LIMITATIONS ON DEPOSITS AND PREPAYMENTS FOR NURSING FACILITY CARE IN MEDICARE AND MEDICAID

— THE PROBLEM —

Ms. L, a 76 year old Medicare beneficiary who is receiving treatment for a heart condition and emphysema, recently fell on her sidewalk, injuring her knee, chin and teeth. She was admitted to the hospital for treatment and observation for her knee; while there, she was found to have medical issues related to her heart and lung conditions. After four days, she was ready to be discharged to a nursing facility; however the nursing facility asked for a deposit equal to one month’s charges before it would admit her.

Nursing facilities may describe the deposits they demand as security deposits, payment of the first month’s charges, prepayment of the next month or prepayment of the Medicare co-insurance for days after the 20^th day of stay. A one month’s charge for nursing facility care averages over $4500, an amount that is virtually unaffordable by any but the wealthiest individuals. The inability to pay such a deposit could result in Ms. L. being denied admission for much-needed care or, alternatively, having to ask her relatives or friends to help make the payment. In most instances, however, beneficiaries of the Medicare and Medicaid programs are protected, as such charges are impermissible under federal Medicare, Medicaid, and nursing home reform law; other laws may circumscribe their use as well.

MEDICARE

Medicare law prohibits Medicare providers from charging Medicare beneficiaries for services that are eligible for payment by Medicare. This includes the prepayment of co-insurance, such as that required for skilled nursing facility services received after the 20^th day in a skilled nursing facility (SNF).

In applying these legal protections, questions that would be relevant to Ms. L’s circumstances are:

1. Was her hospitalization a qualifying event entitling her to skilled nursing facility coverage?  Medicare beneficiaries are entitled to medically necessary skilled nursing facility services for post-hospital care after a three-day prior hospitalization. However, if Medicare denied coverage for the hospital stay because, for example, it believed Ms. L could have been served on an outpatient basis, even the fact that Ms. L was in the hospital for four days would not make it a qualifying hospital stay. The prohibition against charging Medicare beneficiaries does not apply "where it is clear upon admission that payment under Medicare Part A cannot be made." If the nursing facility knew that Medicare had denied payment for the hospital stay, it might be protected.

2. Is her receipt of skilled nursing facility services medically necessary?  Aside from the question raised above about the qualifying hospital stay, if the skilled nursing facility determined that Medicare was not likely to cover Ms. L’s SNF stay because, for example, she does not need skilled nursing care, it might demand the deposit on those grounds - that the stay is not Medicare-covered and therefore the facility is not prohibited from asking for prepayment. However, the facility is obligated to provide Ms. L with a notice saying that it believes her stay will not be covered by Medicare but that, if she wishes, she can ask the facility to submit a bill to Medicare so that a formal determination of coverage can be made. Such a bill is called a "demand bill;" the requirement for it came from a lawsuit called Sarrassat v. Sullivan, about thirteen years ago. If Ms. L requested a demand bill, the facility would be prohibited from charging her at all until a determination of Medicare coverage had been made by the fiscal intermediary.

3. Was the facility to which she sought admission certified as a Medicare skilled nursing facility?  Medicare will only pay for skilled nursing services provided in a Medicare-certified skilled nursing facility, so it would be important for Ms. L to find such a facility for her post-hospital services. About 86% of the nation’s nursing facilities are fully or partially certified for participation in Medicare; nearly 80% of nursing facility beds are. Still, a facility might have only a portion of its beds certified for Medicare; if Ms. L were not in a Medicare-certified bed, she would have a harder time arguing that the protections of the law applied to her if the facility had given her notice that it was placing her in a non-certified bed.

In summary, Medicare law would protect Ms. L from having to pay a deposit upon admission to a Medicare bed in a skilled nursing facility if she had a qualifying three-day hospitalization and needed institutional skilled nursing care. The facility can charge her for coinsurance (for the 21^st through 100^th day of SNF coverage) on or after the day to which it applies. For goods or services not included in the Medicare payment, such as a private telephone, it can only charge her for items she has requested and it cannot make requesting the items a condition of admission. Moreover, if the facility has incorrectly charged her for covered services or services she did not request, it must refund her money.

MEDICAID

If Ms. L had little income and few assets in the bank and qualified for Medicaid as well as Medicare, she would be entitled to additional protections from demands for deposits that exist in the Medicaid law and that would not depend on having a qualifying hospitalization or needing skilled nursing care in an SNF.

Although Medicaid coverage varies in many ways from state to state, every state must include both hospital and nursing facility coverage in its Medicaid program for low-income older people and people with disabilities. "Nursing facility" coverage comprises both skilled care (identical to what Medicare covers) and "health-related care and services" above the level of room and board that can only be made available in institutional facilities. Under Medicaid, neither level of care requires prior hospitalization.

