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Wednesday, May 12, 2004 - Page updated at 12:00 AM

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Medicaid law saves state less than was expected

Seattle Times staff reporter

The cost of long-term care


Medicaid is a state-federal program for the poor that pays for medical services, including long-term care.

Last year, it paid an average of $1,068 per person a month for nearly 34,000 state Medicaid recipients cared for in their own homes, adult family homes or assisted-living facilities. That's a total of $432 million for the year.

Nursing-home care is even more expensive. The nearly 13,000 Medicaid recipients in nursing homes cost an average of $3,128 per person each month a total of $486 million for the year.

Source: state Department of Social and Health Services

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A new state law that made it tougher for a married person to qualify for Medicaid payments for long-term care is projected to save taxpayers millions of dollars less than originally thought.

The estimated savings through fiscal year 2006 have been slashed from $9.5 million to $3.6 million, probably because more people than expected are still finding ways to qualify for Medicaid, state Department of Social and Health Services officials say.

The law also creates a financial incentive — one the measure's co-sponsors did not anticipate — for some couples seeking Medicaid support to choose more-expensive nursing-home care over cheaper alternatives such as care in their own homes.

That flies in the face of the state's long-held goal to encourage people to receive long-term care in less-costly settings than nursing homes when appropriate. Last year, the state and federal government paid about three times more per person for Medicaid recipients in nursing homes than for those in community settings.

The new law, opposed by several consumer- and senior-advocacy groups, went into effect in August.

It aimed to reduce the amount of assets a healthy spouse can keep — from $92,760 this year to $40,000, not counting a home, car and a few other essentials — and still have Medicaid pay for the ailing spouse's care.

The intent was to slow Medicaid's growth and take care of the neediest people first.

"All it's really done is hurt the poorest of the applicant pool and hasn't affected those couples with more resources," said Bill Hickman, chairman of the elder-law section of the Washington State Bar Association.

The bill's co-sponsors say they were unaware of this potentially uneven impact.

"I don't know how we let that one happen. That's news to me," said Rep. Bill Fromhold, D-Vancouver, who co-sponsored the bill with Rep. Helen Sommers, D-Seattle. "Just from a personal viewpoint, I have no interest in creating an unequal playing field."

State financial analysts estimated last year that, because of the cutback in allowable spousal assets, 687 fewer people would qualify for Medicaid. Now they estimate that only 335 fewer people will qualify.

That's because married people have been more determined than anticipated in taking advantage of the remaining legal means to become eligible for Medicaid, say officials from the Department of Social and Health Services.

Applicants still can give away up to $5,300 a month to spend down assets faster and become Medicaid-eligible. They also can convert assets to an irrevocable annuity that pays out a monthly income based on their life expectancy. That income isn't required to be used for the ailing spouse's care.

Critics say the cut in allowable assets might force the healthier spouse onto public assistance sooner because the interest earned on $40,000 isn't enough to supplement Social Security income and provide a decent standard of living.

And though it's still rare, elder-law attorneys report more couples now are considering divorce as a last resort to protect assets, thanks to the impact of the new law and other recent state efforts to cut Medicaid costs, said Hickman, of the State Bar.

"I can't put a number on it, but I'm quite sure you'll see more," he said.

Some couples also could feel forced to choose a more-expensive nursing home simply to save financial resources for the healthier spouse.

Federal law requires states to protect some level of the healthy spouse's financial well-being. Medicaid-eligibility criteria take into account the value of assets excluding a home, household goods, car and burial costs.

The federal government allows states to decide within a range the value of assets the healthier spouse can keep. The tightest limit this year is $18,552; the maximum is $92,760. Washington state's limit is $40,000.

But federal law, which trumps state law, also says that, at the time an ill spouse applying for Medicaid enters a nursing home, the healthy spouse can keep half of the couple's assets, up to the $92,760 limit.

That federal law does not apply to someone whose spouse applies for Medicaid but chooses care in a less-costly community setting, such as in their own home, an adult family home or an assisted-living facility. In those cases, the state's standard kicks in and the healthy spouse can keep only $40,000.

So the law favors wealthier couples who choose nursing-home care.

Fromhold says the impact of the new lower limit deserves another look. "You just don't pass laws and then ignore the consequences," he says.

Marsha King: 206-464-2232 or mking@seattletimes.com

Copyright © 2004 The Seattle Times Company

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