Deciphering the Impact of Affordable Care Act on the Special Needs Clients

David Lillesand

Itisasplitdecision.TheSupremeCourtupheldtheconstitutionalityofhealthinsurance industryreforms,butlimitedthefederalgovernmentsabilitytoforcetheextensionofMedicaidto millionsofuninsuredpoorworkingfamilies.Thiswillsubstantiallyassistsomemiddleandupperincome familieswhohaveadultchildrenwithdevelopmentaldisabilities.Forothers,whowerehopingfor universalhealthinsurancecoverage,theAffordableCareActsinability,accordingtotheSupremeCourt, toforcestatestoexpandMedicaid,willawaitstatelegislativeactiontoparticipate,ornot,inthefull benefitforallitscitizens. Onethingisclearfromalawyersperspective,particularlyonewhorepresentsfamiliesand individualstryingtosecurehealthservices,manyclientswillneeduslessthantheyhaveinthepast. AndIcouldntbehappierforthem.UnlessthereispoliticalinterventioninJanuaryofnextyearduetoa changeofgovernmentinNovemberthefullimplementationofhealthinsurancereformsonJanuary1, 2014,willmeanthatthosewhohavetheabilitytopurchaseprivatehealthinsurancewillbeabletodo so. Ofnote,however,theAffordableCareActishealthinsurance.Itisnottheprovisionof residentialorotherextraordinaryservicesoftenprovidedtodevelopmentallydisabledindividualswho cannotlivealoneandneedeithernursinghomeorgrouphomeservices.Privatehealthinsurancehas nevercoveredthoseitems.TheAffordableCareActdoesnotchangethat. Forthespecialneedstrustpractitioner,thefocusisondisability.Currently,thelegalstatusof disabledisbothanegativeandapositive.Beingdisabledunderthelawnegativelyaffects,tothe pointofexclusion,anindividualsabilitytopurchaseprivatehealthinsuranceduetoapreexisting condition.Inspiteofthefinancialabilitytopurchaseprivatehealthinsurance,healthinsurance companieswillnotsellittoadisabledcustomer.Onthepositiveside,currentlyatleast,thelegal statusofdisabledasdeterminedbytheSocialSecurityAdministration(SSA)orastateMedicaid agency,fulfillsthefirstprongtosecuringpublichealthcare(Medicaid).Thesecondprong,havinglittle incomeandfewassets,isthedrivingforceforthespecialneedspractitionerhelpingindividualslegally shelterexcessresources(thoseover$2,000)inthesafeharborofanoncountableSpecialNeedsTrusts. TheAffordableCareActchangesthispositivenegativedynamicbecauseitreformshealth insuranceindustrypracticesandopensthemarkettopersonswithdevelopmentaldisabilitiesand others. Tothepersonwhohasbothdisabilitiesandmoney,orhasfamilythathastheabilitytopayfor healthinsurance,thepoliticalfocusontheindividualmandateIamnowrequiredtobuyhealth insurancewasneveraproblem.Theproblemalwayswastheoppositeindividualswithdisabilities wereexcludedbytheprivatemarket.UntilACAcamealong,theironlychoice,however,waspublic insurancethroughMedicareorMedicaideligibility,whichinturn,requiredafavorabledeterminationof eligibilityforSSDIorSSIdisabilitybenefits.One(afindingofdisability)triggerstheother(health

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insuranceeligibility)andcurrentlyprovidestheonlyoptiontosecuremedicalcareformillionsof personswithdisablingconditionswhoarerejectedduetopreexistingconditions. Inourlawpracticeweoftenseedisabledclientswithfundsthatpotentiallyresultin disqualificationfrompublichealthinsurance(Medicaid)forbenefitsthathadbeenreceivingforsome time.Althoughtheynowhavefunds,theyarestillexcludedfromtheprivatemarket.Generally,our typicalspecialneedstrust(SNT)clientsarepersonswhosuddenlyacquirewealththroughaninheritance