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Medicare, Medicaid Take Hits from House as Budget Bill Goes to Senate Today

Surprise cut in home health care spending by Medicare

Dec. 19, 2005 The Senate is expected to vote today on the Budget Reconciliation Act passed by the House in the early morning hours that is estimated to reduce the Federal Budget by just under $40 billion. Significant cuts will be made in Medicaid and Medicare under the bill.


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Leading elder law Website warns that House bill cutting Medicaid would drastically change asset transfer rules, punishing older Americans

Nov. 29, 2005 - House and Senate conferees will soon sit down to reconcile two very different budget bills that cut billions from the Medicaid program. The House bill, H.R. 4241, contains provisions that will punish unwitting elders who have given their families modest gifts, and will force some middle-income elderly to sell their homes and spend down the proceeds, warns ElderLawAnswers (, the nation's leading elder law Web site. Read more...

House Joins Senate in Passing Budget Cuts Including Medicaid

Nov. 18, 2005 After embarrassing failures by the Republican leadership in the House of Representatives to pass a bill to cut the federal budget, they finally passed the finish line early this morning with a 217 to 215 vote victory. The House bill has major differences from the bill passed by the Senate yesterday 64-33, including cuts in Medicaid, which will impact millions of senior citizens. President Bush has said he will veto the Senate bill, should its provision for additional taxes on oil companies be part of the compromise. Read more...

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A major surprise is a one year freeze on payments to home health care providers, which many see as a significant blow to this industry that is popular with senior citizens. This had not been in earlier budget reduction proposals. Observers believe the freeze was due to a recent Medicare Payment Advisory Commission finding that home health Medicare profit margins are currently in the 16 to 17% range.

It was also surprising because many states and other lawmakers have been developing new ways to encourage home health care, saying it is less costly to government than nursing homes.

The largest cut in Medicare will be a reduction of funding for the private Health Maintenance Organizations that was established in the 2003 Medicare bill. These plans are part of the Medicare Advantage option and the 2003 legislation was designed to encourage them to participate in Medicare, working on the assumption that these plans save money for Medicare over traditional Medicare health coverage.

Total Medicare cuts are anticipated to reduce the budget about $8 billion.

The House increased spending on physicians, however, by cancelling a planned 4.4 percent reduction in payments to doctors in the Medicare plan. This is expected to increase costs of $7.3 billion. The budget calls for Medicare physician payments to be frozen at FY 2005 levels.

Medicaid will be cut about $5 billion, with most of that coming on tighter restrictions of the rules for seniors to transfer assets out of their name primarily to children in order to qualify for Medicaid assistance with nursing home costs. (See more on asset transfers below this report.)

The bill passed the House by a 212-206 vote and the Senate must act before the holiday recess.

"This conference report on the Deficit Reduction Act makes government run better by making some commonsense reforms," said House Speaker Dennis Hastert (R-Ill.).

"It includes market based Medicaid reforms that both Republican and Democratic governors - who pay 43 percent of the program's cost - have been begging for. One of those reforms includes starting a demonstration project to give states the flexibility to offer Health Opportunity Accounts for Medicaid beneficiaries. We are also giving Governors the flexibility they need to better serve their Medicaid recipients."


GOP conservatives, chagrined that their party has been at the helm during a surge in government spending and massive federal deficits, are leading the charge for the first budget cuts in entitlement programs.


House Democratic Leader Nancy Pelosi said, " It is shameful that this Congress will adjourn passing this immoral budget, meeting the greed of the special interest friends of the Republicans instead of the needs of the American people."

"With this budget, do we say, 'God bless you' when we leave here without extending the time our seniors need to understand the befuddling prescription drug plans that have been handed to them with a time limit? Democrats have a better idea, extending the time for seniors to enroll and lowering the cost of prescription drugs. But no, the pharmaceutical industry goose is getting fat off this Congress at the expense of America's seniors," Pelosi added.

Although the bill will reach the Senate vote today, the vote may be later in the week. Some moderate Republican senators have been "rankled" by proposals to increase Medicaid beneficiaries' costs, CQ Today reports. For example, Sen. Gordon Smith (R-Ore.) and six other moderate Republicans in a letter last week asked Frist to avoid changes that would increase Medicaid beneficiaries' costs. According to CQ Today, it is not clear whether those senators will vote for the spending cut package (Schuler, CQ Today, 12/19).

More on the Medicaid Asset Transfer Provisions from

The bill places major new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. The bill, a compromise between House and Senate budget bills hammered out by Republican leaders, now must be approved by the Senate, an action that could come quickly as lawmakers rush to leave town for the holidays.

The bill retains changes in the transfer rules that were part of the earlier House bill. It would extend Medicaid's "lookback" period for all asset transfers from three to five years and change the start of the penalty period for transferred assets from the date of transfer to "the date on which the individual is eligible for medical assistance under the State plan and is receiving services . . . but for the application of the penalty period, whichever is later. . . ". The bill also would make any individual with home equity above $750,000 ineligible for Medicaid nursing home care.

The House bill would also:

   ●  Establish new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.

   ●  Require Medicaid applicants to provide "full information . . . concerning any transaction involving the transfer or disposal of assets during the previous period of 60 months, if the transaction exceeded $100,000, without regard to whether the transfer or disposal was for fair market value."

   ●  Allow Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.

   ●  Set forth rules under which an individual's CCRC entrance fee is considered an available resource.

   ●  Extend long-term care partnership programs to any state.

Kirsten Sloan, chief health lobbyist for AARP, said, "AARP strongly opposes the current conference agreement. This is irresponsible policy and will harm millions of low-income Medicaid beneficiaries, millions of older persons who need long-term care and unfairly increases Part B premiums for all Medicare beneficiaries."

For the full text of the Deficit Reduction Act of 2005, click on: Click on the third version of the bill listed, then scroll down to Title III, Chapter 2, for the asset transfer rule changes.




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