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Volume 21, No. 2, June 1987

Making the Medicaid Spend-Down Program Work: A Part

nership of Community Education and Administrative Advocacy, by Gordon Bonnyman and Adinah Robertson 105 This article describes how one program's experience in developing community education materials on the Medically Needy SpendDown Program had a favorable impact on the quality of client casework and proved to be an extremely cost-effective form of advocacy.

Chapter 12 Bankruptcy-How Will It Operate?,
Farmers' Legal Action Group .............113
Susan Schneider outlines new Chapter 12 of the
Bankruptcy Code, which is designed specifically
for the reorganization of family farms.

How the Receipt of Public Benefits Can Endanger an Alien's Immigration Status, National Center for Immigrants' Rights..126 The receipt of certain types of public assistance, including receipt of AFDC by U.S. citizen children of legalization applicants, may preclude an alien from establishing admissibility under the legalization program; this column discusses the public charge ground for exclusion. One Year Later: City of New York Begins to Bear Fruit, National Senior Citizens Law Center

.132 In Bowen v. City of New York, the Supreme Court sharply curtailed SSA's ability to use the “60-day rule" and the exhaustion requirement of 42 U.S.C. § 405(g) to limit class membership; one year later, several courts have responded with decisions indicating that a practical approach to these issues will control.

Reflections of a Country Lawyer, by Robert Mark ......

......117 The Director of Legal Services of Northeast Missouri, recently testified at a meeting of the Committee on Provisions for the Delivery of Legal Services of the LSC Board of Directors; here is an edited version of his remarks.

New Developments in Health Benefits for Aliens, National Health Law Program ....121 Under the Omnibus Budget Reconciliation Act of 1986 and the Immigration Reform and Control Act of 1986, alien access to Medicaid benefits has been simultaneously restricted and expanded and public health benefits beyond Medicaid for newly legalized aliens have been affected; this column analyzes these changes.

A New Basis for Conservation Programs for the Poor: Expanding the Concept of “Avoided Costs,” National Consumer Law Center

.135 NCLC, in conjunction with a utility economic consulting firm, has proposed in a recent case a new utility-industry financing program for conservation measures that would

primarily benefit low-income households. Adequacy of Current AFDC Need and Payment Standards, National Social Science and Law Center ....

...... .141 This column provides a state-by-state comparison of AFDC need and payment levels since 1970 with the cost of living and with established poverty standards.



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Making the Medicaid Spend-Down Program Work: A Partnership of Community Education

and Administrative Advocacy

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IV. The Need for Community Education Regarding the Spend-Down Program ......106

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Making the Medicaid Spend-Down

Program Work:
A Partnership of Community
Education and Administrative


by Gordon Bonnyman and Adinah Robertson

I. Introduction

Legal services advocates, like most anyone else confronted with Medicaid law, often conclude that they want no part of anything so badly drafted and unnecessarily complex. Even federal judges for whom the Internal Revenue Code holds no terror become sullen and embittered when forced to deal with the arcana of Medicaid law.' Within the legal services community, it is assumed with some justification that few advocates will willingly develop any expertise in Medicaid law.

Unfortunately, the program is as important as it is perverse. For all its maddening shortcomings, Medicaid is the most important vehicle in the nation for affording the poor access to needed medical care. Thus, like it or not, meeting client needs unavoidably demands that each legal services program develop at least a working knowledge of Medicaid.

This article is for advocates who would like to help one part of Medicaid the Medically Needy Spend-Down Program-better serve their clients, but who have perhaps been intimidated by the program's well-earned reputation for complexity. Outlined below is an advocacy strategy that the authors have found to be practical even for advocates who start without any prior knowledge of the spend-down program, other than an awareness of its critical importance to clients.

II. Overview of the Spend-Down Program

Gordon Bonnyman is a staff attorney and Adinah Robertson is a community education specialist with Legal Services of Middle Tennessee, Inc., 211 Union St., Nashville, TN 37201, (615) 244-6610.

