Hazen Elder Law: The Law Office of Marielle F. Hazen

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Legislative Update Summary Elder Law

This article was prepared for the Woman's Legislative Exchange in the Winter of 2006 to provide a Pennsylvania legislative update.

  1. Act 42 of 2005 was signed into law on July 7, 2005. It amends the Public Welfare Code as follows:
    1. Section 441.3: Three month retroactive limit on unpaid medical expenses. Only medical expenses incurred on or after the first day of the third month before the month of application may be deducted from countable income, provided the expenses were not previously deducted in determining eligibility for medical assistance.
    2. Section 441.4: Limit of $10,000 on unpaid medical expenses unless showing of "undue hardship" which is defined as depriving the individual of medical care and endangering the individual's health or life; or the individual or a financially dependent family member would be deprived of adequate food, shelter or other necessities of life.
    3. Section 441.5: Partial month ineligibility for asset transfers. Transfers totaling five hundred dollars ($500) or less in a calendar month will not be subject to the penalty. This will be administratively difficult for the County Assistance Offices (CAO's) to administer. They will be required to calculate partial months of ineligibility. The calculation will be different depending upon the number of days in the month.
    4. Section 441.6: Modification of Hurly rule to require purchase of an annuity in an amount equal to the difference between the community spouse's Minimum Monthly Needs Allowance (MMNA) and the community spouse's income from all sources if the community spouse survives the institutionalized spouse. The annuity must be purchased and must be actuarially sound, guaranteed, pay in equal monthly installments, and name the department as the contingent beneficiary in the event that the community spouse predeceases the guaranteed period of the annuity. If the annuity is purchased and the community spouse's income from all sources including the annuity is still less than the monthly maintenance needs allowance, the institutionalized spouse may transfer sufficient income to bring the community spouse's income up to the monthly maintenance needs allowance.

      This provision raises significant concerns. The most obvious is the administrative nightmare it presents for the CAOs in trying to project the amount of income the community spouse will have upon the death of the institutionalized spouse. Further, the requirement of purchasing the annuity may create a hardship for the community spouse by restricting their access to the assets for use in paying for assisted living or other levels of care needed by the community spouse. These provisions are very problematic and will result in significant hardships for low income community spouses.
    5. Section 441.7: Treatment of Life Estates, Annuities and other Contracts. With regard to life estates, as a condition of eligibility for medical assistance, every applicant or recipient who owns a life estate in property with retained powers to revoke, amend or re-designate the remainderman must exercise those rights as directed by the department. Acceptance of medical assistance shall be deemed an assignment by operation of law to the department of any right to revoke, amend or re-designate.

      With regard to annuities, an annuity contract purchased by an individual will not be considered an available resource if the annuity meets the following requirements: (1) Is an irrevocable guaranteed annuity; (2) Guarantees to pay out principal and interest in equal monthly installments with no balloon payment to the individual so that payments are paid out over the actuarial life expectance of the annuitant; (3) Names the department as the residual beneficiary of any funds remaining due under the annuity at time of death of the annuitant, not to exceed the amount of medical assistance expended on the individual during his or her lifetime; and (4) Is issued by an insurance company licensed and approved to do business in this Commonwealth.

      Further, "Any provision in any annuity or other contract for the payment of money owned by an applicant or recipient of medical assistance, or owned by a spouse or to the legally responsible relative of such applicant or recipient, that has the effect of limiting the right of such owner to sell, transfer, or assign the right to receive payments thereunder, or restricts the right to change the designated beneficiary thereunder, is void." Further, there shall be a rebuttable presumption that any annuity or contract to receive money is marketable without undue hardship.

    6. Section 441.8: Eligibility for home and community based services will be the same as for nursing facility services. Applicants for home and community based services will have to meet all of the medical and financial eligibility requirements for medical assistance as have to be met for payment for nursing facility care or the equivalent level of care in a medical institution. This is a significant change because previously to qualify for the home and community based services, a review was done of only the applicant's resources and income. The resources of the community spouse were not considered. This change will significantly limit the number of individuals able to qualify for home and community based services. It will be applied retroactively which will result in current recipients of benefits having their services terminated.

