News

New Medicare Mental Health Law

The following is a summary of the new Medicare law providing mental-health parity for beneficiaries in outpatient settings:

On July 15, 2008, the U.S. Congress voted overwhelmingly to override the President’s veto of the Medicare Improvement for Patients and Providers Act, H.R. 6331.  Making front-page news, the legislation halts a payment cut for physicians providing care to Medicare beneficiaries.  A less-publicized provision of the law਍ഀ establishes equity between Medicare mental health and medical coverage.

The bill ends the long-standing requirement that affected Medicare beneficiaries who required outpatient mental-health services. Until implementation of the new law, beneficiaries face a discriminatory 50% co-insurance for outpatient psychotherapy and services furnished by non-physician mental-health professionals. This is in sharp contrast to other outpatient health services which require only a 20% co-payment.  The initial reduction in the co-insurance charges will be first implemented in January 2010.

The former system requiring higher copayments for mental-health services served as an incentive to use inpatient or institutional care instead of outpatient services.  It has also led seniors and people with disabilities, who rely on Medicare, to forgo needed mental-health treatment.

The bill establishes mental-health parity within the Medicare program, phasing in a reduction of the higher co-payment over six years, to 20% in 2014. 

This summary has been adapted from an announcement by the Bazelon Center for Mental Health Law, www.bazelon.org/newsroom/2008/7-10-08Medicare.htm.

For the full text of the Medicare Improvement for Patients and Providers Act, H.R. 6331, see www.govtrak.us/congress/billxpd?bill=h110-6331.  The portion of the Act that deals specifically with mental-health parity is Section 102: Elimination of Discriminatory Copayment Rates for Medicare Outpatient Psychiatric Services.


Changes for Powers of Attorney in New York

By Rose Mary Bailly, Executive Director of the New York State
Law Revision Commission. and Barbara S. Hancock, Counsel to the
Commission

Editor's Note: This article first appeard in the March/April issue of the New York State Bar Association JOURNAL.

On January 27, 2009, Governor David Paterson signed Chapter 644 of the Laws of 2008, amending the General Obligations Law to provide significant reforms to the use of powers of attorney in New York. Chapter 644 was the result of eight years of study by the New York State Law Revision Commission and was the subject of much debate and comment by several Sections of the New York State Bar Association. The power of attorney is an effective tool for attorneys and the public at large for estate and financial planning and for avoiding the expense of guardianship. The power of attorney is also a simple document to create. It can be obtained from any number of Web sites on the Internet or in a stationery store, and its execution merely requires the principal’s signature and its acknowledgment before a notary public. But this simplicity belies the extraordinary power that the instrument can convey, and its popularity has also led to its use for transactions far more complex than were originally contemplated by the law, particularly in the areas of gift giving and property transfers. The instrument’s power is also demonstrated by the potential authority the agent can hold. This can include power to transfer assets that pass by will as well as those that usually pass outside a will, such as joint bank accounts, life insurance proceeds and retirement benefits.

The principal can delegate these sweeping powers to the agent without fully recognizing their scope (particularly if the principal executes the document without the benefit of legal counsel). The agent can act immediately, unless the instrument is a springing power of attorney, i.e., one that becomes effective upon the occurrence of a specified event such as the principal’s incapacity. In all cases, the agent can act without notifying the principal. Under a durable power of attorney or springing durable power of attorney, which continues in effect after the principal’s incapacity, the agent acts without oversight when an incapacitated principal is no longer able to control or review the agent’s actions – a situation which under common law would have terminated the power of attorney.

Despite the broad authority associated with this important, popular and powerful tool for financial management, the N.Y. General Obligations Law (GOL), which governs powers of attorney, has been silent as to a number of matters. These omissions include descriptions of the agent’s fiduciary obligations and accountability, the manner in which the agent should sign documents where a handwritten signature is required, the limits of the agent’s authority to make gifts to third parties and to himself or herself, the manner in which the principal can revoke the document, the circumstances under which a third party may reasonably refuse to accept a power of attorney, and the effect on powers of attorney of the 2003 Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule regarding medical records. The statute’s provisions have been ambiguous in other areas such as gift-giving authority and authority to make other property transfers.

