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Medicaid Law Scares Seniors Lawmakers Aim To Repeal ‘Granny Go To Jail’ Rule

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 for poor people in nursing homes.

The new law took effect Jan. 1.

“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 non-profit organization in Cincinnati that runs a statewide hot line giving legal advice to the elderly.

Rep. Steven C. LaTourette, R-Ohio, has introduced a bill in the House to repeal the provision, and is gathering strong bipartisan support.

The fear stems from the complex nature of Medicaid, which pays medical bills for the poor. Medicaid 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. The home and car are excluded. If there is a married couple, and one person goes into a nursing home, the spouse remaining at home can keep assets up to $79,020, and an income of at least $1,295 a month.

Persons can give away assets, but any gifts made within three years of entering a nursing home will delay eligibility. For example, suppose a nursing home in the state costs an average of $4,000 a month. If someone gives away $40,000 and goes into a nursing home the next month, claiming poverty, the money given away is counted as an asset, and the patient must pay $4,000 a month for 10 months before becoming eligible.

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. The only penalty would be a delay in eligibility.

The 1996 law included a provision which would add a federal criminal penalty.