Paying Back Medicaid
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LEE HOCHBERG: Walter Kluss and his sister, Barbara Rossos, grew up in this small home in Portland. Kluss never moved out, living with and helping take care of his mother for almost 50 years.
BARBARA ROSSOS: She enjoyed having a bouquet of roses in the house, especially from her yard.
LEE HOCHBERG: Their memories of their mother’s last years are pained, as were their experiences with the federal Medicaid system. Seventy-one-year-old Minnie Kluss suffered two major strokes. Her family placed her in a nursing home, and her life savings went quickly.
BARBARA ROSSOS: We applied for Medicaid because we did not have the finances to take, you know, to pay for all of her bills.
LEE HOCHBERG: Rossos and Kluss thought Medicaid, the government health care program for the poor, would cover the cost of their mother’s care, but they got a surprise-a letter from the state demanding Kluss pay rent if he wanted to continue living in the house he’d lived in since childhood. The rent would go to the state to reimburse it for paying his mother’s nursing home bill.
WALTER KLUSS: I didn’t like it, but, you know, what are you going to do? It’s pretty hard to fight the state.
LEE HOCHBERG: He paid Oregon $300 a month for the next two years. After his mother died in 1996 came another letter docking her estate for more than $62,000, the rest of the Medicaid money it had spent on her. The only asset in Minnie Kluss’s estate was the family house. The state staked claim to it. To pay the claim and keep the house, Walter Kluss had to take out a loan and buy it from the state.
WALTER KLUSS: I don’t think the government’s got a heart at all. A person’s home should never be in jeopardy in something like this.
LEE HOCHBERG: What Oregon did is perfectly legal. Since 1949, the state has demanded families reimburse it for aid it’s provided for long-term care. And now other states are demanding the same thing. President Clinton’s 1993 federal budget mandated every state try to recoup Medicaid money spent on long-term care. The head of Oregon’s recovery program emphasizes Medicaid assistance is a loan, not an entitlement.
DAN KAPLAN, Oregon Estate Recovery Chief: At the time that the client is incurring the cost of the services she’s not in a position to make the payment because her assets are tied up, generally in a house. However, after death, those assets, which are hers, become available and be used to defray the cost of her care.
LEE HOCHBERG: Long-term care accounts for $57 billion out of the $165 billion federal Medicaid budget. Kaplan says the more money states can recover, the more there will be other Medicaid recipients.
DAN KAPLAN: If we didn’t go after those assets, we would have to either come up more general fund or income tax money to run the program, or conversely, you would have to serve fewer people who needed long-term care.
LEE HOCHBERG: Oregon is considered the state with the most aggressive recovery program and lawyer Doug Fellows, one of the state’s most aggressive collectors. Typically, he goes after homes of the deceased; they’re the largest asset elders have been allowed to keep and still qualify for Medicaid. But he also tries to recover trusts and bank accounts. He says some people purposefully spend down their money, giving it to family members, and then unfairly turn to Medicaid to pay for their long-term care.
DOUG FELLOWS, Lawyer: There are people who would rather take their parents’ assets and go buy a new car or a new pickup and let the taxpayers pay for the person’s care. You know, it becomes a question of relative fairness, doesn’t it?
LEE HOCHBERG: Yet, these studies from the Health Care Financing Administration find the majority of people have not purposely divested or sheltered their assets prior to applying for Medicaid. Most simply go broke paying nursing home bills that can run as high as $6,000 per month. Portland elder law attorney Tim Nay says recovering money from their estates is cruel to their heirs.
TIM NAY, Lawyer: They’re absolutely overwhelmed with what’s going on. Although the Medicaid application in most states has a small statement about a right to recover, it’s almost unnoticeable in the application form.
LEE HOCHBERG: On Oregon’s application the warning shows up on page 3 of the 10-page form.
TIM NAY: Most people don’t really understand what that means, and the impact only hits them after Mom has died.
LEE HOCHBERG: Nay says the system disproportionately impacts middle class families, who often don’t have attorneys to advise them on estate matters.
TIM NAY: We do horrible things to very vulnerable people, particularly middle class people. They’re the ones that fare the worst. They’re the ones that are targeted.
LEE HOCHBERG: Portland elder law attorney Cindy Barrett says there are ways to ease the bite. She tells clients to make advanced plans to transfer their savings to family members who provide at-home care for them.
CINDY BARRETT, Lawyer: If they would like to preserve that home for that child, or some other assets for that child, look at selling bits and pieces in return for services over the years as you go along.
LEE HOCHBERG: Barrett says elders should consider purchase of long-term care insurance, or a life insurance policy which pays beneficiaries on death but is exempt from recovery. But even if there are ways to keep recovery to a minimum, critics say the complicated system underscores a hole in the nation’s patchwork health care system. They ask why a patient with an acute illness can undergo a $75,000 operation and not owe the government a penny, but those whose medical need is long-term care have to jump hoops to avoid owing a fortune.
TIM NAY: There’s no commandment that Moses came down from the mountain with saying thou shalt lose the shirt for long-term care.
DOUG FELLOWS: If we want to have cradle to grave health care and long-term health care and so on, that’s fine. The problem is right now the way our system has worked for years is that people are supposed to pay for their own long-term care.
LEE HOCHBERG: With recovery programs growing more ambitious, people like Carmen Perkins, who have been forced to pay large sums, say there should at least be a better way to arbitrate disputes. Carmen Perkins’ mother-in-law, Hazel Perkins, and her second husband, Lloyd Gooding, died within months of each other in 1993 and ’94. Gooding had been on Medicaid. After their deaths, Oregon tried to recoup Gooding’s Medicaid costs from Hazel Perkins’ estate. But Perkins had kept her property separate from Gooding’s, so by law, the state had no legal claim on it. Nonetheless, it began collecting $425 a month from the Perkins estate, money Carmen Perkins would have inherited.
CARMEN PERKINS: We did everything we could. There was nothing else we could do but pay it. So we did.
LEE HOCHBERG: Carmen Perkins needed the money. Her husband, David, was stricken with Lou Gehrig’s Disease, and the couple was spending thousands on medical supplies. The state took $14,000 over four years and the family sought legal help.
CARMEN PERKINS: I don’t know how people that are just plain law-abiding citizens that are hard working can fight a government.
LEE HOCHBERG: Only when attorney Nay threatened a class-action suit to open files on all of Oregon’s recovery cases did the state back down. This March it mailed the family this letter and a $14,000 check. David Perkins died shortly afterwards. The state’s Dan Kaplan says the government made no mistake; the Perkins family just hadn’t explained clearly that Hazel Perkins’ money was hers, not her second husband’s.
DAN KAPLAN: The heirs didn’t help us by providing the information that made it clear.
LEE HOCHBERG: The family didn’t communicate it to you clearly enough?
DAN KAPLAN: Right.
LEE HOCHBERG: Did the state err?
DAN KAPLAN: The state didn’t have all the information that it needed.
TIM NAY: They say, you owe it, you pay it, and if you don’t, we’ll go after it in court, plain and simple. It’s probably the ultimate debt collection entity in the world.
LEE HOCHBERG: Attorney Nay estimates one in four state claims is actually invalid and says state should establish independent arbiters to mediate disputes. Kaplan calls the allegation outrageous.
DAN KAPLAN: We file claims based on the information we have at the time the client dies. Lots of times through the estate’s claim process we get more information, and we very often withdraw our claims. And I wouldn’t say that those claims that we initially filed are invalid when we withdraw them when we get more information.
LEE HOCHBERG: Congress approved a tax deduction in 1996 to help people afford long-term care insurance. But there’s been no effort to regulate the estate recovery process itself.