orapersonalinjurysettlement.Wehavetodosomespecialneedsplanningusingspecialneedstrusts, personalservicecontracts,SSIspenddownplans,prepaidcontractsforroomandboardcontractsand otherlegaltransferstoguaranteecontinuedaccesstohealthcare. ACAchangestheworldforpersonswithdisabilitiesandfundswhowillnowhaveachoice betweenpublicorprivatehealthinsurance.Forsignificantfinancialaswellashealthreasons,we believethatprivatehealthinsurance,notMedicaid,willbesoupdjourforthevastmajorityofSNT clients.Wecannotknowforcertain,butIwouldnotbesurprisedtoseepersonswithdisabilitiesleaving publichealthinsurance(Medicaid)fortheprivatemarketinJanuary,2012. ThemostobviousandmostsignificanthealthindustryreformimportanttoourSNTclientsisthe eliminationofpreexistingconditionsasabartopurchasingprivatehealthinsurance.However,ACA alsoeliminatesannualorlifetimecaps,rescissionofinsurancepolicies,nonrenewability,andhigher premiumcostsforpersonswithpreexistingconditions.Forindividualswithsignificantmedical problems,eliminationofcostcontainmentceilingsisjustasimportantasaccesstothedoorofprivate medicalcare.Itisnotunusualtoseeclientswhohavemaxedouttheirlifetimecapandarenowseeking publichealthinsurance. WhywouldclientsopttopayforprivatehealthinsuranceratherthanfreeMedicaid?Thetwo majorreasonsarefirst,securinghealthinsurancewithoutapaybackondeathandsecond,accessto significantlybettermedicalcare. AnySNTdraftingattorneycaneasilycomeupwithalltheotherreasons.Theyarethepointsof resistancehearddailyininitialSNTclientconferencesastowhytheclientdoesnotwantaspecial needstrust. Statedpositively,additionalreasonstooptoutoftheSNTSSIMedicaidrouteandpurchase privatehealthinsurancedirectlyincludetheabilitytohavebothfullmedicalinsuranceandthedignityof havingdirectcontrolofonesownresources(notrusteerequiredaswithSNTs)aswellaseliminatinga longlistofthingsthathavenointrinsicvaluebythatImeanhavingtouseameans(SNTs)toanend (accesstomedicalcare).Purchasingprivateinsuranceeliminateshiringandpayinganattorneytodraft aspecialneeds;lifetimepaymentofbankandtrusteefeeswhichcanbeasmuchas$15,000peryear eveninsmall(under$1million)trustcases;restrictedaccesstoonespersonalfundswithouthavinga trusteejumpthroughthehoopsofthefivetrustdistributionrules;removingthelimitationonsharing thenewfoundwealthwithspouses,childrenandotherswithoutthelimitationsoftheSSI/Medicaid solebenefitrule;andtheeliminationofcourtfeesorhearingstoestablishaspecialneedstrustas nowsometimesrequired.

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Onthefinancialside,themostsignificantbenefitofusingprivatehealthinsuranceoverpublic healthinsurancewillbetheavoidanceoftheMedicaidpayback.IwillnothaveMedicaidpaybackwhenI diebecauseIamnotusingMedicaid.Ihaveprivatehealthinsurance.Forpersonswithdisabilities,who mayneedsignificantmedicalcare,usingMedicaidcanbuildupaverylargelienveryquickly.Sinceby lawprivatehealthinsurancepremiumsforsickprivatelyinsuredclientswillbeidenticaltothoseofus ingoodhealth,itsprettymuchanobrainertooptforprivatehealthinsurancegetbettercareforonly thesmallcostofthepremium,notthecostoffullreimbursementforthepaymentsmadetoallmedical providersduringoneslifeasintheMedicaidprogramwhichhasbothSNTliensandestaterecovery liensatdeath. Thereisanotherreasonthatclientswilloptforprivatehealthinsurance.Itsthesamereason thatnoneofusworktoarrangeourfinancestoputourchildrenorourselvesonMedicaid:inmany states,itssimplyterriblecoverageandgettingworse.Forexample,Theprogramissobadlyrunbythe Republicanleadershipinthelast14years,thatinFloridaonly8percentofphysicianstakeMedicaid. Therearelongwaitinglistsofthreetosixmonthstoseeaprimarycarephysician.Referraltoa