Posts Tagged ‘Health Insurance Reform Act’

Family Care-Givers of Elderly Recognized for Budget Impact


National policy considerations regarding long-term care of the elderly and disabled are beginning to be noticed by business and political leaders. When the business-oriented Wall Street Journalwrites about the issue, conservative politicians and policy makers can not be far behind.

In a December 11, 1996, article titled Families of Elders Have a Lot Riding On Budget Debates, the Journal recognizes the profound effect Congressional action can have on the quality of life for elders and their caregivers. Of particular interest is the analysis of the recent Kassebaum-Kennedy law criminalizing some gifts by those facing long-term care expenses (see Elder Law Issues, August 19, 1996). The Journal article refers to the new law as the “throw-Granny-in-jail” law.

Although Medicaid now pays for approximately half of all formal long-term care for seniors and the disabled, the Journal article points out a more profound statistic: as much as 80% of long-term care is provided directly by family members. Nearly all of that care is provided in the home, where Medicaid is the least likely to be considered as a possible substitute.

Government involvement in long-term care has focused primarily on nursing home placement. In the past five years, however, the government’s role has begun to shift. While Medicaid provided $3.4 billion in home care services in 1990, by 1995 the figure had tripled (to $10.33 billion). At the same time, Medicare (which has traditionally provided more home care services than Medicaid, but still has focused on institutional care) increased its home care benefits from $3.66 billion to $14.90 billion, a four-fold increase.

Now Congress is seeking ways to cut the federal budget, and particularly the federal-state commitment to Medicaid care. The “throw-Granny-in-jail” law is an early attempt to restrict payments for long-term care (though some discussion is being undertaken in Congress about repealing the new law altogether). Any significant change in government benefits is likely to have a devastating effect on the ability of families to provide some care to their aging seniors. As theJournal article points out, it could also lead to the paradox of increasing nursing home costs as the family members providing 80% of care find themselves unable to make their care plans work.

1997 Medicare Figures

Beginning with the Social Security checks due January 3, 1997, Medicare premium deductions will increase to $43.80 per month (up from $42.50 per month in 1996). Since the new year also brings a 2.9% increase in the Social Security benefit, most people will still see a larger total check.

Other Medicare figures will also change beginning with the new year. The initial hospitalization deductible increases from $736 (1996) to $760 (1997). Coinsurance (the amount which Medicare beneficiaries must pay for their 61st through 90th days in the hospital) will increase from $184/day (1996) to $190/day (1997). “Lifetime reserve” days will have a copayment increase from $368 (1996) to $380 (1997).

Skilled nursing care copayments will also increase, from $92/day (1996) to $95/day (1997). Since Medicare has no deductible or copayment from the first twenty days of skilled nursing care, however, the copayment amount only applies to the 21st through 100th day of nursing home placement.

Medicare HMO participants will not be affected by the new copayments and deductibles. HMO programs are permitted to charge less than Medicare copayments and deductibles, and most (in the Tucson area, at least) charge only a single per-visit copayment. Similarly, Medicare beneficiaries with Medigap coverage will not be directly affected by the increases.

Health Insurance Reform: What the New Law Does


Last August, President (and Candidate) Bill Clinton signed the Health Insurance Reform Act, better known as the Kassebaum-Kennedy bill after its two principal sponsors. Much has been written about the effect of the new legislation on the elderly, but most of the focus has been on the bill’s provision making it a crime to transfer assets for the purpose of gaining Medicaid eligibility. Other provisions of the new law have potentially far-reaching effects as well.

The Good News

The primary focus of the new legislation is “insurance portability.” Many workers have found that they are unable to change jobs (even to higher salaries and better positions) because of the inability to secure medical insurance coverage for pre-existing conditions. The new law should eliminate that problem; insurers must cover pre-existing conditions for workers who have maintained continuous medical insurance coverage, and there is a time limit of one year for most pre-existing condition exclusions in any event.

The new law also forces insurance companies to make policies available to smaller employers, and expands the right of workers to continue their insurance programs after leaving employment. Both of these changes are intended to make insurance more widely available to the small-company employee and self-employed workers. This goal is further advanced by increasing the income tax deductibility of health insurance premiums for the self-employed.

The most important new provision for seniors, however, is to make clear that nursing home and home health care costs are fully tax-deductible. While many practitioners advised claiming most or all such long-term care costs as medical deductions in previous years, the law was unclear. The new provision removes any uncertainty and provides clear tax relief to long-term care patients, at least those with incomes high enough to be concerned about taxes.

Similarly, the cost of long-term care insurance will now be an income tax deduction, just as health insurance has been for years. This provision may encourage at least some taxpayers to purchase long-term care insurance, and may help make the industry more robust and effective. Unfortunately, the tax break is only going to apply to those with relatively high incomes, and so will provide little relief for low or middle-income citizens.

The Bad News

Of course, the most dramatic bad news for those faced with long-term care costs is the criminalization of some gifts. Under the new law, anyone who “knowingly and willingly” transfers assets (that is, makes a gift) to qualify for Medicaid may have committed a felony. Even in the face of this somber news there remains a ray of hope, however; the new law is so poorly written and so ambiguous that it seems unlikely to result in any prosecution or administrative action. Still, those who would otherwise consider planning to make themselves eligible for long-term care assistance must now seriously consider the possible punitive effect of the new law.

Even as the new law encourages the development of long-term care insurance as another option for financing nursing home (and home health) care, it also opens the door to a new kind of abuse. Insurers are permitted to sell overlapping and redundant policies, without any requirement of disclosure or review of existing long-term care insurance. Observers who recall the abuses by insurance companies (and agents) selling multiple “Medigap” policies prior to government regulation may well cringe at the prospect of another insurance feeding frenzy, preying on the legitimate concerns and accepting manners of a burgeoning elderly population.

Most observers expect further changes to be debated in Congress again this year. Stay tuned.

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