Nursing Homes Selling Insurance - What Could Go Wrong?

According to an article by Jordan Rau, writing for Kaiser Health News ("KHN"),nursing home companies have begun selling their own private Medicare insurance policies. Pledging close coordination between caregivers and institutions, and promising to give clinicians more authority to decide what treatments they will cover for each patient, these plans are marketed to seniors likely to or already requiring long term care.  These plans are recent additions to the Medicare Advantage market, where private plans have become an increasingly popular alternative to traditional fee-for-service coverage. There are currently nearly 18 million enrollees in the overall Medicare Advantage market. 

Medicare pays private insurers a set amount to care for each beneficiary. In theory, this payment method gives the insurers motivation to keep patients from needing costly medical services such as hospitalizations.Unlike other plans, these alternate policies offered by long-term care companies often place a nurse in the skilled nursing facility or retirement village, where they can talk directly to staff and assess patients’ conditions. Some provide primary care doctors and nurses to residents in the homes or in affiliated assisted living facilities or retirement villages with the aim of staving off hospitalizations. According to Advantage proponents, this model offers patients a more individualized approach to their care. 

Supporting the use of Advantage plans sold by nursing homes, Angie Tolbert, a vice president of quality at PruittHealth, which began offering its plan to residents in 10 of its nursing homes in Georgia last year, told KHN that:

“[t]he traditional model is making decisions based on paper, and in our model, these decisions are being made by clinicians who are really talking to the staff and seeing the patient. It’s a big shift in mindset.”

“There’s a conflict there,” Toby Edelman, a senior attorney with the Center for Medicare Advocacy told KHN.  Attorney Edelman should know; she has spent a career advocating on behalf of the elderly.  

An insurance agent represents the insurance company.  When disputes arise between the insurance company, the health care provider, and the insured, the agent is typically in the corner of the insured.  At a minimum, the agent's duty is to the insured vis-à-vis the health care provider.  In this most recent development in the insurance market, the agent works for both the insurance company and the health care provider. Where do the loyalties and duties of an agent employed by the health care provider lie in payment and coverage disputes? 

In addition, given that both insurance companies and health care providers may support low cost modalities offered by the provider rather than those offered by others, will these cheap substitutes be provided when they do not necessarily serve the interest of the insured patient?  Collusion between insurance company and health care provider regarding cost can impact quality of care.  If anything, health care providers are accused of recommending expensive unnecessary tests and treatments, but what if they are necessary and unavailable through the provider; will they still be recommended?  Might both collude to provide less expensive alternatives offered by the provider rather than better, more expensive services offered by third parties?    

In the real world, these complexities are causing some to doubt the advantages of the arrangement.  KHN reported regarding some patients who are in disputes with the insurers who have faulted the nursing home staff — who work for the same company — for not helping challenge decisions about coverage:

They complain that the company holds an unfair advantage over Medicare beneficiaries.

In an Erickson Living retirement village in Silver Spring, Md., Faith Daiak signed up for an Erickson Advantage plan sold by a nurse whose office was in the main village building, according to her son, J.J. Daiak. After a bout with the flu last February weakened her enough to need a 10-day hospitalization, she was sent to her village’s skilled nursing facility. There, the insurer repeatedly tried to cut short her stay.

Erickson Advantage first said it would stop paying for Daiak, 88, because she wasn’t getting healthier in the nursing facility. Her son appealed by pointing out that Medicare explicitly said as part of the 2014 settlement of a class-action lawsuit that patients do not have to be improving to qualify for skilled nursing care.

Daiak’s appeal was denied, but the issue was sidelined in March when her rapid weight loss in the nursing home sent her back to the hospital, he said.

After Daiak returned to the nursing home with a feeding tube in her stomach, the insurer again tried to curtail her time there, saying she did not need that level of care. The family successfully appealed that decision after noting that Medicare’s manual said feeding-tube maintenance required the skilled care of a nursing facility.

In April, Erickson Advantage again said it would not continue paying for Daiak’s stay. It reversed that decision after Kaiser Health News asked the company about the case, J.J. Daiak said. He said the plan did not explain its turnaround.