specialistisoftennearlyimpossibleormayinvolvea150mileroundtriptofindtheclosestphysician specialistwhoisamongthe8percentwhotakeMedicaid.Forexample,countieswithtwentyormore convenientlylocatedprivatepediatricneurologistssometimeshavenonewhoacceptMedicaid. Furthermore,aclientwhoisillorinjuredneedsabetterinsuranceplanthantherestofuswhomayonly seeadoctoronceeveryfiveyearsforacheckup.Medicaidisnotthatplan.Theclientneedsthebest hospitalsandbestphysiciansintown.Therefore,adisabledclientwhojustsettledapersonalinjurycase forasubstantialamounthastolookatgoodprivateinsuranceasthefirstoption,notthepolitically malignedandconsistentlyattackedpoormansinsurance,Medicaid. InmakingthatchoicebetweenprivatehealthinsuranceandpublicMedicaidviaaspecialneeds trustwithaMedicaidpaybackforthetypicalpotentialSNTclient,theresultispreordained. Howdoweknowthat?InFloridaandtwentyotherstates,ObamaCareisalreadyinplacefor personswithpreexistingconditionswhohavebeenexcludedfromtheprivatehealthinsurancemarket. AtthispointalimitednumberofthemareeligibleforthefederalPreexistingConditionInsurance Program(PCIP)describedatwww.pcip.gov.Almosteverysinglemonth,however,ourofficehaslosta newSNTcasetothePCIPprogram(purchasinggreatprivatehealthinsurance)whenwepresentedthe plusesandminusesofbothtotheclient.Fullyinformedclientchoicewillalmostalwaysendupwithan unopenedSNTfile. Willtherestillbesomeclientswhowilloptforspecialneedstrusts?Yes,buttoaverylimited degree.Thoseclientswithsmallsettlementsorinheritanceswhosenewfoundwealthisinsufficientto payprivatehealthpremiumsandcopayswilloptforSNTswithoutregardtotheMedicaidpayback. Theyhavenochoice. Whatwillhappentothosedisabledpersonswhoalreadyhavecreatedandarebeneficiariesof SpecialNeedsTrusts.InJanuary,2014,IforeseeoldSNTclientscomingbacktoreassessthesituation andperhapsleaveMedicaidbecause,atthatpoint,theseformerclientswhoarenowSNTbeneficiaries

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willbecomeeligibletopurchaseprivatehealthinsurance.JustbecauseoneiseligibleforMedicaiddoes notmeanonehastocontinueonpublicinsuranceorthatitisdesirabletodoso.Whatwillbethe optionsforclientswhoalreadyhaveSNTs? First,oneoptionmaybetoterminatetheSNT,payofftheexistingMedicaidlien,purchase privatehealthinsurance,andavoidtheadditionallargerlienatdeath.Withahighlycompetentclient whocanmanagefundswithouttheadviceofatrustee,terminatingatrustandeliminating$15,000per yearintrusteefeesisanattractiveoption.InterminatingtheSNT,theSSIclientmustalsobewillingto giveupthemonthlySSIcheck,whichamountstoanetofapproximately$450permonth(aftertheIn kindSupportandMaintenancedeductionfromthefullSSIbenefit).Thelossof$450permonthmustbe measuredagainsttheeliminationoftrustmanagementfeesandrelatedtaxpreparationcosts,aswellas thesoftadvantagesofnothavingaspecialneedstrustnotedabove(dignity,access,sharing,etc.). Obviously,onewouldnotpayofftheMedicaidlienandclosethetrustifthelienislargerthanthetrust estate,orifthetrusthadinsufficientresourcestopayhealthinsurancepremiumsandcopays. Asecondoptionforsomeclientswillbetocontinuethetrustinplaceforthepurposeof financialmanagement,buthavethetrusteepurchasebetterprivatehealthinsurance.Thiswillhavethe dualbenefitofsecuringbetterhealthcareandnotincreasingtheMedicaidlienpaybackatdeath.There isnorequirementtopayofftheMedicaidlienifthepersongoesoffbenefits.Onlydeathtriggersthe obligationtopaytheMedicaiddeathlien.TheoptionofgivingupSSIandMedicaidbutnotterminating