The National Health Law Program (NHELP) has put a basic understanding of Medicaid within easy reach of all legal services field programs. Two NHELP manuals, An Advocate's Guide to the Medicaid Program and An Advocate's Guide to the Medically Needy Program, are graced by text that is concise, readable, and well-organized, and are supported by footnotes that provide comprehensive citations of authorities. A quick initial reading will give an advocate a basic grounding in the program, and each guide is organized in a manner that facilitates its use as a reference resource for particular issues. Copies of these guides have been distributed to each LSC-funded program in the country. Because of the availability of these resources, no attempt will be made here to provide more than a cursory overview of the Medicaid program and the laws that

govern it.

1. In measured terms, the Supreme Court has characterized the

Medicaid provisions of the Social Security Act as “Byzantine” and “among the most intricate ever drafted by Congress." Schweiker v. Gray Panthers, 354 U.S. 34, 43 (1981) (Clearinghouse No. 21,452). Lower courts have been more colorful, one describing Title XIX and its attendant regulations as an aggravated assault on the English language.” Freidman v. Berger, 409 F. Supp. 1225, 1225-26 (S.D.N.Y. 1976). The regulations alone are said to be ''so drawn that they have created a Serbonian bog from which the agencies seemingly are unable to extricate themselves. An attorney representing one (Medicaid) agency describes the situation as in a 'confusing state of flux,' gross understatement. It is a mess...." Feld v. Berger, 424 F. Supp. 1356, 1357 (S.D.N.Y. 1976) (Clearinghouse No. 20,566).


(1985) (Clearinghouse No. 40,200); J. PERKINS & L. WULSIN, AN Advocate's GUIDE TO THE MEDICALLY NEEDY PROGRAM (1985)

(Clearinghouse No. 40,250). 3. See also Wulsin, Adopting a Medically Needy Program, 18

CLEARINGHOUSE Rev. 840 (Dec. 1984).

families pauperized by large medical expenses, spend-down Medicaid can literally be a lifesaver that provides them with continued access to critically needed medical care.

However, the complexity of the program and lack of public awareness concerning its benefits have in many instances resulted in nearly negligible rates of participation among those who would be eligible. Therefore, one of the most fruitful types of legal advocacy involving this program will take the form of community education. The recent experience of one legal services program that has attempted to develop community education materials indicates that such efforts can also produce valuable opportunities for administrative advocacy. In addition, the process of developing such materials educated program staff regarding a program that advocates might have otherwise found difficult to understand, much less to affect.

Established by Title XIX of the Social Security Act, Medicaid pays health care providers for treatment of certain categories of poor people. Although heavily federally subsidized, the program is administered by the states, which have broad discretion to determine eligibility and scope of benefits within general parameters established by Title XIX and federal regulations. Federal law requires that state Medicaid programs cover the so-called "categorically needy." This group is made up primarily of individuals receiving cash assistance in the form of Aid to Families with Dependent Children (AFDC) or supplemental security income (SSI), although in some states SSI eligibility does not ensure Medicaid eligibility.

In addition to these mandatory coverage groups, the states may, at their option, cover the so-called “medically needy." Thirty-six states and the District of Columbia have elected to do so.” Medically needy coverage extends to those individuals who are aged, blind, disabled, or in families with dependent children, but whose incomes make them ineligible for cash assistance through AFDC or SSI. A subgroup of the medically needy population consists of those whose incomes do not exceed a state's medically needy income level (which cannot be any higher than 133 percent of the state's AFDC payment level) and who, therefore, are automatically incomeeligible for the medically needy program. In those states in which AFDC payment levels are substantially less than SSI eligibility limits, relatively few elderly, disabled, or blind individuals are able to benefit from this coverage. The number of families with dependent children who are ineligible for AFDC but still poor enough to satisfy this medically needy income limit (MNIL) is also relatively small.“

The other subgroup of the medically needy population is made up of those whose resources are within prescribed limits, but whose incomes exceed the state's MNIL. These individuals become eligible for Medicaid by incurring medical expenses in an amount sufficient to "spend down” their income below the income eligibility level, hence the name “Medically Needy Spend-Down.”? For the poor, and even for moderate-income

III. Helping Clients Through the Labyrinth A. The Need for Community Education

Regarding the Spend-Down Program

[Some) individuals become eligible for Medicaid by incurring medical expenses in an amount sufficient to "spend downtheir income below the income eligibility level....

