

Response:  Consumer advocates have always been concerned about claims that some people who could afford to pay for nursing home care transfer their assets to family members. However, solutions should be addressed cautiously. Many elderly people who do not consult estate planners innocently give money to help their children or grandchildren, never considering that a long nursing home stay could deplete what they have left. Even under current law, their generosity is often rewarded with a denial of Medicaid benefits to pay their unexpected long-term care expenses.

Secretary Leavitt: “There are ways families can preserve assets without shifting the costs of long-term care to Medicaid.”

Response: The way often mentioned is to give well-off families tax deductions to purchase private long-term care insurance. When their private insurance benefit runs out, they may become eligible for Medicaid and preserve their assets to hand down to their families. Policymakers and taxpayers should question why it is all right for well-off families to use this means to preserve assets while individuals with modest incomes may be denied Medicaid for helping a grandchild finish college. 

Secretary Leavitt: States have resorted to loopholes and accounting gimmicks to increase federal Medicaid matching funds.

Response: True, and under some states’ programs, residents may not benefit from special “bed taxes” that nursing homes pass on to their private pay residents. However, in addressing these “loopholes,” Congress must assure that the projected $4.5 billion in savings to the federal government does not jeopardize the quality of care or the ability of eligible people to get Medicaid assistance.

Secretary Leavitt: “Providing the care that lets people live at home if they want is less expensive than providing nursing home care.”

Response: Care at home is cheaper for some people. But it is not cheaper for those who need 24-hour nursing care and supervision and who do not have family members who are able to supplement part-time paid care. Community-based care is also not cheaper if it is not carefully regulated and monitored by state authorities. Recipients of such services will require frequent hospitalizations if they become victims of poor care, neglect or abuse.

Secretary Leavitt: “Medicaid should not force . . . people to live in institutions. . .”

Response:  We agree. Far too many people enter a nursing home because it is the only place they can get the cost of their care supplemented by Medicaid. But we are very concerned that the “flexibility” Secretary Leavitt promises under the Administration’s deficit-reduction plan would transfer residents from nursing facilities, which are well-regulated and required to have licensed nurses, to assisted living and personal care homes that are poorly regulated and infrequently inspected. A Government Accountability Office report found little government oversight over home and community-based services currently receiving waivers from the normal Medicaid rules, and the Administration has been silent on regulating these services in the past.

Any effort to end the institutional bias of Medicaid must be accompanied by a commitment to ensuring that care does not diminish in other settings. NCCNHR has worked for three decades to protect nursing home residents. Congress should ensure that elderly and disabled Americans receive the protections in current law whatever long-term care setting they live in.

Secretary Leavitt: The law must be changed so that state Medicaid programs pay the same low “wholesale” rates that Medicare and pharmacies pay.

Response: A good idea. But beginning January 1, 2006, nursing home residents will receive their drug coverage through private prescription drug plans (PDPs). These plans may not offer the same savings. Moreover, states will have to absorb the PDPs’ charges because of a provision in the Medicare prescription drug law that requires them to reimburse the federal government for the amount they would have spent for the residents if they were still covered by Medicaid.

To read Leavitt’s speech, go to 

http://www.hhs.gov/news/speech/2005/050201.html.