Medicaid Planning for the New Elder Law Attorney - VAELA

MEDICAID 101: Medicaid Planning for the New Elder Law Attorney

Elizabeth E. Bircher, Esq. The Heritage Law Group

Susan I. Jean & William H. Carmines, LLC 400-B City Hall Avenue

Poquoson, VA 23662 (757) 659-1350

(757) 659-1351 fax [email protected]

Medicaid LTC Strategies for New Attorneys VAELA UnProgram – February 2014

This document was originally prepared by Susan I. Jean, Esq., and updates by Elizabeth Bircher, Esq. in January 2014. This document is not intended to be a structured legal outline, but rather a practical tool to allow a new elder law attorney to deal with those first cases that walk in the door. Medicaid LTC rules are complex and this outline is neither complete nor intended to be so.

A. MEDICAID LONG TERM CARE BASICS

1. What is LTC Medicaid? Long term care (LTC) Medicaid is a joint federal/state program that provides payment for institutional-level care on behalf of individuals who meet the medical, categorical, financial, and other criteria. Although LTC services are commonly provided in a nursing home setting, they may also be provided in the community under PACE (Program for All-inclusive Care for the Elderly) or by waiver services. Note that PACE has some unique elements.

2. Medicaid Rules and Regulations

a. Medicaid, as dual federal/state program, is subject to both federal regulations and state

requirements. b. Federal elements may provide some implementation latitude to the states, which is why

a strategy that works in one state may not work in another or some income or some resource limits may vary among states.

c. Federal law, Chapter 42 of the CFR/USC d. Virginia Administrative Code, Agency 30, Department of Medical Assistance Services

(DMAS) e. Virginia Medicaid Manual and Transmissions (intermediate updates):

http://www.dss.virginia.gov/benefit/medical_assistance/manual.cgi. Note that the Medicaid manual references either begin with an “M” (Medicaid) or an “S” (pulls from Supplemental Security Income rules).

3. Is the applicant married or single? (Note that Medicaid “covered groups” also vary by income and some income groups have different eligibility criteria, a discussion of which is beyond the scope of this introduction; but be aware of and look for these differences.) The rules here apply to the 300% SSI income level applicants, which is a substantial portion of the applicants.

a. Medicaid offers certain protections for the community spouse of a Medicaid applicant/recipient,

i. “Community spouse” = non-institutionalized spouse (i.e., not also residing in a nursing home and/or not also receiving community-based Medicaid LTC services)

ii. If both spouses are considered institutionalized, then each is evaluated as a single individual.

b. Note that as of the writing on January 2, 2014, Virginia does not currently recognize marriages between same sex couples.

4. Community Spouse Resource Allowance (CSRA) = Married Community Spouse can keep a certain amount of the countable marital resources, which is subject to adjustment each January 1. Figures listed are current as of January 1, 2014. M1480.231

http://www.dss.virginia.gov/benefit/medical_assistance/manual.cgi


a. Minimum CSRA = $ 23,448.00 b. Maximum CSRA = $117,240.00 c. If you can only remember one of these numbers, you can calculate the other because the

maximum is 5x the minimum. d. CSRA is determined based on a “snapshot date” M14800.000

i. First day of the month in which the institutionalized spouse entered a 30-day continuous period of institutionalization, after September 30, 1989.

5. The Community Spouse (CS) is also entitled to keep some of the Institutionalized Spouse’s (IS)

income if the CS does not have sufficient income him/herself to meet the minimum maintenance standard allowance. This standard is subject to change throughout the year. M1480.410

a. Monthly Maintenance Needs Standard (MMNS): $1,938.75 (eff. 7/1/13) b. Maximum Monthly Maintenance Needs Allowance: $2,931.00 (eff. 1/1/13) c. Excess Shelter Standard: $581.63 (eff. 7/1/13) d. Utility Standard Deduction: $275 - $345 based on household size (eff. 10/1/13)

6. Resource & income allowances for the single applicant or institutionalized married spouse are

identical: a. Resources: $2,000.00 b. Income: $ 40.00/month

7. In Medicaid-land, some assets are not resources, some resources are countable and some

resources are not countable! A receipt of money may also count as income. or not…or not for a period of time!

