DEPARTMENT OF HEALTH AND SOCIAL SERVICES

Division of Medicaid and Medical Assistance

Statutory Authority: 31 Delaware Code, Section 512 (31 Del.C. §512)

FINAL

ORDER

Title XIX and DSSM 20620 and 20995

NATURE OF THE PROCEEDINGS

Delaware Health and Social Services ("Department") / Division of Medicaid and Medical Assistance initiated proceedings to amend the Title XIX Medicaid State Plan and the Division of Social Services Manual (DSSM) regarding the Medicaid Long Term Care Program. The Department's proceedings to amend its regulations were initiated pursuant to 29 Delaware Code Section 10114 and its authority as prescribed by 31 Delaware Code Section 512.

The Department published its notice of proposed regulation changes pursuant to 29 Delaware Code Section 10115 in the July 2006 Delaware Register of Regulations, requiring written materials and suggestions from the public concerning the proposed regulations to be produced by July 31, 2006 at which time the Department would receive information, factual evidence and public comment to the said proposed changes to the regulations.

SUMMARY OF PROPOSED CHANGES

Statutory Authority

• Social Security Act §1917(c), Liens, Adjustments and Recoveries and Transfers of Assets

• 42 CFR §435.700 et seq., Specific Post-Eligibility Financial Requirements for the Categorically Needy

• 42 CFR §435.832, Post-eligibility Treatment of Income of Institutionalized Individuals: Application of Patient Income to the Cost of Care

Background

On April 18, 2006, CMS issued Regional Memo 06-04. This memorandum addresses the treatment of medical and remedial care expenses incurred as a result of the imposition of a penalty for transferring assets for less than fair market value under the Medicaid post-eligibility treatment of income.

Under section 1917(c) of the Social Security, certain individuals who dispose of assets for less than fair market value are subject to imposition of penalty. The statute provides that during the penalty period such individuals are ineligible for Medicaid payment for nursing facility services, and for comparable long-term care services provided in institutions other than nursing homes, in an individual's home, or in a community setting. The length of the period of ineligibility (known as the penalty period) is directly related to the uncompensated value of assets that were transferred.

Because Medicaid is not paying for a person's nursing home care during a penalty period, an individual subject to a transfer of assets penalty is responsible for paying for that care him or herself. At the end of the transfer of assets penalty period, such an individual may have incurred nursing facility and other penalized expenses that remain unpaid.

Once the penalty period expires, the individual can become eligible for Medicaid payment for nursing home or similar care, at which point the individual also becomes subject to the post-eligibility treatment of income process as set forth in regulations at 42 CFR §435.700 et seq. and 42 CFR §435.832.

Summary of Proposal

In compliance with recent clarification of federal regulations, DMMA will amend the provisions governing incurred medical expenses that may be considered allowable deductions in the determination of patient liability. DMMA amended policies will clarify that the State will not allow any expenses incurred during a penalty period to be used in the post-eligibility period for the purposes of long-term care services.

The following provisions contained in DSSM and the Title XIX Medicaid State Plan will be amended: DSSM 20620.2.2, 20620.2.3, 20995.1 and State Plan Supplement 3 to Attachment 2.6-A.

The proposed amendment is subject to approval by the Centers for Medicare and Medicaid Services (CMS).

SUMMARY OF COMMENTS RECEIVED WITH AGENCY RESPONSE AND EXPLANATION OF CHANGES

The State Council for Persons with Disabilities (SCPD) offered the following observations and recommendations summarized below. DMMA has considered each comment and responds as follows:

SCPD opposes the proposed regulations based on the following observations.

First, the regional memo from an "associate regional administrator" does not have the force and effect of law. Moreover, as reflected in the memo (at page 2), it conflicts with prior official CMS interpretations which concluded that "the loophole could not be closed without changing the post-eligibility regulations". The regional memo is not as authoritative as the previous inconsistent national CMS guidance. If CMS wishes to modify its view of long-standing statute, it should do so by regulation, not by a regional memo to a handful of states.

Agency Response: DMMA recognizes the CMS letter as guidance. CMS provides guidance and clarification on current information pertaining to Medicaid policy to ensure consistency and better serve States. States are required to follow guidance from CMS.

Second, the CMS interpretation is contrary to the plain meaning of the statute. If Congress authorized "reasonable limits", it obviously envisioned some upper caps on amounts, or some flexibility in determining the amount of allowable deductions. Congress did not authorize total exclusion of all necessary expenses. Indeed, since Congress addressed the transfer of assets penalty in the Deficit Reduction Act of 2005, it would logically have changed the "deduction" statute if it were dissatisfied with the existing interpretation of that statute. The failure of Congress to amend that statute represents acquiescence in its traditional interpretation.

Agency Response: DMMA believes that a reasonable limit could be zero and states are being given flexibility to use a range beginning at zero. The guidance is in the spirit of the Deficit Reduction Act of 2005, a federal law.

Third, if DMMA chooses to follow the sub-regulatory regional memo, and it is subsequently repudiated by the courts or other authority, Delaware will be faced with "underpayment" claims by providers and reimbursement claims by beneficiaries. The State assumes a risk in following a sub-regulatory opinion contrary to statute and long-term national CMS guidance. If DMMA wishes to adopt some restrictions, it could consider a more "defensible" standard than "zero". For example, it could consider a percentage approach (e.g. 25% reduction in otherwise allowable deduction for medical and remedial care expenses incurred as a result of imposition of transfer of assets penalty period). Alternatively, it could adopt a phased-in approach (e.g. 25% reduction for first 12 months of post-transfer of assets penalty period followed by 50% reduction for balance of post-transfer of assets penalty period). This would be less burdensome on beneficiaries with bills that could be paid within several months.