Like their Medicare counterparts, Medicaid providers must promise, as a condition of participation, not to charge beneficiaries for covered services, except for co-payments, such as the share of cost that most Medicaid recipients pay to nursing facilities from their own income. Medicaid law requires providers to accept Medicaid payment - including the share of cost - as payment in full.

In addition to the payment in full requirement, Medicaid providers are prohibited from charging Medicaid beneficiaries any amounts not required to be paid by the state Medicaid plan as a precondition for admission to or continued stay in a nursing facility if their care in the facility is covered by Medicaid. This prohibition appears in two places in the law - in a section describing criminal conduct by a facility and making such conduct a federal felony, and in a section of the nursing home reform law of 1987 that describes federal requirements for nursing facilities’ admissions policies concerning Medicaid beneficiaries. These provisions - payment in full and limitation on extra charges - make the demand for a deposit unlawful. At the time of admission, the nursing facility could rightfully ask for the monthly share of cost that is the individual’s responsibility.

Most of the provisions of the nursing home reform law, referred to above, apply to facilities participating in either Medicare or Medicaid or both (over 80% of all nursing facilities participate in both programs; only 2% participate in neither program). The reform law provides protections in addition to those contained in other places in the Medicare and Medicaid statutes, some of which will be helpful to individuals who are faced with demands for deposits or other prepayments.

Facilities must inform residents before or at the time of admission of services available in the facility and charges for those services, including services not covered by the Medicare or Medicaid rate. The facility may not charge for services not requested by the resident.

Facilities must also inform residents of their right to refunds for payments made that are subsequently determined to be covered by Medicare or Medicaid. This situation should arise most frequently when an individual has applied for Medicaid and is subsequently found eligible retroactive to a period for which she has already paid the facility.

Another helpful section of the reform law pertains to facilities’ managing and protecting residents’ funds. Facilities may not require residents to have the facility manage their funds, but must do so if the resident requests it. If the facility does manage the resident’s funds, it is governed by detailed requirements including payment of interest on funds over a specified amount and a prohibition on commingling the funds with those of the facility. If the facility had received a deposit from a resident that would not be permitted, it could be viewed as an instance of the facility managing the resident’s funds and the relevant protections would apply.

Facilities also may not require applicants for admission to waive their rights to Medicare or Medicaid benefits or to give assurances that they will not apply for such benefits in the future. Demanding deposits or other payments not authorized by either program is tantamount to requiring applicants to waive their rights, since their rights include protections from such payments. An applicant who has applied for or is close to applying for Medicaid and who has a small amount of money in the bank above the amount Medicaid allows might argue that a deposit that would deplete that amount to below what Medicaid allows violates this protection, since it requires payment of money that Medicaid would not require to be paid over to the facility. A similar argument could be made with respect to deposits demanded from couples who have larger amounts of assets protected by the spousal anti-impoverishment provisions of the Medicaid law.

Finally, facilities are prohibited from requiring third parties who have no legal responsibility for an individual’s finances to guarantee payment in order for the individual to be admitted. If a facility will not admit an individual without the payment of a deposit and the individual must seek such payment from a family member or friend because she does not have enough money, the payment by the third party might violate the third party guarantor provision.

Admission to a nursing facility often follows either hospitalization or a traumatic or acute episode at home. Even when that is not the case and people are looking because informal caregivers have become exhausted or are no longer able to care for their loved ones, nursing home admission is an emotionally difficult time for individuals and their families to bargain and negotiate for their rights. Ms. L has both institutional and financial pressure to leave the hospital and needs a nursing home placement quickly; she will not have the luxury of picking and choosing those aspects of a facility’s admissions policies that please her. Nonetheless, it will be helpful for her and her family to know her rights in advance so they can, at least, question the facility’s practices and, at a minimum, seek redress after admission.

Because advocacy related to facility admissions policies and practices is difficult to undertake effectively on an individual basis, it is helpful for advocates for people needing nursing facility care to survey facilities in their area and know what the facilities’ practices are with respect to deposits and prepayments, as well as other aspects of admission. Advocates can then also alert federal and state surveyors and ombudsmen to improper practices and seek changes in such practices on a facility-wide basis.

42 U.S.C. § 1395cc(a)(1)(A)

42 U.S.C. § 1396i-3

42 U.S.C. § 1396r

42 C.F.R. § 489.22

42 C.F.R. § 447.15

Skilled Nursing Facility Manual, Ch.3 §§317, 318
CMS Regional Office Manual, Part 6 (May 21, 1979). Medicaid Guidelines, Transmittal No. 16 (Medicare and Medicaid Guide, CCH, ¶ 30,144)
State Operations Manual, Appendix P, Survey Protocol for Long-Term Care Facilities, Part II

Sarrassat v. Sullivan, No. C 88-20161 RPA (N.D. CA, Sept. 19, 1989)

© Center for Medicare Advocacy, Inc. 05/02/2008