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How Obamacare Raids the Assets of Low-Income Older Americans

Monday, February 17, 2014 By Yves Smith, Naked Capitalism | News Analysis
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One feature of Obamacare that Lambert has mentioned in passing in his posts is that individuals over 55 who are enrolled in Medicaid are subject to having expenses like being in a long-term care facility, home services, and related drugs and prescriptions clawed back from their estates. A must read post at Paul Craig Roberts details how pernicious and sneaky these provisions are.

The pilfering of assets of low-income Americans results from the interaction of several nasty features, and the article contends none of these were an accident (as in objections were made when the Affordable Care Act was being drafted and were ignored).

The estate recovery feature of Medicaid is pre-existing, from the Omnibus Reconciliation Act of 1993. But it didn’t seem to have much practical effect when it was added because Medicaid had an assets test which meant that people with meaningful assets were not eligible. As the article explains:

OBRA 1993 requires all states that receive Medicaid funding to seek recovery from the estates of deceased Medicaid patients for medical services received in a nursing home or other long-term care institution, home- and community-based services and related hospital and prescription drug services regardless of age. It also allows, at state option, recovery for all services used in the Medicaid state plan at age 55 or older. At minimum, states must pursue recovery from the probate estate which includes property that passes to heirs under state probate law, but states can expand the definition of estate to allow recovery from property that bypasses probate. This means states can use procedures for direct recovery from bank accounts and other funds. The state keeps a running tally, and even if you have a will, your heirs are chopped liver. Estate recovery can be exempted or deferred in certain situations after your death, but the regulations for this are limited and complicated with multitudes of conditions.

Now consider the ACA changes. First is that Obamacare expanded Medicaid eligibility. The ACA ended the asset test.

Second is that enrollment in Medicaid is now mandatory. If you or your family make less that 138% of the Federal poverty level, which in the 48 states and Washington DC would be $16,105 for an individual and $32,913 for a family of four in 2014 you are enrolled unless you fit in a short list of categories, such as being in jail, being in a state that opted out of Medicaid expansion, or being a member of an Indian tribe. You cannot opt out of Medicaid because you object to the estate recovery. You have to pay the penalty if you want out. And there are many routes by which you can become enrolled: by applying on an exchange and having it determine your income is too low to qualify for private insurance; by being in the SNAP (food stamps) database; by having an Obamacare plan but having a fall in income that puts you in the Medicaid category.

So if you have low income (by virtue of unintended early retirement, or even bad performance on your investment portfolio) but a decent level of assets, you can be caught in these provisions and have assets you had hoped to leave to family members instead taken by the government. And before you try arguing that that’s somehow fair, consider that the estate tax exemption is now $5.34 million. As the article points out:

Some might think it fair that those who are enrolled in Medicaid pay back the benefits they received. However, under a mandate that requires all Americans to be covered by health insurance or pay a tax penalty to the IRS, estate recovery is unconscionable since Obamacare offers no other viable option for this income-segment of the population. It also discriminates by age since only Medicaid enrollees who use benefits in the state plan at age 55 and up are subject to estate recovery, but those who use benefits at age 54 or less are home free unless they receive long-term care. Under federal law, discrimination is not permitted on the basis of age, but, obviously, the U.S. government turns a blind eye to to its own law. Perhaps, when states need more money due to the Obamacare expansion of Medicaid, and as the jobless economy continues causing more people to be eligible, age discrimination will be broadened to 45 and up.

But one of the most troubling elements is the lack of adequate disclosure about the estate clawback. Again from the article:

In June 2013 a letter was sent to the Centers for Medicare & Medicaid Services by a well-informed citizen pointing out that the Medicaid Manual prepared by CMS to provide guidance for states contains procedural rules intended to ensure that individuals are informed about estate recovery before they complete the application process.

There are variations in the ways in which states implement estate recovery, depending upon their Medicaid program and state laws. However, Federal law requires all states to incorporate the following protections for Medicaid recipients into the design of their estate recovery program:

— The State should notify Medicaid recipients about the estate recovery program during their initial application for Medicaid eligibility and annual re-determination process.
— The State must notify affected survivors about the initiation of estate recovery and give them an opportunity to claim an exemption based on hardship.
— The State must establish procedures and criteria to waive recovery if it would cause undue hardship.