Based on its study, the Commission concluded that while a power of attorney should remain an instrument flexible enough to allow an agent to carry out the principal’s reasonable intentions, the combined effect of its potency and easy creation, the General Obligations Law’s silence about several significant matters, and ambiguities about the authority to transfer assets can frustrate the proper use of the power of attorney, particularly when a principal is incapacitated and can no longer take steps to ensure its proper use. Chapter 644 addresses these statutory gaps and clarifies the ambiguities to assist parties creating powers of attorney and third parties asked to accept them.

General Provisions

Chapter 644 creates a new statutory short form power of attorney. On or after the chapter’s effective date, to qualify as a statutory short form power of attorney, an instrument must meet the requirements of GOL § 5-1513.1

The statutory short form is not valid until it is signed by both the principal and agent, whose signatures are duly acknowledged in the manner prescribed for the acknowledgment of a conveyance of real property.2 The date on which an agent’s signature is acknowledged is the effective date of the power of attorney as to that agent; if two or more agents are designated to act together, the power of attorney takes effect when all the agents so designated have signed the power of attorney and their signatures have been acknowledged.3 A power of attorney executed prior to the effective date of Chapter 644 will continue to be valid, provided that the power of attorney was valid in accordance with the laws in effect at the time of its execution.4

Major Gifts and Other Property Transfers

Chapter 644 requires that a grant of authority to make major gifts and other asset transfers must be set out in a major gifts rider to a statutory power of attorney, which contains the signature of the principal duly notarized and which is witnessed by two persons who are not named in the instrument as permissible recipients of gifts or other transfers, in the same manner as a will.5 In the alternative, the principal may grant such authority to the agent in a nonstatutory power of attorney executed in the same manner as a major gifts rider.6 The creation of a major gifts rider or its alternative nonstatutory power of attorney allows the principal to make an informed decision as to whether the agent may make gifts or other transfers of the principal’s property to third parties as well as to the agent. The execution requirements alert the principal to the gravity of granting the agent this type of authority. An agent acting pursuant to authority granted in a major gifts rider or a nonstatutory power of attorney must act in accordance with the instructions of the principal or, in the absence of such instructions, in the principal’s best interests.7 All statutory provisions relating to major gifts and property transfers have been located in a new GOL § 5-1514, rather than spread throughout the statute.

Powers of attorney often serve two very different purposes: management of the principal’s everyday financial affairs and reorganization or distribution of the principal’s assets in connection with financial and estate planning. The General Obligations Law has allowed the use of the statutory short form power of attorney for both purposes.

The former statutory language and statutory form made it difficult for a principal to make an informed deci sion about what, if any, authority he or she wants to give the agent with respect to making gifts and transferring property interests in connection with financial and estate planning. First, the gifting and transfer provisions were scattered among other arguably more routine provisions. The statutory gifting authority was listed 13th (M) of 16 powers, and authority over insurance transactions and retirement benefit transactions, which can include changing beneficiaries, were listed sixth (F) and 12th (L) respectively; all of these could easily be overlooked. Unlike the gifting power, the insurance and retirement benefit powers listed on the form gave no hint that their construction sections allow the agent to change beneficiary designations. In giving the agent authority over insurance policies and retirement benefits, the principal might have been thinking of more routine matters, such as the need for more insurance or a different type of insurance and might have been unaware that he or she had given the agent authority that could alter the estate plan or reduce his or her property.

Second, the statutory short form did not indicate that the agent may be able to engage in self-gifting or designate himself or herself as the beneficiary of the principal’s insurance policies and retirement benefits.

The potential for confusion was compounded by a third factor, namely, the ambiguity of the law regarding these types of transactions. The statutory construction sections for the authority to open joint bank accounts, and to change beneficiaries of insurance policies and retirement plans, did not require on their face that in order to exercise such authority the agent also be granted authority to make gifts or vice versa. So it might appear from a reading of the statute, that the agent could open a joint bank account and make changes in beneficiary designations without having separate gifting authority. However, cases interpreting the statute appeared to hold that if the principal intends to authorize the agent to open joint bank accounts with the principal and change the beneficiaries of the principal’s insurance policies and retirement benefits, the principal must grant gifting authority in addition to authority over joint bank accounts, and insurance and retirement benefits.

