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«Ethical And Public Policy Considerations Related To Medicaid Planning By JOHN B. PAYNE,* Allegheny County Member of the Pennsylvania Bar and Michigan ...»

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Ethical And Public Policy

Considerations Related

To Medicaid Planning

By JOHN B. PAYNE,* Allegheny County

Member of the Pennsylvania Bar and Michigan Bar



QUALIFYING A NURSING HOME FOR CARE........................ 143



CLIENT’S MEDICAL PAYMENTS FOR PLANNING....................... 144 NURSING CARE................... 142 JUDGE’S ETHICAL OR MORAL VIEWS LONG-TERM CARE CONSUMER’S NOT RELEVANT................... 148 JUSTIFICATION TO SEEK GREATEST CONCLUSION...................... 150 ABSTRACT This paper discusses moral, ethical, and public-policy issues regarding Medicaid planning—transferring or converting assets of a long-term care consumer to create Medicaid eligibility. The author argues that it is not unethical to qualify a nursing-home resident for Medicaid by means of asset transfers where the resident will receive the same service under Medicaid as he or she would receive as a private-pay patient. The author further contends that an applicant’s lawyer would have an ethical and moral obligation to the client and the client’s family to maximize Medicaid payments for nursing care where it is clear that the client would want Medicaid to cover the cost of care. Finally, the author urges that the state’s or commonwealth’s fiscal concerns should not be given priority by a court above a Medicaid candidate’s legitimate desire to preserve his or her wealth in the face of ruinously expensive nursing home costs.

* Member of the Pennsylvania Bar and Michigan Bar. John B. Payne, Attorney, established his practice in 1983, after graduating cum laude from Detroit College of Law. In 1988 he received an LL.M. in Taxation at Wayne State University. He has been licensed in Pennsylvania since 1986 and maintains offices in Michigan and Pennsylvania. He is Secretary of the Elder Law and Disability Rights Council of the State Bar of Michigan and Chair of the Allegheny County Elder Law Committee. He is a member of the Pennsylvania Supreme Court Elder Law Task Force.



Much of Elder Law practice is concerned with long-term care: finding the best living arrangement when older clients must downsize their habitation, protecting the resident’s or patient’s rights in residential and care facilities, advising clients and their families about hiring, employing and supervising care providers, and protecting and balancing the fiscal interests of clients, their families and the state or commonwealth in long-term care financing decisions. A core component of this last area of practice is what is called “Medicaid planning,” transferring or converting assets of a long-term care consumer to create Medicaid eligibility.

There are six constituencies who are involved in or Transferring or affected by planning steps that advance the point at converting assets which a nursing home resident becomes eligible for

government assistance with the cost of care:

of a long-term care consumer to create • Legislators and public welfare administrators, who are responsible for fiscal program integrity;

Medicaid eligibility

• public welfare caseworkers, who implement the raises delicate law and policy promulgated by the first conpublic-policy and stituency;

ethical issues. • nursing facility owners and administrators, whose profits are affected by the mix of private- and government-paid residents;

• lawyers, who apply the laws and rules to their clients’ circumstances;

• judges, who decide disputes between various combinations of the above classes; and

• commentators, who analyze the literature generated by all of the above and try to both spot and affect trends.

This paper is primarily intended to be of interest to lawyers and judges, to assist them in analyzing the issues implicit in Medicaid cases and controversies. Arguments on pages 142 and 143 may also be of interest to legislators and administrators in considering how to make Medicaid more accessible to those who need it, while maintaining program integrity.

Katherine C. Pearson’s seminal article in the January 2005 issue of the Pennsylvania Bar Association Quarterly, “The Lawyer’s Ethical Considerations in Medicaid Planning for the Elderly: Representing Smith and Jones,”1 examines the ethical questions that are internal to the attorney-client relationship. She explores the questions that arise in determining the identity of the “client” and sorting out the conflicting interests of the client and family members who act as surrogate decisionmakers. However, there is another area of ethical, moral and policy conflict that she does not address: When is it appropriate to impoverish the client to qualify for

Medicaid and other government benefits? This implicates a bundle of knotty issues:

• ethical hurdles to qualifying a nursing home resident for a welfare program;

• the lawyer’s obligation to maximize Medicaid payments for the benefit of the claimant’s family; and

1. http://law.psu.edu/_file/Pearson/LawyersEthicalConsiderationsInMedicaidPlanningJan2005.pdf.

Ethical And Public Policy Considerations Related To Medicaid Planning

• whether the court has a duty to protect the Medicaid program and the public fisc.


Qualifying a nursing home resident for Medicaid is often criticized as resulting in substandard care. Where planning for Medicaid eligibility would result in a degraded quality of life or restricted options in placement, there is a valid ethical objection to planning that would impoverish the client. This would be more likely where the client is not presently a nursing-home resident or where there is a reasonable likelihood of rehabilitation and return to a less restrictive environment.

However, in most cases the nursing care would be the same, without regard to source of payment.

In an unusual case, an adult protective services worker originated a complaint in 2007 on Mabel Mirabel after an Elder Law attorney qualified her for Medicaid using a spousal-annuity trust to protect marital assets for her husband. The APS worker stated that the woman was being abused because she was in a Medicaid four-bed ward instead of a private room, as a private-pay resident. Ironically, a geriatric-care consultant who evaluated the woman stated that she was better off in the four-bed ward because the constant activity kept her mind active. Six years later she was still in the four-bed ward and doing well there. If she had been in a private room she would have quickly exhausted the funds, unless she was sooner bored to death.

