PA Federal Court Settlement May Affect Arizona’s ALTCS

AUGUST 26, 1996 VOLUME 4, NUMBER 8

A settlement finalized last month in a Pennsylvania Federal Court may have some effect on Arizona’s ALTCS program. The settlement was reached in a three-year-old class action filed by Medicaid long-term care recipients and their non-institutionalized spouses.

Under federal Medicaid law, the non-institutionalized spouse of a Medicaid recipient is entitled to retain sufficient income to ensure basic necessities of life. Currently, this means that the community spouse is entitled to at least $1,295 per month; if the community spouse’s own income does not reach that amount, he or she is entitled to special treatment in the application process.

Pennsylvania previously interpreted that Federal provision the same way as Arizona currently does: when the community spouse’s income is insufficient, he or she was permitted to retain a portion of the institutionalized spouse’s income to make up the difference. The lawsuit challenged that approach. Instead, argued lawyers for Pennsylvania Medicaid recipients, the community spouse should be first permitted to retain additional assets (beyond those already permitted by separate Medicaid provisions, usually referred to as the “Community Spouse Resource Allowance”). The additional assets should be sufficient, they argued, to provide the required additional income. Only if the couple’s total assets were insufficient to ensure the $1,295 per month to the community spouse should the institutionalized spouse’s own pension income be tapped.

The effect of this approach would be to permit the spouses of many Medicaid applicants to retain significantly larger portions of their joint assets. In cases where the institutionalized spouse is the first to die, this would also help the surviving, community spouse to afford living expenses after Medicaid eligibility no longer made any difference.

Pennsylvania’s Medicaid agency has now admitted that its approach to calculating the “share of cost” (which was identical to Arizona’s methodology) was incorrect. Instead, community spouses will be entitled to keep sufficient assets to purchase an annuity large enough to make up the difference in income between the community spouse’s pension and $1,295. Hurly v. Houston, U.S. District Court, Eastern District of Pennsylvania, July 1, 1996.

Increases in Health Care Spending Slowed in 1994

Federal figures for 1994, recently released, show that the cost of medical care continue to rise at a rate faster than inflation. Still, the good news is that the increase was the smallest in three decades.

According to HCFA Review, the quarterly journal of the Health Care Financing Administration, the 1994 increase in medical costs was 6.4%. The smaller increase, however, was larger than the general increase in cost of living, with the result that the portion of our Gross Domestic Product devoted to health care also increased slightly, from 13.6% to 13.7%.

Of the $949.4 billion spent on health care in 1994, the federal-state Medicaid program accounted for $122.9 billion (or about 13%). Of that figure, the federal government contributed $78.4 billion and the remaining $44.5 billion came from state governments.

While overall health care costs increased 6.4%, Medicaid costs increased by 7.7%. This figure, like the overall health care costs, represented a decrease in the growth rate. Medicare, the federal insurance program for health care for the elderly and disabled, increased its outlays during the same period by 11.4%.

The 1994 figures represent an expenditure of $3,510 by each American on health care costs.

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