Finally, the statute permitted modifications to the statutory short form to authorize significant transfers; but, like the powers listed explicitly on the form, they could be buried amid masses of legal text and could fail to attract the principal’s attention to the significance of these modifications.

HIPAA Privacy Rule

Chapter 644 adds the term “health care billing and payment matters” to the term “records, reports and statements” as those terms are explained in construction § 5-1502K,8 so that an agent can examine, question, and pay medical bills in the event the principal intends to grant the agent power with respect to records, reports and statements, without fear that the HIPAA Privacy Rule would prevent the agent’s access to the records. This provision is applicable to all powers of attorney executed before, on or after the effective date of Chapter 644.9 It does not change the law forbidding the agent from making health care decisions.10

The General Obligations Law has been silent as to the relationship between the power of attorney, an agent‘s authority to access medical records under New York law, and the Privacy Rule, a federal regulation regarding individual medical information promulgated in April 2003 pursuant to HIPAA. The ambiguity about an agent’s authority to access medical records under New York law arose out of several factors. Neither subdivision K on the statutory short form (power to access records), nor § 5-1502K, which construed the term “records,” contained an express reference to medical records. Moreover, § 18 of the Public Health Law, which identifies qualified persons who are entitled to access to a patient’s health records, does not include all agents acting pursuant to a power of attorney.11 As a result, health care providers have refused to make records available to an agent seeking clarification of a medical bill, without the express language in the power of attorney document authorizing such release. The ambiguity thus created is exacerbated by the HIPAA Privacy Rule, which creates national standards limiting access to an individual’s medical and billing records to the individual and the individual’s “personal representative.” Under the Privacy Rule, health information relating to billings and payments may be available to an agent if the agent can be characterized as the principal’s “personal representative” as defined in the Privacy Rule. Under the regulations, the “personal representative” for an adult or emancipated minor is defined as “a person [who] has authority to act on behalf of a individual who is an adult or an emancipated minor in making decisions related to health care.”12

The General Obligations Law has limited the authority of the agent to financial matters, and expressly prohibits the agent from making health care decisions for the principal. The Public Health Law defines a health care decision as “any decision to consent or refuse to consent to health care.”13 “Health care,” in turn, is defined as “any treatment, service or procedure to diagnose or treat an individual’s physical or mental condition.”14

The principal may grant health care decision making authority to a third party only by executing a health care proxy pursuant to § 2981 of the Public Health Law. The health care proxy law makes clear that financial liability for health care decisions remains the obligation of the principal.15 As a practical matter, payment issues are left to the principal or the principal’s agent. The Privacy Rule regarding access to records does not take into account a statutory structure such as New York’s, which permits the division of the responsibilities for health care decisions and bill paying between two representatives, the health care agent and the agent.

Agent

Chapter 644 includes a statutory explanation of the agent’s fiduciary duties, codifying the common law recognition of an agent as a fiduciary.16 A notice to the agent is added to the statutory short form explaining the agent’s role, the agent’s fiduciary obligations and the legal limitations on the agent’s authority.17 If the agent intends to accept the appointment, the agent must sign the power of attorney as an acknowledgment of the agent’s fiduciary obligations.18

Chapter 644 also requires that, in transactions on behalf of the principal, the agent’s legal relationship to the principal must be disclosed where a handwritten signature is required.19 In all transactions (including electronic transactions) where the agent purports to act on the principal’s behalf, the agent’s actions constitute an attestation that the agent is acting under a valid power of attorney and within the scope of the authority conveyed by the instrument.20 Chapter 644 allows for the principal to provide in the power of attorney that the agent receive reasonable compensation if the principal so desires.21 Without this designation, the agent is not entitled to compensation.22

Both the durable and springing durable power of attorney permit the agent to continue to act after the principal has become incapacitated. The intent behind this change to the common law was laudable – to allow an agent to act for the principal precisely at a time when the principal needs assistance, to permit the principal to plan for possible incapacity, and to eliminate the need for expensive alternatives such as a trust or guardianship. However, the principal’s incapacity leaves the principal unable to monitor the agent’s actions and to revoke the power if he or she is not satisfied with the agent’s conduct. Thus an agent could take actions on behalf of the principal for months or years, without any supervision and not always to the benefit of the principal.