The letter went on to say that the final CMS Health Insurance Marketplace application (healthcare.gov) notifies applicants about Medicaid’s right to pursue and recover any money from other health insurance, legal settlements or other third parties but does not disclose estate recovery. Since estate recovery is one of the terms of the Medicaid contract, it is deceptive to omit disclosure of this practice. CMS was asked to provide the reasons for this omission.

CMS responded evasively to the concerned citizen’s question. CMS claimed that the Health Insurance Marketplace application at healthcare.gov does not disclose Medicaid’s right to claim against the estate, because CMS wanted to provide flexibility to state Medicaid agencies as to how each one notifies applicants about estate recovery. Some states have developed pamphlets to address common estate recovery questions or devote a portion of a general Medicaid pamphlet to the subject. Some states also post their state plans, perhaps with additional explanatory text, on their web sites.

You can see the Catch-22 here. CMS puts the onus on states to make the notification, but people in the states that refused to set up exchanges apply through healthcare.gov. So consider this:

When you complete the application at healthcare.gov, it is assumed that when you submit it, you are fully informed and agree to all terms. Submission of the application is akin to signing a contract. Your signature not only means you have provided true answers to all the questions under penalty of perjury, but also that you understand and agree to all the rules and conditions. However, by not disclosing estate recovery CMS expunged your right to make an informed decision. Therefore, you may not realize that your estate can become government property because Obamacare forces you into Medicaid if your income is less than the threshold for a subsidized premium.

And here’s more state/Federal Catch-22:

Note that Obamacare applications contain a section titled Renewal of Coverage in Future Years. An applicant can agree to allow an exchange to use income data, including information from tax returns to automatically renew eligibility for 1, 2, 3, 4 or 5 years, or applicants can check “Do not use information from tax returns to renew my coverage.” Exchanges have access to the federal data hub which keeps track of your income and other personal data. If you gave unfettered access to your data by choosing auto-renewal, they have all the information needed to determine whether you are still eligible for your subsidized policy or should be moved into Medicaid.

The letter sent to CMS in June 2013 also asked about estate recovery disclosure in cases where coverage is auto-renewed during the annual redetermination process, when people are shifted from a subsidized plan to Medicaid due to a decrease in income or other change in circumstance, and when people are auto-enrolled on the presumption that they are eligible according to a database such as SNAP (food stamps) or by a hospital or health care center. A similar letter was sent to the Massachusetts Office of Medicaid.

The federal procedural rules on estate recovery say the state should notify Medicaid recipients about the estate recovery program during the annual redetermination process, but according to the Massachusetts Office of Medicaid, you don’t need to be informed about estate recovery during the redetermination process because you presumably read about this on the original application you filled out and submitted.

If you submitted an application that did not disclose estate recovery, it cannot be presumed that you are aware of estate recovery, because notification was not on the application. Thus, the redetermination procedure is one more example of the failure to disclose.

If you are bumped into Medicaid from a subsidized plan due to a change in your circumstances, the Massachusetts Office of Medicaid believes that you don’t need to be informed about estate recovery because you presumably read about this however many years ago when you filled out the original application. You will simply be sent a notice that you are now in Medicaid, and the notice will refer you to the Medicaid Member Booklet for information on the rules. If you obtain and read the booklet, you can learn that you may be subject to estate recovery. But don’t expect to receive a Medicaid Member Booklet with your notice, because “It would be cost prohibitive to include a Member Booklet with every notice. Instead, every notice includes information on how to contact Customer Service with any questions, including to request a copy of the Member Booklet.”

If these issues may be important to you or anyone in your family, I strongly urge you to read the post in full. It contains a great deal more important information. And it reminds us of how this is just another way to loot the public:

Obamacare was not written for the benefit of the poor and uninsured. It was written for the profits of the insurance companies giving them millions of new customers subsidized by U.S. taxpayers. The business of America is business. Private insurance company CEOs receive multi-million dollar pay packages, while under Obamacare low-income earners and the poor have to give up their homes and other assets in order to receive medical care.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Yves Smith

Yves Smith has been in and around finance for more than 30 years as an investment banker, management consultant to financial institutions across a large range of wholesale banking and trading markets businesses, and a corporate finance adviser. She has also written for The New York Times, Al Jazeera, the New Republic, Salon, the Conference Board Review, the Australian Financial Review and other financial publications. Her TV appearances include NBC News, CNBC, Fox Business, PBS, Bill Moyers, The Real News Network, Democracy Now!, Russia TV, ABC (Australia), Al Jazeera and BNN (Canada). Follow her on Twitter: @yvessmith.