thetrustwillalsohavetheadvantageofmakingtrustadministrationeasiersincethelimitationson distributionswouldberemovediftheclientoptedtoalsogiveupSSIeligibility.Trusteescouldmake directpaymentoffundstothebeneficiary,forexample. Athirdoptionmaybetocontinuethetrust,purchaseprivatehealthinsurance,andmaintainSSI andMedicaideligibility.Inotherwords,theclientwouldcontinuetobeeligibleforSSIandMedicaid, butwouldaddprivatehealthinsurancetothemix.Privatehealthinsuranceisprimarywhenan individualiscoveredbyboth.Thiswillreducethelien,butleaveinplacethemonthlySSIincome,and thebackupofMedicaideligibilityforthosethingsthatprivateinsurancemaynotcover.Inthisscenario, unliketheoneabove,thetrusteewillstillhavetofollowthefiveSSIrulesfortrustdistributionsto maintainSSIeligibility.Manyyoungadultclientsarealreadyinthissituation.TheyhaveanSNTandSSI andMedicaideligibility,butarealsocoveredundertheirparentshealthinsurancesincetheyareunder age26.UnderACA,otherclientswithoutparentalcoverage,willalsobeabletohavebothpublicand privateinsuranceandSSI.Thisthirdoptionwillbemoreattractivewhenthetrusteeisafamily memberorisservingfreeofcharge. Isthereafutureneedforspecialneedsattorneysatthepointoftheclientsreceiptofan inheritanceorapersonalinjurysettlementtoreplacethed4Aord4Ctrust?Yes.Expertiseinmoney managementthroughtrustsingeneralwillbecomeimportant.Oftenprobateattorneys,but particularly,PIattorneysareasworriedabouttheclientsabilitytomanagefundsastheyareabout maintainingaccesstohealthcare.Forexample,ayoungmanwithborderlineIQwholostalegplaying footballwillnothavesignificantfuturemedicalneeds.Hemayevenbeemployableasasingleamputee. Buthandinghim$500,000inasinglelumppaymentclearlyhasitsdrawbacks.Specialneedstrust

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attorneyshaveacquiredexpertiseovertheyearsthatcouldbeusefulinpostsettlementlifeplanningas wellasestateplanningforthenewlywealthy.Theseattorneysunderstandtheprosandconsand limitations,particularlyintheeraofJ.G.Wentworthrepurchaseofstructuredsettlementannuities. Specialneedsattorneysalsohaveexperiencenegotiatingwithbanksonfeesandthetermsoftrust administrationagreements,andknowwhichbanksandtrustcompaniesarecompatiblewithoragood fitforourclientsandtheirindividuallifestylesandneeds.WealsoknowhowtoinsertTrustProtectors andcotrusteeshipintrustsituationssothatthereisabrakingforceonexcessivedepletionoftrust assets.Specialneedstrustexperiencecanstillbeavalueaddedbenefittotheclient,hisfamilyand thepersonalinjuryattorney,evenaftertheissueofsecuringhealthcarehasbeenremoved,anda normalSNTisnotused.Whetherpersonalinjuryandprobateattorneyswillcalluponspecialneeds trustattorneyswilldependinlargepartonwhetherSNTattorneyspivotawayfromaMedicaid eligibilitycenteredapproach,andmarketinsteadafinancialplanningbenefitmodel. ThiscommentaryisnotdirectedattheimpactofACAonpersonalinjurypractice,butitcannot beignoredthatthesizeofjuryverdictsandsettlements,whicharetheresofourtrustestates,willbe reducedunderObamaCare.Ifyouhaveattendedpretrialmediationsorjurysummationinapersonal injurycases,youllnotethatthelifecareplanpreparedbyplaintiffsattorneysCertifiedRehabilitation Counselorsinconjunctionwithactuariesandfinancialplannersisthebasisforthelargestverdictsand settlements,particularlyinstateswhichhavefollowedthenationaltrendofreducingcompensablepain andsuffering.UnderACA,theinjuredplaintiffwillbeassuredofaccesstohealthcareinthefuture,at onlythecostofthepremiumsandcopays.Sincefuturemedicalexpensesarethebulkoftheinjury claim,doesACAnotreducethesizeofthesettlementby80%ormore?Thedefenseresponsetoa