a. Where to start looking? Expect a lot of cross-referencing! i. Long-Term Care Medicaid general rules: M14

ii. Resource rules for Married LTC applicant with community spouse: M1480 iii. Resource rules for single individuals: S11 iv. Income rules for single individuals: S08


B. PAYING FOR LONG TERM CARE: MARRIED STRATEGIES See Attachment 2, Married Long Term Care Consultation Summary

1. Non-Medicaid Solutions a. Just Pay the Bill: income, savings, family contributions b. Long Term Care Insurance c. Veteran’s benefits (pension/housebound/Aid & Attendance) d. Reverse Mortgage e. Tricare for Life (rarely, but powerful when it fits)

2. Medicaid

a. Not everything counts! See Resource Exclusions: S1130 b. EARLY PLANNERS: NO SNAPSHOT DATE YET

i. If clients will not have the maximum CSRA, consider bumping them up: 1. Borrow funds 2. Place home in RLT (assets owned by RLT are “countable”) 3. Save

c. Gifting: is it possible? i. Competent, agent authority, court approval

d. Gift/transfers that do not affect eligibility because the asset is not a resource for the transfer rule: M1450.300

i. Personal effects & household items ii. One vehicle

1. Used by applicant to obtain medical treatment, or 2. Other uses, or 3. Worth less than $4,500

a. More valuable cars can be transferred, but only $4,500 of value is exempt from the transfer penalty

iii. Life insurance 1. Any policies w/no cash value (term) 2. Policy/ies with a total face value of $1,500 or less

iv. Burial spaces or plots held for the applicant, applicant’s spouse, or the applicant’s immediate family

e. Gift/transfers that do not affect eligibility because the manual excludes them: M1450.400

i. Transfers with an aggregate value of less than $1,000 per year (or up to $4,000 with a 3-year proven habit of gifting). Note that some Department of Social Services have allowed the first $1k per year of larger gifts to be exempt, but more recently others have not.

ii. Transfers to a spouse, child under 21, or child of any age who meets the SSA or Medicaid definition of blind or disabled

iii. Transfers for a reason other than becoming or remaining eligible for Medicaid. Note that this exclusion is hard to receive.


iv. Transfers of the home property to a spouse, child under 21, child of any age who meets the SSA or Medicaid definition of blind or disabled, sibling with an equity interest in the house who resided there for at least one year prior to institutionalization of the transferor, or to a caretaker child (but beware of the timing and details! In addition, the caretaker must be the child, not a step-child nor an in-law)

v. Transfers of any asset into an irrevocable Special Needs Trust (SNT) that is for the benefit of a child under age 21, a child of any age who is blind or disabled per SSA or Medicaid rules and the trust requires actuarially sound distributions or has a payback provision, or for the benefit of any individual under age 65 who is disabled when the trust includes payback provisions.

3. Medicaid Strategies AFTER the snapshot date a. Is there a Community Spouse (remember, can reside at home, in independent living, or

in assisted living, just not in a nursing home or be receiving institutional-level of care outside of a nursing home)

b. “Smart Spending” = any spending for the community spouse and/or institutional spouse is fine and not penalized

i. Pay for legal assistance ii. Pay debts and anticipated or owed taxes

iii. Pay for funeral, burial, or cremation 1. Note that for married individuals, it makes more sense to actually pay for

these services (pre-plan and pre-pay) in advance because the amount of funds that could otherwise be set aside are insufficient

iv. Purchase “stuff” (tangible personal property) v. Fix up the house where the community spouse lives

vi. Sell the marital home and purchase a more expensive residence 1. Hard to do in a slow real estate market 2. Be careful of the “substantial home equity” limits

vii. Trade in the old vehicle(s) and purchase a new(er) vehicle for the community spouse

viii. Purchase a Single Premium LTCI plan for the community spouse ix. Purchase property contiguous to the marital home if the community spouse

resides in the marital home and the home equity limits won’t be exceeded x. List non-home, non-contiguous property for sale at tax-assessed value

c. Remove the residence from an RLT and put in the name of the community spouse (converts a countable asset into an excluded resource)

d. Purchase electronic EE and/or I US Savings Bonds in an amount not to exceed $10,000 for each type per person per calendar year, plus up to $5,000 in paper I bonds with a tax refund.

