Public Pays for Wealthy Seniors’ Care
For older Californians distressed by the thought of nursing home bills devouring their savings, the words of a Los Angeles attorney may seem astonishing: “We can qualify even a millionaire for Medi-Cal benefits.”
But as troubled as they may be by such an offer, officials at California’s healthcare program for the poor admit it’s possible.
At a tremendous cost to taxpayers, aging Americans in California and across the nation are transforming themselves, at least on paper, from affluent seniors to needy individuals eligible for state health benefits.
“It’s a huge public health problem,” said Thomas Scully, who ran the country’s $269-billion Medicaid system for the Bush administration until December. Medi-Cal is California’s version of that program.
“There is an entire industry around the country set up to coach people to transfer their assets to their children, so the state can pay for their care,” Scully said. “Every time you pay for one of these people to go to a nursing home, you are taking money away from the people who are truly poor.”
In financially squeezed California, the situation is especially poignant.
It’s costing the state as much as $150 million a year, as estimated by the California Assn. of Homes and Services for the Aging. And an investigation by state Atty. Gen. Bill Lockyer’s office backs up the math: It has found one Northern California attorney alone who has been able to get a thousand clients into the system, costing the state an estimated $50 million.
The state has tried to limit losses by putting liens on the homes of patients after they die, but Medi-Cal officials and elder-law experts say the process can be easily evaded. Lockyer said there was only so much he could do: Most of the time it is legal.
“If there are legal ways to legitimately pass assets to heirs, I can’t fault people for having that desire,” he said. “If somebody wants the system changed, that’s up to policymakers.”
Jack Christy, director of public policy for the California Assn. of Homes and Services for the Aging, said the policymakers need to do something.
“A lot of the things California is allowing just defy common sense,” he said. “You end up with people paying taxes into the system -- like a gardener making $20,000 or $30,000 a year -- so some millionaire can get on Medi-Cal. It’s not right.”
Nursing home administrators see the asset transformation firsthand. At the Pilgrim Haven Retirement Community’s nursing home in the affluent San Francisco suburb of Los Altos, the staff was baffled when a patient with a $2-million house, pricey commercial property in San Jose and considerable savings recently became eligible for the program.
“The sons went to an attorney, and she qualified,” said administrator Tara McGinnis at a recent legislative hearing. She said four more patients at the home with substantial financial resources had also switched over to Medi-Cal recently.
Now, taxpayers pick up a monthly tab of about $3,500 each at Pilgrim Haven, and it’s against state law for the nursing home to evict them.
Medicare, the federal healthcare program for the elderly, covers 100 days in a nursing home. If senior citizens can get on Medi-Cal, they are eligible for a semiprivate room in a nursing home, therapy and some prescription drugs for as long as is medically necessary.
A cottage industry of attorneys and estate planners is marketing Medi-Cal as a kind of inheritance insurance through which parents can give their money to relatives, declare poverty and get state assistance. Some of those attorneys say they can get just about anybody on the system.
“You can secure your children’s inheritance!” says a pamphlet given out by Senior Care Advocates, a Northern California company that helps seniors qualify for Medi-Cal. “You can protect your assets
“Find out how to qualify for nursing home benefits and have Medi-Cal pay the expenses!” says a brochure from another firm. “If you are paying out of pocket, STOP!”
Los Angeles attorney Judd Matsunaga says in a videotaped presentation: “We can qualify even a millionaire for Medi-Cal benefits.”
“It’s a matter of knowing the law and working within the rules of the law to do what is legal,” Matsunaga said in an interview. “My belief is these loopholes were put into the system because the people who wrote the laws knew the average American would never seek legal advice to try to preserve their assets.”
Medi-Cal is reserved for single people with no more than $2,319 of assets. If a person is married and his or her spouse is not on Medi-Cal, the couple can have no more than $94,760. Simply giving cash away to family members can cause disqualification.
But estate planners have found ways to reconfigure people’s assets to make the people eligible penalty-free. The planners first move the money into a place that is exempt from the restrictions, and then give it away.
For example, the family home. Clients can pour all of their money into an expensive new house and still qualify. If they tell the state that their intention is to return to that home, the state can’t take it. The house can then be transferred to relatives while the patient is in a nursing home, and the state can’t go after it once the patient dies.
Other exemptions are certain kinds of investments. Some insurance companies, for instance, market “Medi-Cal friendly” annuities, into which seniors can move their savings to keep them from the state.
For the lawyers and estate planners, all this can mean big money.
A paper passed around at an elder-law conference on Mackinac Island, Mich., last year encouraged lawyers to charge as much as $7,000 for completing the paperwork to get a client government assistance, “even if you spent only two or three hours on the case.” After all, the report points out, the client will be saving $60,000 or $70,000.
Medi-Cal officials say that they plan to ratchet up some restrictions on who can qualify -- enough to save about $4 million annually -- but that, as far as doing much more is concerned, their hands are tied.