While this Medicare Advantage plan touts its “team that knows you personally and wants to help,” J.J. Daiak said he found the registered nurse at Erickson’s Silver Spring community not helpful. “All I see is her trying to get Erickson out of having to pay for the nursing home,” he said. He subsequently switched his mother to traditional Medicare coverage with a supplemental Medigap policy, which she had until this year.

Erickson Living, the parent company of the nursing home and insurer, declined to discuss individual cases but noted that Medicare has given its insurance plans the best quality rating of five stars. In a written statement, the company said that “medical service determinations for Erickson Advantage members are based on reviews by licensed clinical staff and clinical guideline criteria. Our primary focus is always on ensuring that the healthcare being provided for our residents matches a patient’s needs and established clinical treatment protocols.”

Edelman said the dispute was particularly troubling because Erickson’s retirement villages are marketed on the promise that the company will care for seniors in all stages of aging. “They don’t tell you what they won’t pay for,” she said.

Will nursing homes be able to evaluate properly the competence of  a consumer, or will they sell policies to those too diminished to understand fully the policies or their implications? Will consumers feel pressure to purchase policies, worried that nursing homes mght dump them as residents if the policies are rejected?  Will nursing home agents dissuade patients from superior alternatives that may separate the patient from the nursing home, or from the insurance company?  Will nursing homes seek reimbursement for services based upon profitability rather than necessity?  Why can't nursing homes work with insurance companies for better quality care without demanding the additional compensation that comes from sale of the policies?  

This writer would take more seriously pledges and promises if they were not ransomed for additional profit.  Why should consumers pay nursing homes more for care that they should already be receiving?

Conflicts of interest may not always be improper, and may not lead to improper decisions, but always have at least the appearance of impropriety. Consumers deserve better than the "appearance of impropriety" at the inception of a relationship.   This writer recommends that every consumer reject these arrangements.   

Trust Can be Reformed to Change Beneficiaries

Can a trust be reformed to add beneficiaries where the trust as originally drafted fails to include beneficiaries?  According to a recent Florida trust case, a  trust can be reformed to add a residual beneficiary clause. 

In Megiel-Rollo v. Megiel, 2015 Fla. App. LEXIS 5601 (Fla. Dist. Ct. App. 2d Dist. Apr. 17, 2015), the decedent had prepared a will naming her three children as equal beneficiaries.  Some years later, the decedent prepared a revocable trust.  She also deeded her real property to the trust.  The trust, however, failed to name any beneficiaries of the trust upon the death of the decedent.  The trust, instead, stated that, upon the death of the settlor, the corpus should pass according to a "Schedule of Beneficial Interests," which was supposed to be prepared and attached to the trust.  At the time of death, no Schedule of Beneficial Interests was located.  

Of course, it not uncommon for documents (wills, trusts, beneficiary designations, and the like) and attachments to come up missing after death.  The case presents an object lesson why one should not rely upon attachments or schedules to nominate fiduciaries or beneficiaries, and should instead incorporate both in the body of the instrument, and further, why it is important to ensure the integrity of the instrument through time.  For more information regarding this aspect of planning, go here (the link will take you to series of articles regaring planning protection or vaulting).  

In this case, a dispute arose among the three children of the decedent, with two claiming that the decedent intended to name the two of them as the sole heirs, with the third child contending that the trust was void and/or could not be reformed.  Under the third child's contention, the trust would be split into three equal shares for the children. In support of the claim of the two, the drafting attorney filed an affidavit admitting that he had made a mistake and should have prepared the Schedule of Beneficial Interest naming only two the decedent's children as the beneficiaries of the trust.  Based on this affidavit and other information, the two children argued for trust reformation.

The Florida Trust Code, as of 2007, contains a trust reformation provision that allows a trust to be reformed to correct a mistake, Section 736.0415:

Upon application of a settlor or any interested person, the court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor's intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor's intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. In determining the settlor's original intent, the court may consider evidence relevant to the settlor's intent even though the evidence contradicts an apparent plain meaning of the trust instrument.