Recognizing that the potential for financial exploitation was inherent in the delegation of authority to an agent, public hearings in the early 1990s led to a two-pronged recommendation for reform – educating the principal and holding the agent accountable. Changes to the law regarding the principal’s education were adopted but the statute was not revised to reflect the agent’s accountability until now.

Principal

Chapter 644 adds a section to the statute that explains how the power of attorney can be revoked.23 It expands the “Caution” to the principal so that the principal will be better informed about the serious nature of the document.24 Chapter 644 also permits the principal to appoint someone to monitor the agent’s actions on behalf of the principal,25 and gives the monitor the authority to request that the agent provide the monitor with a copy of the power of attorney and a copy of the documents that record the transactions the agent has carried out for the principal.26 Such accountability is consistent with the common law requirement that where one assumes to act for another he or she should willingly account for such stewardship.

Third Parties

Chapter 644 provides that third parties have the ability to refuse to accept powers of attorney based on reasonable cause.27 The basis for a reasonable refusal includes, but is not limited to, the agent’s refusal to provide an original or certified copy of the power of attorney and questions about the validity of the power of attorney based on the third party’s good faith referral of the principal and the agent to the local adult protective services unit, the third party’s actual knowledge of a report to the local adult protective services unit by another person, actual knowledge of the principal’s death, or actual knowledge of the principal’s incapacity when he or she executed the document, or when acceptance of a nondurable power of attorney is sought on the principal’s behalf.28 When a third party unreasonably refuses to accept a power of attorney, the statute authorizes the agent to seek a court order compelling acceptance of the power of attorney.29 Chapter 644 expands the definition of “financial institution” to include securities brokers, securities dealers, securities firms, and insurance companies30 and provides that a financial institution must accept a validly executed power of attorney without requiring that the power of attorney be on the institution’s own form.31 The third party does not incur any liability in acting on a power of attorney unless the third party has actual notice that the power is revoked or otherwise terminated.32 A financial institution is deemed to have actual notice of revocation after the financial institution receives written notice at the office where the account is located and has had a reasonable opportunity to take action.33

One of the goals of the original creation of a statutory short form was to encourage financial institutions to accept such documents. The anticipated results did not follow. Many institutions instead required that the principal execute a document prepared by the institution. The enactment of the durable power of attorney actually exacerbated the situation. If the financial institution would not accept a statutory short form durable power of attorney and the principal had already lost capacity, serious difficulties could ensue because the principal could not legally execute another document. In 1986, the General Obligations Law was amended to make it unlawful for a financial institution to refuse to accept a statutory short form. Notwithstanding this statutory provision, financial institutions apparently continue to refuse to accept statutory short form powers of attorney and continue to demand that the institution’s own form be completed.

Other Major Provisions

Chapter 644 increases the amount of the gifting provision to that of the annual exclusion amount under the Internal Revenue Code.34 It adds a provision allowing gifting to a “529” account, up to the annual gift tax exclusion amount.35 These “529” accounts, authorized in the Internal Revenue Code at § 529, are popular tax-advantaged savings accounts for education expenses. Chapter 644 amends the provisions regarding gift splitting to allow the principal to authorize the agent to make gifts from the principal’s assets to a defined list of relatives, up to twice the amount of the annual gift tax exclusions, with the consent of the principal’s spouse.36

Other Provisions

An attorney who has been instructed by the principal not to disclose the document to the agent at the time of the agent’s appointment may do so without concern that it is already a legally effective document because the instrument does not become effective until the agent signs.37 An attorney can certify a copy of a power of attorney instead of having to record it to get certified copies from the county clerk, which result protects client’s privacy and limits costly trips to the county clerk’s office.38 In addition, the default statutory provisions regarding annual exclusion gifting will always be up to date with federal law.39