“We have tried to tighten all the loopholes we are aware of that can be tightened under federal law,” said Stan Rosenstein, who oversees the Medi-Cal program. “There are some loopholes in the federal law that we can’t touch.”
Healthcare advocates are not impressed. They note that four other states -- Connecticut, Massachusetts, Minnesota and New York -- are working with the federal government on proposals to waive some of those rules so they can crack down on families of nursing home patients who shelter assets to get state assistance.
Advocates also say they are offended by financial makeovers used to exploit a beleaguered Medi-Cal system, in which nursing home beds are in short supply and waiting lists are common. “We’ve got a huge mess here,” said Stephen Moses, president of the Center for Long Term Care, an insurance industry-backed think tank in Seattle. “The well-to-do use ‘Medicaid planning’ to get into nice homes and the poor people lose everything and end up in Medicaid hellholes.”
Many elder-law attorneys make no apologies. They say their clients paid tens of thousands of dollars into the system through federal and state taxes, and they are entitled to get their share out of it.
“This money is sitting around in every one of our names,” said Zoran Basich, a lawyer who runs a Glendale business called Nursing Home Services, which helps seniors qualify for Medi-Cal and protect their assets.
Basich compares the Medi-Cal program to the federal tax code. “This is how the system was created,” he said. “You jump through the hoops.”
Rosenstein calls such shielding assets to get on Medi-Cal “inappropriate.” He and other state officials say Medicaid was always meant to be strictly a safety net for the poor. But he acknowledges that the law is porous and that there are ways to move money around to keep the state from getting at it.
Calvin Callaway, the administrator at Folsom Convalescent Hospital near Sacramento, said one patient there who was paying with her own funds sold her house a few months into her stay. A few weeks later, she had a new house in Lake Tahoe for her family and a Medi-Cal card.
The state paid for her stay in the home from December 1996 until she died last month.
“Eight years of Medi-Cal funds for a woman who owned a house in Tahoe,” Callaway said. “We turned that one over to the Medi-Cal fraud people. Because it was all done through legal loopholes, they couldn’t take any action.”
On a recent Saturday, about 40 senior citizens and their families sat in rows of chairs at a Doubletree hotel in Sacramento as representatives from Senior Care Advocates encouraged them to sign on to Medi-Cal. The presenters played to the crowd’s suspicion of big government.
“Somebody’s got to stand up and say, ‘I want access to what the government promised me,’ ” said speaker Kevin Pellegrino. “Until we do that, we won’t stop the growth of government.
“Does anyone want their money to go to expanding government?” he asked the enthusiastic crowd. “Don’t you think you have given them enough?”
Events like this irk some lawmakers.
“That offends me,” said Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento), when told of the seminar. “The fact of the matter is: We are living in a time of scarce resources. It is just not fair that people of real means can find ways to shelter their assets and have the public pick up the cost of care. We have to change the law.”
He wants the state to conduct a thorough study to figure out exactly how much it is costing.
In New York, the Citizens Budget Commission, a nonpartisan fiscal watchdog group, estimates that the loopholes there cost the state $608 million annually.
Rosenstein acknowledges that California has been “one of the least aggressive” states in closing the loopholes. The state tries to make up for that, he says, with one of the country’s most ambitious programs of collecting money from patients after they die -- usually by placing a lien on their homes.
Yet enforcement efforts are uneven. Medi-Cal simply mails letters out to the estates of patients who owe money; but it hasn’t bothered to track down those who didn’t respond. That will change this month, said the Department of Health Services.
About 7,000 letters were going out a month, officials said. But half of them were not answered and not followed up on.
Most elder-law experts, however, say that if recipients fill out the paperwork properly before entering the system, they can keep the state from ever having a claim on their property.
“If somebody desires to avoid the estate-recovery process, there are ways to do that,” Rosenstein said. “There are loopholes to take advantage of.”
But although the system may be easy to exploit, he warns that doing so can have unintended consequences for seniors.
“It is very dangerous for someone to voluntarily impoverish themselves,” he said. “If someone voluntarily goes into Medi-Cal, they may be able to retain only $35 per month for personal needs. Most people would think that is not much money to buy things for family or grandchildren or to do whatever you want to do.”
Lockyer warns of “scam artists who rip off elderly people,” hoping to cash in on big fees that asset-sheltering can bring, even when it’s against the client’s interest. “In these cases, no benefit is being conferred on seniors.”
Betsy Hite, director of public affairs at the California Assn. of Health Facilities, has collected a stack of advertisements from lawyers marketing what is known in the industry as Medi-Cal Estate Planning.
“There has been an explosion of these attorneys and estate planners,” Hite said, “and nobody is cracking down on them.”
Rosenstein said the state was doing all it could. “The law is the law,” he said, “until it’s changed.”
Times staff writer Tim Reiterman contributed to this report.