  2. Act 43 of 2005 was signed into law on July 7, 2005. It amends Title 23 of the Pennsylvania Consolidated Statutes Annotated (Domestic Relations) by adding Chapter 46 entitled "Support of the Indigent." This chapter was added to those sections of the Domestic Relations Laws which regulated child and spousal support obligations and procedures. Act 43 repealed the Act of June 24, 1937, known as the Support Law, a little known set of laws having their origins in colonial era poor laws. Act 43 contains the following provisions:

    1. 23 Pa.C.S.A. §4603. Relatives' Liability; Procedure.

      Under this section, spouses, children and parents have the responsibility "to care for and maintain or financially assist an indigent person, regardless of whether the indigent person is a public charge." Other than noting that an "indigent person" is not limited by definition to one who is a public charge, the term "indigent person" is not defined anywhere in chapter 46. The renewed focus on this provision energizes access to the rarely enforced "filial" support obligations, which are those obligations that run from adult child to parent. In addition, this chapter legislates liability for the care and maintenance of children, without regard to age or emancipation. With the exception of calculations of liability pertaining to medical assistance claims, the amount of liability shall be set by the Court in the Judicial District in which the indigent person resides. There are no guidelines in the law for this determination.

      As to "medical assistance for the aged" (aged also not defined), the calculation is express. Determine an adult child's monthly income and the amount needed for the "reasonable support" of the adult child and his or her dependents. The child's contribution during any 12 month period is then the lesser of six times the excess of his or her monthly income over his or her reasonable support, or the cost of the medical assistance for the aged parent. It is unclear whether the Court or the Department of Public Welfare is responsible for the calculation and the determination of "reasonable support"; however, the best reading of this provision favors the latter.

      This law potentially requires adult children who are deemed financially able to share in the huge costs of long term nursing care and the myriad of other medical services provided by the Department of Public Welfare for needy persons.

      Although Act 43 has been portrayed as a mere consolidation of the Commonwealth's support laws, it is of great concern that it was passed contemporaneously with Act 42 and similarly without the opportunity for public comment. Act 42 passed into law a number of provisions which reduced access to medical assistance benefits for long term care. The Pennsylvania Bar Association formally opposed the proposed legislative amendments to the Public Welfare Code, which led to the passage of Act 42. Financing long term care is a major problem faced by our society as more and more are able to live longer. However, just as the answer should not be found by limiting the one public benefit available for helping with the costs and further burdening the middle class elderly, it also should not be found by turning to adult children who are saving for their own later years.

      With this renewed emphasis on the predominantly dormant laws providing for relative support of the poor and aged, there is the strong potential that the Domestic Relations Code will become the basis for frequent claims by hospitals, nursing homes, pharmaceutical providers and miscellaneous other creditors.
    2. 23 Pa.C.S.A. §4606. Guardianship.

      New chapter 46 of the Domestic Relations Code, entitled "Support of the Indigent," includes recodified provisions pertaining to guardianship. In accordance with Section 4606, "[A]ny public body or public agency caring for or assisting any indigent person may petition the Court of Common Pleas, if the person is of full age, or the Orphans' Court, if the person is a Minor, for a rule to show cause why the public body, public agency or some other person appointed by the Court should not become the legal guardian of the person and property of the person." (emphasis added).

      There is no requirement for incapacity. It is sufficient to be poor, or whatever else is deemed "indigent" under this statute. Nevertheless, no person for whom a guardianship has been appointed under this section shall be relieved of the guardianship except upon his or her own petition to the Court and the Court's subsequent satisfaction that "the person has become able and willing to resume control of the person's own person and estate" and the public body or agency "has been fully reimbursed for the expense of the person's care or assistance or that all of the person's estate has been expended for the reimbursement."

      These provisions originally enacted as part of archaic support law passed in 1937 and now given new life as a result of the recodification seriously conflict with the purposes, principles, language and tenor of the Commonwealth's modern guardianship laws, set forth at 20 Pa.C.S.A. §§5501 et seq.

  3. House Bill Number 2178. Would amend the act of May 17, 1921 (P.L. 789, No. 285) regulating the solicitation of insurance to certain elders, and prescribing penalties. This Bill was referred to the Committee on Aging and Older Adult Services on November 1, 2005.