personalinjuryclaimwillbetoofferstructuredsettlementstopaydirectlytheplaintiffsfuturehealth insurancepremiumsandcopays.Painandsuffering,lostofconsortium,derivativeclaimsandevenlost futureearningshaveinthepastbeenthesmallerelementsofapersonalinjuryormedicalmalpractice award.Consequently,itwillbecomeraretosee$10millionverdictsandsettlements. Finally,anoteabouttheimpactofACAonthespecialneedspracticeforthoseofuswhoinclude SSIandSSDIrepresentationinourpractices.TheAffordableCareActwilladverselyaffect(tothe claimantsbenefit!)ourSocialSecuritypracticeinthreeways. First,andthisisobviouslyanecdotal,ourofficehasruninformalsurveysofdisabilityclaimants, askingthemduringtheinitialinterview,Ifwecouldstrikeadealwiththegovernmentwherethey wouldgiveyouhealthcare,wouldyouagreetodropyourclaimforadisabilitycheck?Abouthalfthe respondentssaidtheywould.Theimpetusforapplyingfordisabilitywastotriggereligibilityformedical carethroughMedicaidorMedicare.Familiescanoftenprovidefoodandshelter,evenentertainment andotherextras,toamemberwithdisabilities.Whattheycantdoispayforanoperation,a$200,000 hospitalstay,oreven$1,800permonthformedicine.Furthermore,somepeopledontwanttoapply fordisabilityduetothestigmaofbeingdeclareddisabled.Recentlyaparentconsideredstopping,on theverystepsofthecourthouse,ourSSIclaimforher28yearolddevelopmentallydisabledsonbecause ourlegalbriefarguedthathersonmetthefederalListingofImpairmentsforMentalRetardation.She soopposedthephrase(eliminatedbyfederallawinallagenciesexceptSSA),thatsheseriously consideredstoppingtheproceedingsminutesbeforetheyweretobegin.Butshe,likeothers,was

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driventocontinuetheSSIclaimduetotheneedtotriggermedicalinsurance.Iamquitecertainthat hadaccesstomedicalinsurancebeenassuredasitwillbeonJanuary1,2012,shewouldhaveavoided theSSIdeclarationofdisabilityduetosonsmentalretardation.UnderACA,individualswhocan themselvesaffordprivatehealthinsurance,orwhohavefamilywhowillbuyitforthem,willnowbe abletomaintaintheirpersonalvaluesanddignity.Andnotapplyfordisability. Second,ACAisgoingtoaffectthenumberofdisabilityappealsevenifitwerenottoreducethe numberofclaims.AsmostSocialSecuritypractitionerscanattest,weoftenwincasesthatweredenied bySSAattheearlystagesbecauseweassistclientsingettingthemedicaltreatmentatpublichospitals andcommunityhealthclinics.Thenarmedwiththatinformation,wecandemonstratethroughlab reports,MRIsandotherobjectiveevidence,thattheclaimantmeetsaListingofImpairmentsoris otherwisequalifiedforbenefits.SSAhasneitherthedutynortheresourcestoassistdisabilityclaimants infindingmedicalcare.ItisthelackofmedicalrecordsthatcausesSSAattheearlystagestodeny appropriateclaims.Obviously,ifindividualswithmedicalproblemsaregettingtreatedunder ObamaCare,therewillbefewererrorsindenyingclaims,andtherefore,fewerappeals. Third,withaccesstoongoingtreatmenttoeliminateortocontrolmedicalproblems,some peoplewillbeabletocontinuetowork,orifinanacutestage,willgettreatmenttokeepmedical situationsfrombecomingchronic.Norwaywithits2.8%unemploymentratehasbeenhighlysuccessful inmaintainingahealthyworkforce,andforthoseinjuredorill,returningindividualstoworkquickly.In theU.S.,successfuldisabilityclaimsmustmeettheSSAdurationrequirementthattheclaimanthasa disablingmedicalimpairmentwhich,despitetreatment,continuesforaperiodofatleast12months(or wouldresultindeathinlessthan12monthssuchaswithterminalcancer).Duetobetterhealthcare ObamaCarewillresultinfewerclaimsthatmeetthedurationrequirement.Arecentclientillustrates