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How Obamacare Raids the Assets of Low-Income Older Americans

Monday, February 17, 2014 By Yves Smith, Naked Capitalism | News Analysis
  • font size decrease font size decrease font size increase font size increase font size
  • Print

One feature of Obamacare that Lambert has mentioned in passing in his posts is that individuals over 55 who are enrolled in Medicaid are subject to having expenses like being in a long-term care facility, home services, and related drugs and prescriptions clawed back from their estates. A must read post at Paul Craig Roberts details how pernicious and sneaky these provisions are.

The pilfering of assets of low-income Americans results from the interaction of several nasty features, and the article contends none of these were an accident (as in objections were made when the Affordable Care Act was being drafted and were ignored).

The estate recovery feature of Medicaid is pre-existing, from the Omnibus Reconciliation Act of 1993. But it didn’t seem to have much practical effect when it was added because Medicaid had an assets test which meant that people with meaningful assets were not eligible. As the article explains:

OBRA 1993 requires all states that receive Medicaid funding to seek recovery from the estates of deceased Medicaid patients for medical services received in a nursing home or other long-term care institution, home- and community-based services and related hospital and prescription drug services regardless of age. It also allows, at state option, recovery for all services used in the Medicaid state plan at age 55 or older. At minimum, states must pursue recovery from the probate estate which includes property that passes to heirs under state probate law, but states can expand the definition of estate to allow recovery from property that bypasses probate. This means states can use procedures for direct recovery from bank accounts and other funds. The state keeps a running tally, and even if you have a will, your heirs are chopped liver. Estate recovery can be exempted or deferred in certain situations after your death, but the regulations for this are limited and complicated with multitudes of conditions.

Now consider the ACA changes. First is that Obamacare expanded Medicaid eligibility. The ACA ended the asset test.

Second is that enrollment in Medicaid is now mandatory. If you or your family make less that 138% of the Federal poverty level, which in the 48 states and Washington DC would be $16,105 for an individual and $32,913 for a family of four in 2014 you are enrolled unless you fit in a short list of categories, such as being in jail, being in a state that opted out of Medicaid expansion, or being a member of an Indian tribe. You cannot opt out of Medicaid because you object to the estate recovery. You have to pay the penalty if you want out. And there are many routes by which you can become enrolled: by applying on an exchange and having it determine your income is too low to qualify for private insurance; by being in the SNAP (food stamps) database; by having an Obamacare plan but having a fall in income that puts you in the Medicaid category.

So if you have low income (by virtue of unintended early retirement, or even bad performance on your investment portfolio) but a decent level of assets, you can be caught in these provisions and have assets you had hoped to leave to family members instead taken by the government. And before you try arguing that that’s somehow fair, consider that the estate tax exemption is now $5.34 million. As the article points out:

Some might think it fair that those who are enrolled in Medicaid pay back the benefits they received. However, under a mandate that requires all Americans to be covered by health insurance or pay a tax penalty to the IRS, estate recovery is unconscionable since Obamacare offers no other viable option for this income-segment of the population. It also discriminates by age since only Medicaid enrollees who use benefits in the state plan at age 55 and up are subject to estate recovery, but those who use benefits at age 54 or less are home free unless they receive long-term care. Under federal law, discrimination is not permitted on the basis of age, but, obviously, the U.S. government turns a blind eye to to its own law. Perhaps, when states need more money due to the Obamacare expansion of Medicaid, and as the jobless economy continues causing more people to be eligible, age discrimination will be broadened to 45 and up.

But one of the most troubling elements is the lack of adequate disclosure about the estate clawback. Again from the article:

In June 2013 a letter was sent to the Centers for Medicare & Medicaid Services by a well-informed citizen pointing out that the Medicaid Manual prepared by CMS to provide guidance for states contains procedural rules intended to ensure that individuals are informed about estate recovery before they complete the application process.

There are variations in the ways in which states implement estate recovery, depending upon their Medicaid program and state laws. However, Federal law requires all states to incorporate the following protections for Medicaid recipients into the design of their estate recovery program:

— The State should notify Medicaid recipients about the estate recovery program during their initial application for Medicaid eligibility and annual re-determination process.
— The State must notify affected survivors about the initiation of estate recovery and give them an opportunity to claim an exemption based on hardship.
— The State must establish procedures and criteria to waive recovery if it would cause undue hardship.