i. But note that bonds “work” as a strategy because they have a one year mandatory retention period in which they cannot be redeemed, hence they are not countable resources. Once the year is up, the savings bonds will count against the institutional spouse unless his/her shares are redeemed and repurchased or gift transferred (if possible) to the community spouse.


e. Purchase a Single Premium Immediate Annuity (SPIA) in appropriate circumstances i. Timing is critical

ii. SPIA must satisfy all the requirements to work iii. Clients should not make the purchase without your involvement and/or guidance

f. With a trusted child or other person, consider a Medicaid-compliant Promissory Note i. Promissory note must satisfy all the requirements to work

ii. Clients should not sign without your involvement and/or guidance iii. In 2013, three VAELA attorneys each had promissory notes attacked in different

jurisdictions; every attorney won on appeal. g. “Half-a-loaf” gifting – aka gift and repay. Generally not used for married couples

because better strategies exist to protect the funds for the community spouse. See Attachment 1.

i. With annuity ii. With payback

iii. With trust h. NOTE: After the Institutionalized Spouse is Medicaid-eligible, the Community Spouse’s

resources are not relevant for the Institutionalized Spouse’s ongoing Medicaid eligibility with the exception of any ANNUITY.

Case Study - Married Henry comes in to see you regarding his wife, Wanda. Wanda entered the hospital for her first continuous 30- day period of institutionalization on October 12, 2013. She stayed in the hospital one week, and then was transferred to the nursing home for rehabilitation on October 19, 2013. Henry is concerned that Wanda will not be able to return home when her rehabilitation ends and he is also concerned about how he can pay the bill once her skilled coverage ends. Henry asks you how he can get his wife qualified for Medicaid. Their current resources are as follows: RESOURCES Joint His Hers Home $250,000 Checking account

$15,000

Savings accounts $40,000 $4,000 $20,000 IRA $60,000 $10,000 Rental property $140,000 Cash value life ins.

$2,000 $3,000

Totals $445,000 $66,000 $33,000 $544,000


MONTHLY INCOME

Joint His Hers

$1,200 $2,100 $800 Step One: Married case, determine the snapshot date; determine resource values as of the snapshot date As of October 1, 2013, the resources totaled: RESOURCES Joint His Hers Home $250,000 Checking account

$12,000

Savings account $40,000 $4,000 Savings accounts $20,000 IRA $55,000 $10,000 Rental property $140,000 Cash value life ins.

$2,000 $3,000

Totals $442,000 $61,000 $33,000 $536,000 Step Two: Determine estimated CSRA: Exempt: home Countable: $286,000 Estimated CSRA = 286,000/2 but not more than $117,240 = $117,240 Step Three: Determine spend-down: Countable as of now: $294,000 – $117,240 (CSRA) - $2,000 = $174,760 Step Four: Develop a Plan:

How do you want to use the funds? Who owns the home? Who should own the home? What about income?

Joint income is from the rental. Who owns the rental? Who should own the rental? What about estate planning? What documents do you want to review? What are you looking

for?


C. PAYING FOR LONG TERM CARE: SINGLE STRATEGIES See Attachment 3, Single Long Term Care Consultation Summary

1. Non-Medicaid Solutions

a. Just Pay the Bill: income, savings, family contributions b. Long Term Care Insurance c. Veteran’s benefits (pension/housebound/Aid & Attendance) d. Reverse Mortgage e. Tricare for Life (rarely, but powerful when it fits)

2. Medicaid Solutions

a. “Smart Spending” = any spending for the community spouse and/or institutional spouse is fine and not penalized

i. Pay for legal assistance ii. Pay debts and anticipated or owed taxes

iii. Pay for funeral, burial, or cremation iv. Purchase “stuff” (tangible personal property)

b. List all real property not resided in for sale at tax-assessed value c. Gifting: is it possible?