thepoint.Inoticedinherextensivemedicalfilethatsheishospitalizedabouteveryfourmonths. UnderEMTALA,theEmergencyMedicalTreatmentandActiveLaborActpassedbyPresidentReagan, evenwithoutapatientsinsurancecoverageorfunds,hospitalsarerequiredtotreatacuteemergencies, stabilizethepatient,andrelease.WhenIinquiredwhythisclientwashospitalizedevery4months,she explainedthatupondischargefromhernormaltendayhospitalstay,thehospitalprovidesherwith medicationfor90days.Themedicationcostsinexcessof$1,500permonthifyoudonthaveinsurance (insurancecompaniesnegotiatemuchlowercosts).Afteritrunsoutin90days,herhealthbeginsto deteriorateandsheisrehospitalized,onlytorepeatthecycle.Shewouldprobablynotbedisabled undertheSocialSecurityActsdefinitionifshewereabletobeonmedicationscontinuously.Thatwill nowhappenundertheAffordableCareAct.Ahealthierworkforcewillresultinfewerdisabilityclaims. Medicaidexpansionissues IsthelackofMedicaidexpansioncriticaltoourSNTclients?AlthoughMedicaidmayormaynot beexpandedtotheworkingpoorinaparticularstate,whatisnationallysignificantanduniformunder theActandtheSupremeCourtsdecision,arethehealthinsuranceindustryreformsdiscussedabove thatopenprivateinsurancetoourdisabledclientswithfunds.Theindustryreformsapplytoallstates anddonotrequirestateapproval.Nogovernorcanstopthose.

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NewsreportsthatsomeconservativegovernorswillnotextendACAprovisionstotheirstateis limitedtothesecondprongoftheSupremeCourtdecisionwhichgrantedtothestatesarighttoreject Medicaidexpansiontotheworkingpoor,inotherwords,todenyuniversalcoverage.ButMedicaid expansionisirrelevanttosomeofourspecialneedsclientssincetheywillbenolongeracaptiveofthe Medicaidsystem.DuetothefirstprongoftheSupremeCourtdecision,theconstitutionalityofhealth insuranceindustryreforms,some(many?Most?)specialneedsplanningclientswillbenefitfromthe AffordableCareAct. Noweachstatewilldecideifitwillacceptthe100%federalfundingtoexpandMedicaidto individualswithincomesbelow133%ofthefederalpovertylevel.Itissomewhatdifficulttoimagine how,orwhy,agovernororstatelegislaturewouldrefusetodoso.Becauseacertainnumberofthese uncoveredindividualsendupinthehospital,oratleasttheemergencyroom,atpresentthehospital musttreat,andtreatforfree.Tomakeupfortheloss,higherprivatehealthinsurancepaymentsare negotiatedbythehospitalswiththeprivatecompanies.Inotherwords,youandIpay.Instead,wenow havethepossibilitythatthebillcouldbepaidbythefederalgovernmentthroughMedicaidandnot passedontoyouandmethroughhigherinsurancepremiums.Whenyouthinkaboutit,thefederal taxesIpaywillbethesameifthestateofFloridaoptsinoroptsoutoftheMedicaidcoverage.Isend mydollarstoWashington,andifweoptout,theygoelsewheretoprovidecoveragetootherstates citizens.Whynotbringthosedollarsback? Butthosebattleswillbefoughtstatebystate. TheAffordableCareAct,asJoeBidenwhisperedtoPresidentObamaatthesigningceremony,is abigf#@ngdealwithpotentialforatransformationalimpactonthespecialneedslawpractice.Itis evenamuchbiggerdealthanJoeknowsforourclientswithspecialneeds. Changemakesmostofusuncomfortable,butchangeisaconstantinourlives.Thisisonetime whenspecialneedsattorneyscanbothlamentthenegativeimpactofnationallegislationonour personalfinancialwellbeing,butrejoiceintheconcomitantgoodfortuneofourclientswithdisabilities whocannowjointheprivatehealthinsurancemarketwiththerestofusasequalcitizenswiththeir dignityintact. UniversityofOslo,Norway July12,2012
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