Medicaid Rule Violators Face Imprisonment

Granny could go to jail.

So could her lawyer, her friends, and her kids, too, legal experts caution, if everyone doesn’t watch their step under new laws that criminalize misuse of Medicaid funds to pay for nursing home care.

On Jan. 1 it became a crime to transfer assets to someone else knowingly for less than fair market value - within three years of applying for Medicaid - in order to qualify for federal financial assistance. Medicaid requires a recipient to be destitute.

Up to now, violators of the so-called “look back” rule were penalized by withholding eligibility for a period of months or years. Now they face criminal prosecution and prison.

“This new federal law is a trap for the uninformed,” warns Spokane elder law attorney Susan C. Buerkens.

“The pit is wide open because the law is phrased in a way - ‘whoever knowingly and willingly disposes of assets’ - that implies anyone who assists in the act could also be held responsible,” says the attorney. “This arguably includes not only the Medicaid applicant, but their spouse or caregiver, professional advisors, family members, well-meaning friends, etc.

“If prosecuted under this law, the individual is subject to a potential felony conviction, with up to five years imprisonment and/or a $25,000 fine, or a potential misdemeanor conviction, with up to one year imprisonment and/or a $10,000 fine, depending on the interpretation of the statue.”

As might be expected, the American Association of Retired Persons is up in arms. “This provision is outrageous,” storms staff attorney Michael Schuster in the current issue of the AARP Bulletin. “It’s also unnecessary. People who give away money just to qualify for Medicaid are already penalized.”

Estate planners, too, are in a dither over the legal ramifications of the change. They argue that there was little public awareness or opportunity for debate. The American Institute of Certified Financial Planners says members feel “it wasn’t right to criminalize something that was already prevented by use of the look back rules.”

Not surprisingly then, a major effort to rewrite or eliminate the clause criminalizing infractions is under way by the AARP and a number of other lobbies, including the American Bar Association, the National Senior Citizen Law Center, and the National Academy of Elder Law Attorney.

However, Buerkens says it is unrealistic to think that lawmakers will move fast enough with any changes to accommodate the needs of all the citizens who are entitled to assistance under Medicaid.

Buerkens, partner in Buerkens & Nehen, says the intent of Congressional lawmakers is a mystery. While they may have sought to curtail the potential for fraud by some, “the reality is that the new law unfairly penalizes the vast majority of our law abiding senior citizens. It creates even more uncertainty in an already highly regulated area. Worse yet, it may cause some seniors or their families and caregivers to completely avoid applying for the supplementary income entitlement that Medicaid was meant to provide.”

The Medicaid application and eligibility rules are complex enough in their original form, says the legal expert, without adding this new pitfall. “And each state varies in its interpretation of the federal law,” Buerkens points out, “so getting advice from your sister in Idaho or your friend in Oregon may get you into a jam here in Washington.

“Generally speaking,” she counsels, “it is important to note that the new law does not repeal any of the previous Medicaid transfer of assets rules. And therefore a number of exemptions are still available that will not trigger ineligibility or the potential criminal violation.”

In other words, get expert help.

Correction: A column two weeks ago contained incorrect amounts that workers 65 to 70 can earn without losing any Social Security benefits. The correct amounts are: 1996 - $12,500; 1997 - $13,500; 1998 - $14,500; 1999 - $15,500; 2000 - $17,000; 2001 - $25,000; 2002 - $30,000. Also, recipients must continue to pay federal income tax on 85 percent of their benefits when their allowable income exceeds $34,000 for singles or $44,000 for couples.

, DataTimes MEMO: Associate Editor Frank Bartel writes on retirement issues each Sunday. He can be reached with ideas for future columns at 459-5467 or fax 459-5482.

The following fields overflowed: CREDIT = Frank Bartel The Spokesman-Review