i. Competent, agent authority, court approval d. Gift/transfers that do not affect eligibility because the asset is not a resource for the transfer

rule: M1450.300 i. Personal effects & household items

ii. One vehicle 1. Used by applicant to obtain medical treatment, or 2. Other uses, or 3. Worth less than $4,500

a. More valuable cars can be transferred, but only $4,500 of value is exempt from the transfer penalty

iii. Life insurance 1. Any policies w/no cash value (term) 2. Policy/ies with a total face value of $1,500 or less

iv. Burial spaces or plots held for the applicant, applicant’s spouse, or the applicant’s immediate family

e. Gift/transfers that do not affect eligibility because the manual excludes them: M1450.400 i. Transfers with an aggregate value of less than $1,000 per year (or up to $4,000 with a 3-

year proven habit of gifting). Note that some Department of Social Services have allowed the first $1k per year of larger gifts to be exempt, but more recently others have not.

ii. Transfers to a child under 21, or child of any age who meets the SSA or Medicaid definition of blind or disabled

iii. Transfers for a reason other than becoming or remaining eligible for Medicaid. Note that this exclusion is hard to receive.

iv. Transfers of the home property to a child under 21, child of any age who meets the SSA or Medicaid definition of blind or disabled, sibling with an equity interest in the house


who resided there for at least one year prior to institutionalization of the transferor, or to a caretaker child (but beware of the timing and details! In addition, the caretaker must be the child, not a step-child nor an in-law)

v. Transfers of any asset into an irrevocable Special Needs Trust (SNT) that is for the benefit of a child under age 21, a child of any age who is blind or disabled per SSA or Medicaid rules and the trust requires actuarially sound distributions or has a payback provision, or for the benefit of any individual under age 65 who is disabled when the trust includes payback provisions.

f. Get married? g. “Half-a-loaf” gifting – aka gift and repay. Very useful strategy for single individuals. See

Attachment 1. i. With annuity

ii. With payback iii. With trust

Case Study - Single Sam comes in to see you regarding his mother, Martha. Martha entered the hospital for her first continuous 30-day period of institutionalization on December 4, 2013, and was transferred to the nursing home on December 15, 2013, where she remains today. Although Sam would like for her to return home, he recognizes that her care needs are too great, and that Martha will remain in the nursing home. Sam asks you how he can get his mother qualified for Medicaid. It is now mid-February 2014. Her resources are as follows: RESOURCES Joint w/Sam Hers Home $250,000 Checking account $15,000 Savings account $40,000 Investment account $20,000 IRA $10,000 Rental property Cash value life ins. $3,000 Totals $55,000 $283,000 $338,000 MONTHLY INCOME: $800 Step One: Single case, determine resource values Step Two: Determine spend-down:


Countable as of now: $338,000 – $2,000 = $336,000 Step Three: Develop a Plan

How do you want to use the funds? What about income? What about estate planning; what documents do you want to review? What are you looking for?


Attachment 1 MEDICAID 101

Transfer of Assets Penalties & Half-a-loaf with Cure

1. Look Back timeframe for all transfers = 5 years! (60 months) 2. Disqualification Period Calculation: Total dollar value of all non-exempt transfers within Look Back period DIVIDED BY 5933 (7734 in Northern VA) = number of months disqualified (do not round) 3. Starting the Disqualification Period: The penalty period starts immediately for current recipients of Medicaid LTC services, but for new applicants, it starts at the following:

a. the applicant is actually in need of nursing home level services, and b. the applicant’s countable assets do not exceed $2,000, and c. the applicant files a Medicaid application, and d. the applicant’s income will not cover his/her medical expenses

GIFTING with a HALF-A LOAF CURE EXAMPLE

The Gift: Aunt Bea has income of $1,500 per month. She gives $50,000 to her nephew George on February 28, 2012. Aunt Bea is fine until she breaks her hip and enters a nursing home in January 2013. Aunt Bea pays $6,500 per month for her care until she is down to less than $2,000 in November 2013, when she files a Medicaid application. The Quandry: Because of the asset transfer, she is disqualified from receiving Medicaid benefits for 8.43 months (November 2013 through mid-July 2014) even though she is in need of services and is out of money to pay for her care. How will her care costs get paid? The Cure: Aunt Bea’s income ($1,500) will pay for part of the $6,500 bill. George will pay the $5,000 balance each month, using gifted funds that he retained. How Half-a-Loaf Works: George’s payment is credited as a partial return of the gift, which results in a lessened penalty period. At the same time, Aunt Bea is one month further along towards the end of the penalty period. Month Net Gift Pay-Back New Months Disqualified 1 $50,000 $5,000 8.43 2 $45,000 $5,000 7.58 3 $40,000 $5,000 6.74 4 $35,000 $5,000 5.90 5 $30,000 $5,000 5.05