The APS worker’s attempt to establish a case of neglect was not merely misguided, it was legally wrong. Considering that A) every Medicaid bed is certified by the state as meeting the standards for nursing care; and B) facilities are legally prohibited from discriminating against Medicaid recipients, it would be disingenuous to argue that qualifying a resident for Medicaid is abusive.

Federal law clearly requires facilities to “establish and maintain identical policies and practices regarding transfer, discharge, and the provision of services... regardless of source of payment.”2 Furthermore, admission decisions may not be grounded on Medicaid eligibility or future eligibility.3 The federal Medicaid regulatory agency, Centers for Medicare and Medicaid Services (CMS), prohibits facilities

from requiring a period of private-pay as a prerequisite to admission:

Facilities may not accept additional payment from residents or their families as a prerequisite to admission or to continued stay in the facility. Additional payment includes deposits from Medicaid-eligible residents or their families, or any promise to pay private rates for a specified period of time.4 Despite the legal mandate of equal access to quality care, there are situations where a particular long-term care candidate who must rely only on Medicaid will have a difficult time securing a preferred placement. However, with the assistance

2. Linton v. Commissioner, 65 F3d 508 (6th Cir. 1995); 42 USCA §1396r(c)(4).

3. 42 USCA §1396r(c)(5).

4. Centers for Medicare and Medicaid Services Transmittal 19, June 1, 2006, SUBJECT: Revisions to Appendix PP – Guidance to Surveyors for Long Term Care Facilities, interpreting 42 CFR §483.12(d)(3).

www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R19SOMA.pdf (Accessed July 23, 2013).

142 PENNSYLVANIA BAR ASSOCIATION QUARTERLY | October 2013 of an attorney those cases are rare. More commonly, the placement follows a threeday inpatient hospital stay and the patient transfers to a skilled-care facility for rehabilitation. Once there, the patient has the right to remain in the facility as a Medicaid resident. Even when the patient is in a bed that is dually-certified for Medicare and Medicaid, a facility may falsely tell the family that there is a waiting list for Medicaid. In those cases, the Medicaid-planning attorney plays an important role in protecting the patient’s rights.

Nursing facilities that discriminate based on source of payment present a separate problem. In this paper, the discussion is limited to Medicaid-planning cases where the resident will be in the same facility, receiving equivalent services despite the transition from Medicare or private pay to Medicaid. Where that is the case, there would be no ethical bar to qualifying a client for Medicaid by means of legal divestment.



Here is what Hon. Lawrence J. Bracken, of the New York Appellate Division, has to

say about planning to get the best possible result from a punitive, complex program:

The complexities of the Medicaid eligibility rules.... should never be allowed to blind us to the essential proposition that a man or a woman should normally have the absolute right to do anything that he or she wants to do with his or her assets, a right which includes the right to give those assets away to someone else for any reason or for no reason.

***** [N]o agency of the government has any right to complain about the fact that middle-class people confronted with desperate circumstances choose voluntarily to inflict poverty upon themselves when it is the government itself which has established the rule that poverty is a prerequisite to the receipt of government assistance in the defraying of the costs of ruinously expensive, but absolutely essential, medical treatment.5 Where the nursing home resident is competent and expresses the desire to preserve assets for the family or there is clear evidence that the incapacitated resident would desire Medicaid planning to proceed, the attorney’s obligation is to devise and implement a plan to achieve the greatest possible protection for the resident’s estate.6 Any moral compunction the attorney may have about achieving eligibility for someone who is not “truly needy” must not affect the attorney’s exercise of his or her ethical duty to pursue the client’s interests, as expressed by the client.

A tax attorney would not hesitate to exploit all possible tax exemptions, deductions, credits and offsets, no matter how wealthy the client is. Similarly, it is the Medicaid-planning attorney’s duty to explain the options for achieving Medicaid eligibility and allow the client or the client’s surrogate to decide whether to move forward with any particular plan.

5. In re Shah (N.Y. App. Div. 2 1999), 257 A.D.2d 275, 694 N.Y.S.2d 82.

6. ABA Model Rules of Prof. Conduct, Preamble 2.

Ethical And Public Policy Considerations Related To Medicaid Planning



Timothy L. Takacs and David L. McGuffey, in “Medicaid Planning: Can It Be Justified?, Legal and Ethical Implications of Medicaid Planning,”7 (Takacs and McGuffey) explore the moral and public policy concerns raised by using legal strategies to create Medicaid eligibility for long-term care residents who do not initially meet the financial qualifications.

Takacs and McGuffey state, “Although many nations, and the World Health Organization, regard health care as a fundamental human right, the United States does not.”8 For this proposition they cite a New York Appellate Division case in which the court observed that since this country has no system of public health insurance, citizens are required to pay for their own care.9 As a result, the authors


Health care services are bought and sold on the “free market.”The market is competitive, largely amoral, and (in theory) governed by the free market’s “invisible hand,” within a framework of public laws and regulations by non-governmental organizations (for example, accrediting organizations such as the Joint Commission on Accreditation of Healthcare Organizations, which accredits the majority of the country’s medical facilities).10 Since consumers of long-term care services must compete in an open market, Takacs and McGuffey argue, it is unreasonable to expect them “to refrain from selfinterested conduct, while other market players, such as health care providers and insurers, remain free to condition health care access on payment (and profit).”11 It is unfair to require them to meet a moral or ethical duty above the legal requirements set forth by Congress.

Morris Udall, Arizona Congressman, made this prescient comment in 1975:

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