Sadly, in the great majority of cases in which needy individuals would be eligible, the complexity of the spenddown program and frustrations associated with its implementation simply defeat its purpose, and the potential benefits of the program are never realized. Arcane rules that frustrate judges and lawyers baffle welfare agency caseworkers and intimidate and deter potential beneficiaries. A federal assessment of the spend-down program several years ago noted that spend-down beneficiaries constituted less than 2 percent of the Medicaid population in one of the two states analyzed, and only 6 percent in the other. A computer simulation of Medicaid eligibility for Massachusetts indicated that, during 1974, that state's Medicaid program was only enrolling about 5 percent of the potentially eligible spend-down population. The sheer complexity of the program was cited as the major factor accounting for the failure of the program to reach its intended beneficiaries. 8

Even when potential eligibles manage to get onto the program, they often fail to derive full benefit from participation. Because spend-down eligibility is established only for discrete budget periods of from one to six months (depending upon the option selected by a particular state), making the program work effectively for a particular client often requires difficult choices regarding the timing of an application. These choices in turn require careful consideration of the individual's debt structure, anticipated medical needs, and the scope of any alternative sources of health coverage. Weighing these different variables requires time, patience, knowledge, and empathy, commodities that are too often in short supply in the offices of local welfare agencies. As a result, spend-down coverage is most often requested at the impetus of large institutional health care creditors, such as hospitals. Limited spend-down benefits are therefore used to satisfy outstanding debts instead of to meet the patient's critical present needs for care.

Because of these factors, there is a vital need for effective community education materials that can do each of the following things:

4. 42 U.S.C. $$ 1396 et seq. 5. These include Arkansas, California, Connecticut, the District of

Columbia, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah,

Vermont, Virginia, Washington, West Virginia, and Wyoming. 6. See PERKINS & WULSIN, supra note 2, at 6-7, 11-30 for participat

ing states' MNILs (as of April 1985) and a further discussion of

their implications. 7. It is important to note that the term “spend-down" is a misnomer.

In order to qualify for Medicaid, individuals need only incur medical expenses; they do not have to pay them. Id. at 47-49. Also, some states use a term other than “spend-down,' such as "share of costs."


Aid SPEND-DOWN vii (HEW Contract No. SRS 74-58 1976).

(1) inform clients of the availability of the program and

its potential benefits; (2) give clients sufficient information regarding pro

gram requirements to enable them to establish their

own eligibility; and (3) help clients make the often painful choices neces

sary to get maximum benefits from coverage of

limited duration. And, of course, all of this must be done with graphics and text that will ensure readability by an audience with reading skills of eighth-grade level or less. This form of advocacy and client service is as intellectually demanding as the most complex litigation. B. One Program's Experience

policy to conform with the federal requirements outlined in the Advocate's Guide.

After lengthy consideration of alternative formats, it was finally decided that the material should take the form of a multi-page pamphlet. The pamphlet is now being distributed by Legal Services of Middle Tennessee and by other legal services programs around the state, as well as by health care providers and other social services agencies. A copy of the final product appears at the end of this article.