6 Aunt Bea is qualified for Medicaid early in the month; George keeps ~ $25,000.



Married Medicaid MEDICAID

NH ________ Community Based Care ________

1. Disqualification Periods:

2. Snapshot Date:

3. Exempt Resources: Home ____________________________________ Contiguous property ____________________________________ Life estate in real property ____________________________________ Most expensive vehicle ____________________________________ Funeral / Burial / Cremation ____________________________________ Stuff ____________________________________

Other ____________________________________

4. Available Resources:

5. Apparent Spend-down if computed now:

6. Possible Strategies for satisfying spend-down Nondisq. gifting: disabled child caretaker child Other Car < 4500 Car for med transport

________________________________________________ Smart Spending: ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ Gift, half a loaf: outright gift gift and annuity gift & promissory note ________________________________________________

Other: List property for sale savings bonds annuity

________________________________________________ 7. Income: 8. EP needs: CS: RLT Will POA AMD HIPAA Deed AE Waiver


IS: RLT Will POA AMD HIPAA Deed AE Waiver 9. Targets: Medicaid Eligibility:

File RA: File Medicaid Application: Receive Approval:


AID AND ATTENDANCE CBC ________ PACE ________ AL ________ NH ________

1. Military Member: husband wife both

2. Exempt Resources:

Home ________________________________________________ Vehicles ________________________________________________ Stuff ________________________________________________


4. Probable Eligibility Level (only the DVA knows for sure):


6. Possible Strategies: Smart Spending: ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ Gifting: outright Add joint owners: ________________________________________________ ________________________________________________

7. Compute apparent benefit: Income: _____________ _____________ _____________ RUME _____________ _____________ _____________ Apparent benefit: _____________ _____________ _____________

8. EP needs: Mil. member: Will RLT IDGT POA AMD HIPAA Deed Spouse: Will RLT IDGT POA AMD HIPAA Deed

9. Targets: _________ ____________ __________ ________ Eligibility Informal Award Application Approval


To Do ____ Complete funeral and burial plans – “Medicaid qualified arrangement”

Get Me ____ Note from doctor, is __________________ “competent to understand a Durable Power of Attorney” This form: © 2014 Virginia SoloSolutions, reprinted with permission



Single Medicaid NH ________ CBC ________ PACE ________

1. Disqualification Periods:

2. Exempt Resources: Home _________________________ Life estate in real property _________________________ Most expensive vehicle _________________________ Funeral / Burial / Cremation _________________________ Stuff _________________________

Other _________________________



5. Possible Strategies for satisfying spend-down Nondisq. gifting: disabled child caretaker child Other Car < 4500 Car for med transport

________________________________________________ Smart Spending: ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ Gift, half a loaf: outright gift gift and annuity gift & promissory note ________________________________________________

Other: List property for sale savings bonds

________________________________________________

6. Income: 7. EP needs: RLT Will POA AMD HIPAA Deed 8. Targets: Medicaid Eligibility:

File Medicaid Application: Receive Approval:


AID AND ATTENDANCE

CBC ________ PACE ________ AL ________ NH ________

1. Military Member: self late spouse

2. Exempt Resources: Home _________________________ Most expensive vehicle _________________________ Stuff _________________________


4. Probable Eligibility Level (only the DVA knows for sure):


10. Possible Strategies: Smart Spending: ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ Gifting: outright Add joint owners: ________________________________________________ ________________________________________________

11. Compute apparent benefit: Income: _____________ _____________ _____________ RUME _____________ _____________ _____________ Apparent benefit: _____________ _____________ _____________

6. EP needs: RLT IDGT Will POA AMD HIPAA Deed

7. Targets: _________ ____________ __________ ________


Eligibility Informal Award Application Approval


To Do ____ Complete funeral and burial plans – “Medicaid qualified arrangement”

Get Me ____ Note from doctor, is __________________ “competent to understand a Durable Power of Attorney” This form: © 2014 Virginia SoloSolutions, reprinted with permission

Medicaid Planning for the New Elder Law Attorney - VAELA

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