The letter went on to say that the final CMS Health Insurance Marketplace application (healthcare.gov) notifies applicants about Medicaid’s right to pursue and recover any money from other health insurance, legal settlements or other third parties but does not disclose estate recovery. Since estate recovery is one of the terms of the Medicaid contract, it is deceptive to omit disclosure of this practice. CMS was asked to provide the reasons for this omission.

CMS responded evasively to the concerned citizen’s question. CMS claimed that the Health Insurance Marketplace application at healthcare.gov does not disclose Medicaid’s right to claim against the estate, because CMS wanted to provide flexibility to state Medicaid agencies as to how each one notifies applicants about estate recovery. Some states have developed pamphlets to address common estate recovery questions or devote a portion of a general Medicaid pamphlet to the subject. Some states also post their state plans, perhaps with additional explanatory text, on their web sites.

You can see the Catch-22 here. CMS puts the onus on states to make the notification, but people in the states that refused to set up exchanges apply through healthcare.gov. So consider this:

When you complete the application at healthcare.gov, it is assumed that when you submit it, you are fully informed and agree to all terms. Submission of the application is akin to signing a contract. Your signature not only means you have provided true answers to all the questions under penalty of perjury, but also that you understand and agree to all the rules and conditions. However, by not disclosing estate recovery CMS expunged your right to make an informed decision. Therefore, you may not realize that your estate can become government property because Obamacare forces you into Medicaid if your income is less than the threshold for a subsidized premium.

And here’s more state/Federal Catch-22:

Note that Obamacare applications contain a section titled Renewal of Coverage in Future Years. An applicant can agree to allow an exchange to use income data, including information from tax returns to automatically renew eligibility for 1, 2, 3, 4 or 5 years, or applicants can check “Do not use information from tax returns to renew my coverage.” Exchanges have access to the federal data hub which keeps track of your income and other personal data. If you gave unfettered access to your data by choosing auto-renewal, they have all the information needed to determine whether you are still eligible for your subsidized policy or should be moved into Medicaid.

The letter sent to CMS in June 2013 also asked about estate recovery disclosure in cases where coverage is auto-renewed during the annual redetermination process, when people are shifted from a subsidized plan to Medicaid due to a decrease in income or other change in circumstance, and when people are auto-enrolled on the presumption that they are eligible according to a database such as SNAP (food stamps) or by a hospital or health care center. A similar letter was sent to the Massachusetts Office of Medicaid.

The federal procedural rules on estate recovery say the state should notify Medicaid recipients about the estate recovery program during the annual redetermination process, but according to the Massachusetts Office of Medicaid, you don’t need to be informed about estate recovery during the redetermination process because you presumably read about this on the original application you filled out and submitted.

If you submitted an application that did not disclose estate recovery, it cannot be presumed that you are aware of estate recovery, because notification was not on the application. Thus, the redetermination procedure is one more example of the failure to disclose.

If you are bumped into Medicaid from a subsidized plan due to a change in your circumstances, the Massachusetts Office of Medicaid believes that you don’t need to be informed about estate recovery because you presumably read about this however many years ago when you filled out the original application. You will simply be sent a notice that you are now in Medicaid, and the notice will refer you to the Medicaid Member Booklet for information on the rules. If you obtain and read the booklet, you can learn that you may be subject to estate recovery. But don’t expect to receive a Medicaid Member Booklet with your notice, because “It would be cost prohibitive to include a Member Booklet with every notice. Instead, every notice includes information on how to contact Customer Service with any questions, including to request a copy of the Member Booklet.”

If these issues may be important to you or anyone in your family, I strongly urge you to read the post in full. It contains a great deal more important information. And it reminds us of how this is just another way to loot the public:

Obamacare was not written for the benefit of the poor and uninsured. It was written for the profits of the insurance companies giving them millions of new customers subsidized by U.S. taxpayers. The business of America is business. Private insurance company CEOs receive multi-million dollar pay packages, while under Obamacare low-income earners and the poor have to give up their homes and other assets in order to receive medical care.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Yves Smith

Yves Smith has been in and around finance for more than 30 years as an investment banker, management consultant to financial institutions across a large range of wholesale banking and trading markets businesses, and a corporate finance adviser. She has also written for The New York Times, Al Jazeera, the New Republic, Salon, the Conference Board Review, the Australian Financial Review and other financial publications. Her TV appearances include NBC News, CNBC, Fox Business, PBS, Bill Moyers, The Real News Network, Democracy Now!, Russia TV, ABC (Australia), Al Jazeera and BNN (Canada). Follow her on Twitter: @yvessmith.