Update on Medicaid and the status of DRA in Illinois

Our office continues to monitor the status of the proposed changes to the Medicaid eligibility rules in Illinois, which are currently pending before the Joint Committee on Administrative Rules (J-CAR). We have been advised that the Department of Health Care and Family Services has made certain revisions to the rules, since filing the Second Notice regarding the proposed rule changes to implement the changes to the Medicaid eligibility rules mandated by the federal Deficit Reduction Act of 2005 (DRA). The actual changes, however, are not available for review. Pursuant to information that was shared with the public at the April 12, 2011 J-CAR meeting, it appears that the rules as proposed still exceed the changes mandated by the DRA. J-CAR has continued the consideration of these rule changes to its May 10, 2011 meeting (time and location to be determined). On behalf of our clients and other seniors, we are encouraging the members of J-CAR to vote to prohibit the proposed rule changes as currently drafted. We are, likewise, encouraging others who are concerned that the proposed rules, as drafted, exceed the mandates of the DRA and unfairly penalize senior citizens in Illinois to contact the members of J-CAR and make your voices heard. For additional information as to how to contact members of J-CAR by telephone, fax, or mail, please contact our office at 630-844-0065; or by email at cbr@mickeywilson.com.

House Budget Cutters Prescribe Radical Surgery for Medicare, Medicaid

House Budget Committee Chairman Paul Ryan (R-WI) has proposed a budget that would radically reshape both the Medicare and Medicaid programs and shift more costs to seniors and people with disabilities. The plan may well become the Republican Party’s de facto platform in 2012.

The proposed budget, aimed at shrinking the nation’s deficit as well as the size of government, slashes $1.43 trillion from Medicare and Medicaid over the next 10 years, in part by bringing the curtain down on the popular Medicare program as we know it and by ending Medicaid’s guarantee of nursing home benefits for low-income seniors.

Here are the broad outlines of the proposed changes to Medicare and Medicaid and their impact on seniors. For more details from Kaiser Health News, click here.

Medicare: Starting in 2022, people who turn 65 or who qualify for Medicare because of a disability would not enroll in the current Medicare program but instead would receive a “premium support payment” (what many call a “voucher”) to help them purchase private health insurance. Also beginning in 2022, the age of eligibility for Medicare would increase by two months a year until it reaches 67 in 2033. Because the plan also repeals the new health reform law’s coverage provisions, many 65- and 66-year-olds would be uninsured.

Under the Ryan plan, future seniors would pay far more for health coverage than do today’s beneficiaries, according to an analysis by the nonpartisan Congressional Budget Office (CBO). For example, by 2030 a typical 65-year-old would pay 68 percent of the total cost of her coverage, compared to the 25 percent she would pay under current law, the CBO calculates. In 2022, the typical 65-year-old Medicare beneficiary would be spending $12,500 a year out of pocket in today’s dollars.

This new Medicare scheme would apply to anyone who is age 54 or younger at the end of 2011.

Medicaid: The House Republican proposal would turn Medicaid funding to states into a “block grant,” something proposed by George W. Bush in 2003 and by Newt Gingrich in 1995. Rather than the current system, under which the federal government matches every dollar that states spend on Medicaid, under the House Republican plan starting in 2013 states would receive a fixed amount every year, which would only increase with population growth and the overall cost of living. The result, according to the CBO’s analysis, is that by 2022 federal funding for Medicaid would fall 35 percent below what the federal government now is projected to provide states, and the shortfall would be 49 percent by 2030.

States would make up for this dramatic loss in funding by restricting eligibility for Medicaid (including nursing home coverage), reducing covered services, and cutting already-low payment rates to health care providers. The result would be more uninsured or underinsured citizens, as well as doctors, hospitals, and nursing homes refusing to take Medicaid patients. It would be easier for states to make these changes than under current law because the Ryan plan would give states additional flexibility in designing their Medicaid programs.

“The House Republican budget proposal should be accompanied by a ‘Grandma Beware!’ sign,” said Ron Pollack, executive director of Families USA, in a statement. “The proposal will inevitably result in seniors losing the nursing home and other long-term care they need at a time when they are most frail.”

For the April 11, 2011, New York Times article “Republican Medicare Plan Could Shape 2012 Races,” click here.

To discuss elder law issues with an attorney, please email the Elder Law Center or call 630-844-0065. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

AARP Sues Government Over Reverse Mortgage Foreclosures

Charging that reverse mortgage borrowers were caught in what amounts to a regulatory bait and switch, the AARP’s legal arm is suing the Department of Housing and Urban Development (HUD) on behalf of three now-deceased borrowers’ surviving spouses who are facing imminent foreclosure and eviction from their homes.
The case involves the spouses of individuals who took out Home Equity Conversion Mortgage (HECM), which are the most widely available reverse mortgage and are administered by HUD. A reverse mortgage allows homeowners who are at least 62 years old to borrow money on their houses. The loans do not have to be repaid until the last surviving borrower dies, sells the home, or permanently moves out.

The borrowers in the AARP case all died, leaving their spouses, who were not listed on the loan documents, living in the mortgaged homes. Because of the housing downturn, the homes are now worth less than the balance due on the reverse mortgage. None of the three spouses — residents of Indiana, New York and Maryland — can obtain loans for more than their homes are worth and so are facing eviction.

Since 1989, HUD rules governing reverse mortgages have stated that a borrower or heirs would never owe more than the home was worth at the time of repayment. But at the end of 2008, the Bush administration abruptly changed this policy and said that an heir — including a surviving spouse who was not named on the mortgage — must pay the full mortgage balance to keep the home, even it if exceeds the value of the property. This, AARP says, violates existing contracts between reverse mortgage borrowers and lenders.

“HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people,” said Jean Constantine-Davis, a senior lawyer with the AARP Foundation, the organization’s charitable unit.

A spouse might not be named on the mortgage for a number of reasons: one spouse may have taken out the reverse mortgage before the marriage, or one spouse may be under age 62 and ineligible, or, more likely, lenders often encourage the younger spouse not to be named as a borrower because then the loan amount can be bigger. AARP notes that, perversely, under HUDs current rule a stranger can purchase the property for its current appraised value, but a surviving spouse cannot. The policy also negates a key purpose for which borrowers pay for insurance, AARP adds, pointing out that reverse mortgage borrowers have always paid insurance premiums to protect against going “underwater” — owing more than their homes are worth.

The suit charges that HUD is ignoring another provision of the HECM program that protects a surviving spouse from being arbitrarily displaced from the home upon the death of the borrower.

“This is shameful and we intend to make HUD honor the representations and promises they made to borrowers when they signed up for these government-insured loans,” Steven A. Skalet, of Mehri & Skalet, the law firm pursuing the case for the AARP Foundation. The case was filed in Federal District Court for the District of Columbia. HUD had no comment on the pending litigation.

Nearly one-quarter of all mortgaged homes are underwater, according to CoreLogic, a housing data firm.

For AARP’s news release on the lawsuit, click here.

For a New York Times article on the case, click here. For excellent analyses by the Times and Reuters, click here and here.

For more on reverse mortgages, click here.