Agency Response: Currently, DMMA does not allow protections for expenses incurred during an ineligible period. Therefore, there is no change in office practice. In addition, your suggestion of using a percentage defeats the point of having a penalty period. If an applicant can transfer his assets rather than pay for his long term care, and still have Medicaid pay his medical bills, then there would be no point to having a penalty period.

Fourth, as the CMS memo indicates, the deduction is designed to allow the beneficiary to pay legitimate outstanding medical bills. If no deduction is allowed, the beneficiary may be beset by medical creditors and collection agencies. Predictably, those unpaid creditors will pursue legal action to execute on the beneficiary's assets, including any auto or home in which the non-institutionalized spouse resides. The effect of the state regulation will be to undermine the non-institutionalized spouse protections central to the federal Medicaid system. Moreover, since Delaware law permits long-term care facilities to discharge residents with unpaid bills (Title 16 Del.C. §1121(18), the application of this regulation may result in evictions from nursing homes.

Agency Response: DMMA will continue to offer protections for legitimate expenses which were not incurred during a penalty period. However, if the applicant/recipient had not transferred their assets, then they would not have bills for which they are "beset by medical creditors and collection agencies".

No change to the proposed amendment will be made because of these comments.

FINDINGS OF FACT:

The Department finds that the proposed changes as set forth in the July 2006 Register of Regulations should be adopted.

THEREFORE, IT IS ORDERED, that the proposed regulation to amend the Title XIX Medicaid State Plan and the Division of Social Services Manual (DSSM) regarding the provisions governing incurred medical expenses that may be considered allowable deductions in the determination of patient liability is adopted and shall be final effective October 10, 2006.

Vincent P. Meconi, Secretary, DHSS, 9/14/06

DMMA FINAL ORDER REGULATION #06-40a

REVISIONS:

Revision: HCFA-PM-3 (BERC) Supplement 3 to ATTACHMENT 2.6-A

MAY 1985 Page 1

OMB NO.: 098300193

STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT

STATE: DELAWARE

REASONABLE LIMITS ON AMOUNTS FOR NECESSARY MEDICAL OR REMEDIAL CARE NOT COVERED UNDER MEDICAID

N/A

The deduction for medical and remedial care expenses that were incurred as the result of the imposition of a transfer of assets penalty period is limited to zero.

DMMA FINAL ORDER REGULATION #06-40b

REVISIONS:

20620.2.2 Necessary Medical Care

Cost of necessary medical care not covered under the recipient's medical insurance, Medicaid or Medicare but recognized under state law may be set aside from his/her income. The care must be ordered by a professional, such as a physician, dentist, optometrist, physical therapist, etc. For items such as dentures and hearing aids to be approved a medical professional will have to state, in writing that the patient will benefit medically (as opposed to cosmetically only). Other approved medical care items which might occur frequently are eye exams, eyeglasses, dental care, prostheses and appliances.

When in doubt as to whether the care is recognized under state law or is appropriate to be charged to the patient under this policy, consult the Medical Review Team Long Term Care Operation’s Administrator. The recipient and the provider must understand that these are not Medicaid payments but are an arrangement between recipient and provider, and that it is the responsibility of the recipient, or his representative to see that payments are made. If both parties are agreeable, payments may be spread out over a period of months.

20620.2.3 Prior Medical Costs

Medical costs incurred in a prior period of ineligibility (if approved by Medicaid) may be protected from his/her income. Costs incurred in a period of ineligibility must be approved by the Medicaid State Office prior to being protected and will only be considered if incurred within 30 days of the beginning date of Medicaid eligibility.

The recipient's reimbursement level and patient pay amount must be identified. Medicaid will protect at the Medicaid reimbursement rate, not the private pay rate.

The period of ineligibility may be caused by excess resources or excess income.

Protections for which the individual is seeking coverage will not be granted if the ineligible period occurred during a transfer of assets penalty phase.

20995.1 Post - Eligibility Deductions

Post-eligibility determination is revised to allow the following deductions from the income of the institutional spouse. The deductions must be taken in the following order.

a. Personal Needs Allowance for the institutional spouse

The personal needs allowance amount is $30 per month for SSI recipients, and $44 per month for all others. If the institutionalized spouse is employed, personal needs may range from $50 up to the Adult Foster Care rate per month. See Section 20620.1 Personal Needs.

b. Community Spouse Income Allowance

The community spouse monthly income allowance is the amount of income necessary to bring the spouse's monthly otherwise available income up to:

• the applicable percent of the FPL for two, plus

• an additional amount for excess shelter

The total amount available to the community spouse may not exceed "Cap for Minimum Monthly Maintenance Standard". This standard usually changes each January based on the Consumer Price Index for Urban Consumers.

c. Family Allowance.

d. Items for which protection of income has been approved by the Long Term Care Coordinator Operation’s Administrator and/or incurred medical expenses of the institutionalized spouse.

10 DE Reg. 703 (10/01/06)(Final)