The third child argued that the trust itself failed under the "merger" doctrine, which requires that a trust have some separation of interests in the corpus.  The Court rejected this argument (internal citation omitted: 

[t]he failure of the Trust instrument to designate any remainder beneficiaries would ordinarily result in a merger is correct as far as it goes. "In order to sustain a trust entity, there must be a separation between the legal and equitable interests of the trust. If there is no separation of these interests, the doctrine of merger may apply and the trust be terminated." "If the designation of beneficiaries is deemed too indefinite for enforcement of the provisions of a trust, the usual result is that the trust is void and 'the designated trustee holds the corpus under a resulting trust in favor of the estate of the settlor.'" Based on these general principles, we agree with Sharon that--absent reformation--the failure of the Trust to designate any remainder beneficiaries would have the result that upon the Decedent's death, then Denise, as successor trustee, would hold the Trust assets upon a resulting trust for the benefit of the Decedent's estate.

The Court. then permitted the requested reformation of the trust: 

It is beyond argument that the statutory reference to "a mistake of fact or law" is not limited by any qualifiers. The broad scope of the language used in the statute is inconsistent with the notion that reformation is available to correct some mistakes in a trust, i.e., "simple scrivener's error," but not others. "[W]hen the language of the statute is clear and unambiguous and conveys a clear and definite meaning, . . . the statute must be given its plain and obvious meaning.

Giving the statutory language of section 736.0415 its plain and ordinary meaning compels the conclusion that the remedy of reformation of the Trust is available to correct the alleged drafting error resulting from the omission to prepare and incorporate into the Trust the contemplated Schedule of Beneficial Interests. The absence of any language of limitation in the statute--other than the requirement of proof by the heightened standard of clear and convincing evidence--is additional evidence that  the legislature did not intend the construction of the statute for which Sharon contends. For this court to read such a limitation into the statute would amount to judicial legislation of the sort in which we will not indulge.

The case should comfort those that worry that their wishes may not be accurately or completely expressed in their estate planning documents.  On the other hand, others may be worried that their expressed wishes may be changed by family, friends, or advisers after their death.  Of course, proper planning, and  continued efforts to support the plan will reduce or eliminate such risks.

Woman Posing as Nurse in SNFs Pleads Guilty

McKnight's reports on the case of Leticia Gallarzo, 42, who posed as a registered nurse at three skilled nursing facilities and two hospitals even though she had no medical training, using the name and registered nursing license number from a registered nurse with a name similar to hers in order to obtain employment.  She committed the crimes between March 15 and Oct. 23 in 2015 at three nursing homes and two hospitals in five southern Texas towns. 

She was arrested Oct. 31, 2015, after the fifth facility reported her to authorities.  According to local news reports, she would leave to seek employment elsewhere when an employer would start to realize she was an imposter

Gallarzo pleaded guilty in a federal court case last week to making false statements relating to healthcare.  She faces up to five years in federal prison and a possible $250,000 maximum fine. She was taken into custody upon pleading guilty, and will be held  until her sentencing hearing, which is set for Oct. 3, 2017.

Go here to read the original McKnight's article. 

Irrevocable "Sole Benefit" Trusts Countable as Medicaid Assets in Michigan

A trio of Michigan cases have invalidated the use of Irrevocable Sole Benefit Trusts in Medicaid planning for marital couples.  A Michigan appeals court has held that assets placed in an irrevocable trust by a Medicaid recipient's spouse are countable assets because the principal in the trust can be paid to or for the benefit of the community (non-institutionalized) spouse.  See,  Hegadorn v. Department of Human Services Director (Mich. Ct. App., No. 329508, June 1, 2017); Lollar v. Department of Human Services Director (Mich. Ct. App., No. 329511, June 1, 2017); and Ford v. Department of Health and Human Services (Mich. Ct. App., No. 331242, June 1, 2017).