    The sale of inappropriate annuities to elders in Pennsylvania is a widespread problem as recognized by Attorney General Jerry Pappert in 2004 when he filed a civil action against 16 defendants for the unlawful sale of living trusts and annuities to seniors. The press release issued by the Attorney General's office dated October 28, 2004, provides that the "defendants exploited the trust that many elderly consumers placed in them when they knew these older citizens could not determine what was in their best interest. In one case, an 85-year-old Delaware County man unknowingly was sold a 10 year deferred annuity with his first payment due when he turns 95." Mr. Pappert was quoted in the press release as saying, "In my view, these actions are unconscionable. Consumers were lied to and deceived into purchasing long-term annuities based on what the defendants would make in commissions. The sales commission rate was higher if the pay-out period to consumers was longer. I am proceeding against these defendants with every appropriate remedy available under the law."

    Members of the Elder Law Section of the Pennsylvania Bar Association regularly see elderly clients who have been sold inappropriate annuities. In many cases these clients have been significantly and irreparably financially harmed by the purchase of the annuity. In most cases, the elderly clients had little to no understanding of the terms of the annuity or of the commission that was paid to the insurance producer for the sale of the annuity.

    House Bill Number 2178 provides for important protections for the elderly by regulating the advertisement, sale, solicitation, and negotiation of life, disability and long-term care contracts of insurance or annuity contracts to individuals 65 years of age or older. The provisions of this bill would prohibit many of the deceptive advertising and sales tactics used to sell these products to seniors, and would provide for important enforcement authority for the Insurance Department of the Commonwealth.

    Some of the prohibited acts are as follows:
    1. Using a name which is deceptive or misleading with regard to the true purpose of the advertisement;
    2. Using any symbol, mark or slogan that gives the appearance of association with or endorsement by a governmental or nonprofit agency;
    3. Using the terms "seminar", "class" or "informational meeting" or any substantially equivalent term to describe a sales event unless the advertisement also includes, in the same type size and font, the words "an insurance sales presentation" immediately following those terms; and
    4. Conducting a sales event without appropriate credentials, which include: Certified Financial Planner, Certified Financial Analyst, Chartered Financial Consultant, Chartered Life Underwriter, Certified Leadership Fellow, Certified Public Accountant, Certified Trust and Financial Advisor, Registered Employee Benefit Consultant, Registered Health Underwriter and licensed attorney with at least 50% of his practice dedicated to estate planning or financial planning.
  4. Senate Bill Number 628. Would amend Titles 18 (Crimes and Offenses) and 20 (Decedents, Estates and Fiduciaries) of the Pennsylvania Consolidated Statutes. Provides for Healthcare Powers of Attorney, Living Wills and implementation of out-of-hospital nonresuscitation orders. The bill was reported as committed from the Senate Judiciary Committee on May 10, 2005. It received first consideration in the Senate and was referred to the Senate Appropriations Committee on May 11, 2005.
  5. House Bill 1554. Amends the Health Care Facilities Act prohibiting nursing facilities from requiring a third party to guarantee payment for residents or prospective residents. It includes provisions defining who may be required to pay for a nursing facility resident's care. This bill is on the House calendar for final consideration.
  6. House Bill 2238. Amends Title 20 (Decedents, Estates and Fiduciaries) by requiring Agents under Powers of Attorney to file annual reports with the clerk of the orphans' court in the county where the principal resides.
  7. House Resolution 131. Directs the Joint State Government Commission to review current guardianship statues and programs and make findings and recommendations on effectiveness of these sates and programs in meeting needs of vulnerable incapacitated persons.
  8. House Bill 2621. Provides for a life insurance policy with a total face value of not more than ten thousand dollars ($10,000) to be excluded as a countable resource for the purpose of determining eligibility for medical assistance.
  9. Deficit Reduction Act of 2005. Effective February 8, 2006. Includes the following significant changes to federal Medicaid Laws:
    1. Transfer Penalties. All transfers, whether to individuals or trust, will now be subject to a 5 year lookback. The penalty period for uncompensated transfers will commence on the later to occur of the first day of the month in which the transfer was made or the date on which an individual is eligible for Mediciad benefits and would otherwise be receiving institutional level of care based on an approved application for care, but for the imposition of a penalty period.
    2. Income First Rule. Community spouses with income below the monthly maintenance needs allowance will have to first take income from the institutionalized spouse to make up the shortfall. Low income community spouses will no longer have the option of protecting additional resources first to generate income.