‘Granny Go to Jail’ Law’s Repeal Urged

Responding to widespread fears among the elderly, the Clinton administration Tuesday called for repeal of a “granny go to jail” provision in last year’s health insurance law that makes it a felony to hide financial assets to qualify for Medicaid coverage in nursing homes.

Several senators, citing the worries of constituents, unexpectedly raised the issue at a hearing Tuesday on government rules to carry out the 1996 health insurance portability law.

Bruce Vladeck, the administration official who runs Medicare and Medicaid, agreed with the senators and invited Congress to get rid of the section of law at issue. Vladeck also said the federal government will not take any steps to encourage states to enforce the provision.

“There has been a lot of fear and anxiety created by this provision,” Vladeck said. Section 217 of the 1996 health insurance law makes it a crime punishable by a prison term of up to five years and a fine of $25,000 to commit fraud by hiding assets to qualify for Medicaid, which pays the bills of poor people in nursing homes.

A wave of fear has swept through many elderly communities as word spread about the new law, which took effect Jan. 1, although no one has been prosecuted.

“We got calls from older persons afraid if they gave their grandchildren a Christmas gift, they would be committing a federal crime,” said Gregory French, director of Pro Seniors, a nonprofit organization in Cincinnati that runs a statewide hotline giving legal advice to the elderly.

Older couples, where one spouse faces the likelihood of going into a nursing home, also are frightened that they could be headed for prison, French said.

Rep. Steven C. LaTourette (R-Ohio) has introduced a bill to repeal the provision. It is gathering strong bipartisan support.

The fear among seniors was fanned, LaTourette said, by estate planners and financial counselors eager to get new business.

“The Republican estate planners would run ads saying, ‘Bill Clinton wants you to go to jail unless you take our seminar,’ while the Democratic estate planners would say, ‘Newt Gingrich wants you to go to jail unless you take the seminar,’ ” said LaTourette.

By making the transfer of assets a potential crime, the provision is a “flashing yellow light” telling Congress to take action, Sen. Barbara A. Mikulski (D-Md.) said at a Senate Labor and Human Resources Committee meeting.

Vladeck said that “there needs to be a vehicle to significantly change or repeal” the provision. “We will certainly not be pressing the states to enforce this.”

The fear stems from the complex nature of Medicaid (called Medi-Cal in California), which pays for indigent elderly persons in custodial care in nursing homes. With nursing homes costing $40,000 a year and more, many middle-class people enter nursing homes as paying patients and exhaust their money, becoming eligible for Medicaid.

A person qualifies if financial assets are $2,000 or less. A home and car can be excluded. In the case of a married couple, the spouse remaining at home can keep assets of as much as $79,020 and an income of $1,295 a month.

Persons can give away assets, but any gifts made within three years of entering a nursing home would delay eligibility.

Before last year, when state investigators found people who attempted to conceal that they had given money away, they were simply declared ineligible for Medicaid for a period of time.

The 1996 law included a provision which would add a federal criminal penalty. States that found people concealing the transfer of assets could forward their names to the U.S. attorney for prosecution.

No prosecutor would want to haul an 85-year old woman into court and accuse her of fraud, noted LaTourette, a former prosecutor.