Often they still have some income, but they must sign it over to the nursing home and let the government pay the balance of their nursing home bills.

The government lets a resident keep $35 a month for ``extras,'' such as a haircut. Federal law allows setting aside additional money for private health insurance premiums and medical expenses not covered by Medicaid.

But that's not the way it works in Florida.

For years, Florida has denied nursing home residents the means to keep their own health insurance when they go on Medicaid, the state and federal health care program for the poor.

The result is that residents already losing their independence, and most of their possessions, also lose access to their doctors who don't take Medicaid, including many specialists.

What's more, Medicaid doesn't cover all medications, and July 1 it stopped covering dental checkups, cleanings and dentures, so the only way to get those is through private insurance or an out-of-pocket payment.

Lawyers have challenged the state practice, arguing it ignores federal regulations. How, the lawyers have asked, can the state justify denying such protection to vulnerable people?

Florida Legal Services informed state officials of the conflict in 1992 and again in 1997. In 1999, the federal government sent Florida a letter advising it to change its policy.

Last month, a Tampa lawyer thought he had fixed the problem.

Jack Rosenkranz, an elder law specialist, had filed a half- dozen cases in the past for Medicaid nursing home residents who faced having to give up their private insurance.

Anne Benson was one. Florida's Department of Children and Families, which handles Medicaid applications, counted her income and determined that for February and March, she should pay her nursing home $3,133, according to court filings. But she was not allowed to deduct the monthly $89.09 she needed to keep her Blue Cross Blue Shield policy.

Rose Marie Gibson was another client. The state determined she should pay $1,350 for December and could not hold back the $198.50 she owed her health insurance company for that month.

Ordinarily, Rosenkranz would present these facts to the state along with a copy of the federal rules. He then could expect to win his case because the rules are clear.

But Rosenkranz began to wonder about people who couldn't afford a lawyer or didn't realize one could help. He had talked about the issue with colleagues at conferences. Many had filed individual cases over the years and won.

``It was so much nonsense,'' he said.

So, despite the financial incentive for a lawyer to keep pursuing individual cases, Rosenkranz decided to use the Benson and Gibson cases to challenge the state policy itself.

His tactic forced the Department of Children and Families to confront the conflict. And in July, DCF officials agreed to work on a rule that complies with the federal regulations.

Problem Solved? No

But the issue still isn't resolved. Now Florida's Agency for Health Care Administration, which is responsible for the Medicaid budget, plans to oppose the change.

It's a budget problem, said Bob Sharpe, Medicaid director for the agency. Every dollar deducted from a patient's share of the nursing home payment is one more dollar the government has to pay.

Further, Sharpe said, in most cases private insurance merely duplicates what Medicaid already covers.

``We are concerned that if the state is being asked to pay for any expense,'' he said, ``it is a reasonable expense and not something the state pays for already.''

Sharpe said the agency had planned to try to comply with the rules earlier this year and had asked for $35 million from the Legislature, which denied the request.

But not having the money isn't an excuse to flout a federal regulation, said Babette Bach, an elder law lawyer in Sarasota. ``They can't say say, `We don't like this, so we'll ignore it.' ''

The state also is failing to see the rule could save money, Bach said. It enables nursing homes to bill private insurance first, so the government isn't the only one paying residents' health care bills.

`They're Dead Wrong'

But Bach is most disturbed by the effect of the insurance denials on nursing home residents. Sharpe's wrong when he contends residents get comparable services through Medicaid, she said.

Another elder law lawyer, Lance McKinney of Fort Myers, agreed with her.

``There are a lot more providers who will give services to someone with insurance compared to someone on Medicaid,'' he said.

It's true many doctors who don't take Medicaid take Medicare, the government health care program for people 65 and older. But Medicare services require a co-payment, Bach said. That's where a private policy is essential.

``If anyone thinks that being poor and being on Medicaid doesn't limit their options, they're dead wrong,'' she said.

These cases are bound to keep coming up. A Medicaid spokesman said a federal exception would have to be made if Florida wants to stick to its guns. If the problem isn't settled administratively, it's likely to end up in court.

The Department of Children and Families plans a public workshop on the issue at 10 a.m. Monday in Building 3, Room 421, 1317 Winewood Blvd. in Tallahassee. To comment, write Audrey Mitchell at that address, ZIP 32399-0700.

Reporter Lindsay Peterson can be reached at (813) 259-7834.