This project has also had a favorable impact on the quality of client casework. Because of the time invested in developing an understanding of the spend-down program, staff members have been alert to refer to the program potentially eligible clients whom they would not have otherwise thought to refer. Further, client referrals have been generated by other agencies that were aware of the staff's involvement in the program, and eligibility has been established for clients whom the staff would have otherwise been inadequately prepared to


The effects have not been restricted to the spend-down program, since other agencies have thought, as a result of this community education effort, to refer other health-related client problems to the program as well. All things considered, development of the pamphlet has proven to be an extremely costeffective form of advocacy.'

Development of the pamphlet (describing the spend-down program] has proven to be an extremely cost-effective form of advocacy.


In July 1986, Tennessee reestablished a medically needy program for adults, restoring an eligibility category that had been abandoned four years earlier during a budget crisis. The state lacked any community education or outreach materials regarding the program. Legal Services of Middle Tennessee, Inc., undertook to develop such materials. The authors of this article, a staff attorney and a community education specialist, assumed joint responsibility for the project. Neither had any prior knowledge of the program.

The co-workers approached the task in the manner outlined in the recommendations below. The project took more than 100 hours of staff time, spread over several months. While others could perhaps do the job more efficiently, the inherent complexity of the subject and the need for repeated review by other audiences can realistically be expected to involve a substantial commitment of time. This burden was mitigated somewhat by the fact that the project involved no externally imposed deadlines and could therefore be worked around other, less flexible work responsibilities, such as client caseload. However, to ensure that the project did not stretch out indefinitely, the materials were promoted to other agencies and legal services programs in the state. This generated a steady stream of requests for copies of the materials as soon as they became available, thereby maintaining a constant but manageable pressure to finish the job.

As recommended below, the involvement of the state Medicaid administrator having responsibility for eligibility policy was enlisted. She provided an abbreviated version of a two-day training seminar on spend-down eligibility that her agency was providing to its local caseworkers. As the project developed, she welcomed critiques of state training and policy materials developed to implement the new program. In turn, her critiques of the various drafts of the pamphlet that resulted were welcomed.

Significant changes in state spend-down eligibility policy were made, to the benefit of legal services clients, as a result of this collaborative process. For example, having been alerted to the issue by An Advocate's Guide to the Medically Needy Program, the authors noted in the pamphlet that applicants could use the cost of over-the-counter medications and nonprescription medical supplies to satisfy their spend-down requirements. The state's eligibility director caught this provision in reviewing one of the drafts, said she thought it was incorrect, and asked to be provided with the basis for this position. Support was provided, and the state promptly changed its

Such a project can also have unanticipated benefits for other areas of advocacy. For example, important implications were recognized in the fact that the processing of Medicaid applications is governed by specific timeliness requirements, whereas the processing of applications for social security and SSI disability benefits is not. Like most other states that have spend-down programs, Tennessee contracts with the Social Security Administration (SSA) to determine Medicaid eligibility for individuals who apply for SSI benefits in the state. Although Medicaid eligibility must be determined within 45 days (or 60 days if a determination of disability is involved), as a practical matter SSA does not make such a determination until it has also determined SSI eligibility, a process that typically requires many months."

Litigation has established that states must satisfy their duty under Title XIX to timely dispose of Medicaid applications, even if this requires the states to determine eligibility independently of SSA."2 However, there is still a role for

9. On a print run of 10,000 copies, the cost was 74 per pamphlet. The

pamphlet is eight pages long, printed on both sides of two legal

size sheets, folded and stapled in the middle. 10. 42 C.E.R. § 435.911; Alexander v. Hill, 549 E. Supp. 1355

(W.D.N.C.), amended part, 553 F. Supp. 1261 (W.D.N.C.), aff d, 707 F.2d 780 (4th Cir.), cert. denied, 464 U.S. 874 (1983) (Clearinghouse No. 13,475). See generally PERKINS & WULSIN,

supra note 2, at 72-74. 11. Cf. Heckler v. Day, 467 U.S. 104 (1984). 12. Rousseau v. Murray, C.A. No. 84-0213 (D.R.I. Oct. 1, 1984)

(Clearinghouse No. 40,357).

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