Three women entered nursing homes. Their husbands created irrevocable "sole benefit trusts." The trusts allowed the trustee to distribute principal to the husbands as necessary with the expectation that all the resources would be used up during the husbands' lifetimes. The trusts prohibited distribution of assets to the women A few months later, the women applied for Medicaid. The state determined that the trusts were available assets and denied the applications.

The women appealed, arguing that the trusts were not countable assets because they were for the sole benefit of the husbands. After three trials, two trial courts ruled that the assets in the trust were not available, and the state appealed and the Michigan Court of Appeals decided the cases together.

The Michigan Court of Appeals held that the trusts are available assets and reversed the decisions of two trial courts. The court ruled that when states make an initial eligibility determination, "an institutionalized individual’s assets includes not only those that he or she has, but also those that his or her spouse has" (emphasis in the original).  According to the court, because "there was a 'condition under which the principal could be paid to or on behalf of the person from an irrevocable trust,' the assets in the trusts were properly determined to be countable assets."

The cases underscore the challenges consumers and planners face in crafting estate planning documents.  The holdings remind consumers that there are a variety of types and kinds of irrevocable trusts, and that they do not all work the same or accomplish the same objectives.  Competent counsel can and do sometimes misapprehend the planning area and options, particularly when planners rely upon consensus planning, and periodic approval by low level caseworkers.  

The best long term care plans consider and accomplish, if possible, each of the following (in order of priority): 1) adoption of the best available health care plan, including medically necessary home health care in order to avoid unnecessary long term institutional care; 2) adoption of an "Aging in Place" philosophy and incorporation and expression of the philosophy in estate planning documents; 3) adoption and maintenance of a sound financial plan to protect income and ensure available resources to pay for alternatives to long term institutional care;  4) settling a revocable trust to protect against guardianship, protect assets and decision-making from institutional control in order to reduce the risk of unnecessary institutionalization; 5) settling an asset protection trust to shield selected assets  for the benefit of a community (non-institutionalized) spouse and to protect inheritance;and; 6) making the home suitable for long term care needs.  

It is vitally important to begin the planning with consideration of the proper Medicare health care option.  Quite simply, every legal and financial plan is made more capable by proper health care insurance planning, and many may be rendered utterly useless by inadequate health care planning.  Please contact our office if you want or need a referral to competent and capable health care planners.  

To read the full opinion, go here.  If you are interested in the history of the use of Sole Benefit Trusts, particularly in Michigan, go here and here, and for an argument advocating why Sole Benefit Trust assets should be protected from Medicaid spend down, go here.       

   

Maryland Repeals Filial Responsibility Law

Maryland has repealed its little-used filial responsibility law. Maryland's filial responsibility law provided that adult children are obligated to financially support an indigent parent with basic needs such as food, care, shelter, and clothing. The law was not used much in nursing home cases because Maryland law also prohibits a nursing home from holding adult children responsible for a parent's nursing home bill unless the child consents in writing to be financially responsible. However, the law could have been used when a parent under age 65 was under the care of a psychiatric hospital, or for parents receiving nursing home care paid for by Medicaid in resource recovery after the parent's death.

 Although, like many states, Maryland never used its filial responsibility law to seek repayment of Medicaid benefits, other states have followed the recommendation of the  Centers for Medicare & Medicaid Services (CMS) policy analysts in expanding Medicaid resource recovery efforts to include application of the law.  These states include Pennsylvania, Connecticut and South Dakota.  

  

The repeal saw bipartisan support.  The arguments for repealing the law included that filial responsibility laws were a holdover from Elizabethan times, and that a parent’s failure to exercise sound financial planning should not burden the parent’s adult children.  Of course, one only needs to witness the chaos created by filial responsibility laws in Pennsylvania to justify repeal. 

Idaho repealed its filial responsibility law in 2011.  Only Maryland and Idaho have repealed filial responsibility laws in the modern age, rejecting the havoc that such laws often play play in creating family disputes and  discord, and in potentially negating responsible long term care financial and estate planning.   A host of other states continue to keep and enforce filial responsibility as state law.

 To read the full repeal, go here.