Financial institutions may demand an affidavit that the power of attorney is in full force and effect when they are asked to accept it.40

Investigative agencies and law enforcement officials can request a copy of the power of attorney and the records of the agent41 and bring a special proceeding to compel disclosure in the event of the agent’s failure to comply.42 Additionally, the basis for termination and revocation of a power of attorney and resignation of an agent are described,43 as are the relationships among co-agents and the initial and successor agents.44

Conclusion

With these changes, New York’s law has been updated and refined to reflect the complexities that surround the use of powers of attorney in financial and estate planning matters.45


1. 2008 N.Y. Laws ch. 644, § 2, 5-1501B; § 19, 5-1513. All statutory references for amendments to the General Obligations Law are to the sections in Chapter 644.
2. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(1).
3. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(3).
4. 2008 N.Y. Laws ch. 644, § 21.
5. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(2)(a), § 19, 5-1514.
6. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(2)(b), § 19, 5-1514.
7. 2008 N.Y. Laws ch. 644, § 19, 5-1514(5).
8. 2008 N.Y. Laws ch. 644, § 12.
9. 2008 N.Y. Laws ch. 644, § 21.
10. 2008 N.Y. Laws ch. 644, § 12, 5-1502K(1).
11. See N.Y. Public Health Law § 18(1)(g) (PHL) (refers only to attorneys who hold a power of attorney from an otherwise qualified person or the patient’s estate specifically “authorizing the holder to execute a written request for patient information.” An otherwise qualified person is the patient, article 81 guardian, parent of an infant, guardian of an infant, or distributee of deceased patient’s estate if no executor or administrator has been appointed).
12. 45 C.F.R. § 164.502(g)(2).
13. PHL § 2980(6).
14. PHL § 2980(4).
15. See PHL § 2987.
16. 2008 N.Y. Laws ch. 644, § 19, 5-1505.
17. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(1)(d)(2); § 19, 5-1513(n).
18. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(1)(c); § 19, 5-1513(o).
19. 2008 N.Y. Laws ch. 644, § 19, 5-1507(1).
20. 2008 N.Y. Laws ch. 644, § 19, 5-1507(2).
21. 2008 N.Y. Laws ch. 644, § 19, 5-1506(1).
22. Id.
23. 2008 N.Y. Laws ch. 644, § 19, 5-1511.
24. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(1)(d)(1); § 19, 5-1513(a).
25. 2008 N.Y. Laws ch. 644, § 19, 5-1509.
26. Id.
27. 2008 N.Y. Laws ch. 644, § 18, 5-1504.
28. Id.
29. 2008 N.Y. Laws ch. 644, § 19, 5-1510(2)(i).
30. 2008 N.Y. Laws ch. 644, § 2, 5-1501(5).
31. 2008 N.Y. Laws ch. 644, § 18, 5-1504(1)(b)(1).
32. 2008 N.Y. Laws ch. 644, § 18, 5-1504(3).
33. Id.
34. 2008 N.Y. Laws ch. 644, § 19, 5-1514(6)(1).
35. Id.
36. 2008 N.Y. Laws ch. 644, § 19, 5-1514(6)(2).
37. 2008 N.Y. Laws ch. 644, § 2, 5-1501B(3)(a).
38. 2008 N.Y. Laws ch. 644, § 18, 5-1504(1)(a)(1).
39. 2008 N.Y. Laws ch. 644, § 19, 5-1514(6)(1).
40. 2008 N.Y. Laws ch. 644, § 18, 5-1504(5).
41. 2008 N.Y. Laws ch. 644, § 19, 5-1505(2)(a)(3).
42. 2008 N.Y. Laws ch. 644, § 19, 5-1510(1).
43. 2008 N.Y. Laws ch. 644, § 19, 5-1511.
44. 2008 N.Y. Laws ch. 644, § 19, 5-1508.
45. In so doing, New York’s law has come in line with the laws of many other jurisdictions and the recent amendments to the Uniform Power of Attorney Act, available at http://www.law.upenn.edu/bll/archives/ulc/dpoaa/2008_final.htm.

 

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