Nursing homes, patients win debt payments in Medicaid settlement

Thousands of low-income nursing home patients in Maryland will have millions in old debts wiped out now that the state has settled a years-long case involving Medicaid payments.

Much of the $16 million settlement will go directly to nursing homes that had not received payments from those patients.

"We're starting to send checks to nursing homes now," said Cyril V. Smith, a lawyer for Zuckerman Spaeder LLP who represented the 12,000 Maryland patients who owed the money to about 160 nursing homes. "This wipes out a lot of debt."

The money was about a quarter of what the nursing homes said they were owed from 2002-2005, when Smith and others filed a class-action lawsuit in Baltimore Circuit Court.

But perhaps more important than the one-time payment, he said, is the change in obscure state Medicaid rules that will aid future nursing home patients and could become a road map for other states. Those rules govern how — and when — a patient is required to make a co-payment for nursing home care.

In order to qualify for Medicaid, the federal-state program for the poor, an individual must deplete his or her assets to reach a $2,000 threshold. Often, that patient needs care before reaching that limit and can accumulate thousands of dollars in nursing home bills.

According to the federal Centers for Medicare and Medicaid Services, which oversees the program, Maryland and other states had been calculating a patient's contributions incorrectly all along. They had been requiring all Medicaid recipients in nursing homes to make co-pays regardless of their old debts.

Now, state managers of Medicaid will no longer require co-pays from those who accumulated debt at nursing homes in the months leading up to their eligibility for the program. Instead, the patients can use the money to pay their past-due nursing home bills.

Since the patients will no longer be sending co-pays, the state will make up the difference for the nursing homes. Co-pays had been based on the patients' income, mostly from Social Security and pensions.

The state agreed to forgo these co-pays until three months of old debt is repaid.

And to clear the old debt that accumulated on nursing home books, the state and federal governments will make a one-time $16 million payment.

Some of the money will repay families that did pay the bills out of pocket when they should have been able to use the Medicaid recipients' income. That includes Gail Martin of Catonsville, whose mother was a plaintiff in the class action.

Martin put her mother, Mary Huck, into a nearby nursing home and dutifully wrote a check out of her mother's account to pay the bill for years.

After she paid the last check around 2005 and the bank account was empty, she applied for Medicaid. But, she said, the last check for $4,500 had not cleared before the application was reviewed, so her mother appeared to have too much to qualify for another month.

As the financially responsible person for her mother, that meant she had to pay that month's bill herself, which she did in installments over the next year. In other cases, the responsible person never paid the bills, and either the patient was removed or the nursing homes absorbed the loss.

Martin, a social worker and single mother with two kids in college, said it was money she didn't have. So she was relieved when she got a letter in the spring saying that her mother, who has since died, was a party in a successful suit.

"There was a sense of outrage at the unfairness about it," she said. "I truly spent down her money, carefully watching when I'd be able to apply for Medicaid for her. ... When I got a notice in the mail about the class action lawsuit, I read it carefully and said, 'This sounds like it could be me.'"

She said she's not sure how much she'll get from the settlement — the lawyers say she might get the whole amount. But "anything at this point is a blessing," she said.

The new system will be costly for the state, though it's not clear exactly how much more money Maryland will have to spend while patients are paying down their debts.

John Folkemer, Maryland's deputy secretary for health care, couldn't offer a dollar figure over time. Immediately, the state is responsible for $8 million of the $16 million settlement; the federal government will pay the other half.

He did say the average rate Medicaid pays for nursing home care is just over $200 a day, he said.

In total, last fiscal year, there were 910,000 people in the state's Medicaid program. And Maryland's share of the expenses was about $3 billion, or a little less than half the total cost of the program. About $1 billion of that goes to nursing homes in Maryland.

"We did have to change what we thought was a legitimate practice," Folkemer said about charging co-pays to those with debt. "Now we tell them not to pay for the few months or so until they pay off their debt."

Jason Frank, an elder care attorney at Frank, Frank & Scherr in Lutherville who is not associated with the lawsuit, said the outcome was good for nursing home patients and nursing homes.

While the homes won't get paid at the time they perform the services, as they would like, they will get paid at least some of the money eventually. Given the small incomes of most Medicaid recipients, it could take them two years to repay three months of debt, he said. And many are likely to die before they're done paying.

The lawsuit will affect fewer patients, he said, because many just never paid their old bills. But, he said, they and their families are relieved of a financial burden. The new system could be particularly helpful to spouses, who wouldn't have to pay out of pocket and could use the patient's income to pay the debt.

The model could be used in other states, Frank said, though it's not clear how many are not now conforming to the federal rules. Smith already has settled a similar case in Washington.