Category: Medicaid & Gifts

Can I Keep My Small Business and Still Go on Medicaid?

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & GiftsLeave a comment

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Medicaid, the largest payment source for nursing home care in the United States, is a government health insurance program for low-income, low asset individuals. In New Jersey, a single individual generally cannot become financially eligible for Medicaid during any month in which her assets exceed the sum of $2,000 by even one cent on the first date of that month.  The $2,000 limited for Medicaid eligibility is referred to as the resource eligibility limit.

Certain assets are disregard in determining whether an individual is in excess of the Medicaid eligibility resource limit. The income producing property exemption may protect certain business property, including the land and buildings from which the small business is operated (and the machines, tools, trucks and equipment and even cash held in bank and investment accounts) where that business property is income producing property essential to self-support.  See 42 U.S.C. § 1382b(a)(3).

Suppose Kylie is age 65, has had a stroke, and now needs Medicaid to pay for her long-term care.  If Kylie owned and operated a profitable business selling her own line of cosmetics for several years before her entry into skilled care, the business, its inventory and the business’s operating accounts may be excluded from consideration in determining whether Kylie is eligible for Medicaid.

If you’re faced with a similar situation, it is important to seek counsel from a seasoned elder law attorney to ensure that you find the best care, and that you will qualify for Medicaid in order to pay for that care with public benefits. This can help you and your family protect the family home and your life savings, as well as ensure the best care is given to you or a loved on.

Questions? Let Jane know.

Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

What is a Medicaid Penalty Period?

On By Jane Fearn-Zimmer, Esq.In Medicaid & GiftsLeave a comment

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Medicaid is a joint federal and state program that provides funding for long-term care in a nursing home, an assisted living facility, an adult medical day care program or at home. As a means-tested public benefit program, there are strict asset and income requirements. A single individual who wishes to qualify for Medicaid can have no more than $2,000 in countable assets in his or her name and if both members of a married couple seek Medicaid, they can have no more than $3,000 in assets in either or both of their names. There are somewhat higher limits, where one member of a married or a civil union couple will remain in the community independently and the other member will apply for Medicaid.

Generally speaking, an individual cannot give away his or her money and immediately qualify for Medicaid without being subject to a Medicaid penalty period. What does that mean? A penalty period is a period of time during which Medicaid will not pay for the care of the applicant, as a consequence of gifting during the five years immediately prior to the date of filing of the Medicaid application.

“Gifting” for Medicaid may not always be obvious.  Unverified withdrawals from a joint bank account by a child for cash payments of the parent’s expenses may be penalized as gifts. This happened in E.S. v. D.M.A.H.S. and Bergen County Board of Social Services, (Final Agency Decision, N.J. OAL Docket No. HMA 9477-2014, December 11, 2014).

What can you do if you are preparing to file a Medicaid application and the applicant has already given away more than $1,000 during the past five years?  Having the right documentation in hand is very important. Collect and keep financial statements, receipts, notes in checkbook registers and calendars to substantiate cash transactions.  If cash was paid for utility bills, medications, or for groceries, do you have a receipt or a prescription log from a pharmacy? Was a store loyalty card used? If there was gambling, are there statements available from the casino, to substantiate the amounts and dates of the losses?

Documenting that the uncompensated transfers were made exclusively for a purpose other than expediting Medicaid eligibility can also be an option. This can work when the client was living actively in the community at the time of the transfer. See Estate of M.M. v. DMAHS and Union County Division of Social Services, (Final Agency Decision, NJ OAL Docket No. HMA 13911-08, May 27, 2009) (reversing the imposition of any Medicaid transfer penalty for the transfer of $25,000 to a daughter by the Medicaid applicant, when she was living independently at home prior to traumatic onset of disability).

Questions? Let Jane know.

Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Can A Computer Deny My Medicaid Application?

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & GiftsLeave a comment

Jane Fearn-Zimmer take on the role of artificial intelligence when establishing medicaid eligibility In the information age, computer programs are increasingly relied upon to streamline and facilitate important decisions. A number of states require online applications for Medicaid.  In New Jersey and other states, Medicaid caseworkers have access to Social Security databases and even monthly bank balances, which are otherwise protected under bank secrecy laws.  Bank accounts in addition to those listed by the applicant on the Medicaid application can be identified with computer matching data. The computerized process is unquestionably far more efficient than the old-school method, which involved a lot of early mornings and late nights, during which the attorney responsible for filing the Medicaid application would manually review every transaction listed on every page of up to five years of bank statements and then compare available withdrawal and deposit slips with all of the contemporaneous deposits and withdrawals for multiple accounts, in effort to “verify” that there were no other unknown accounts throwing off income.  In these situations, a computer program which can scan the bank statements and identify unverified deposits is a godsend. However, two recent Medicaid cases from opposite regions of the United States recently prompted me to ponder whether there should be limits on the use of computer programs in determining or terminating Medicaid eligibility.

Earlier this month, a federal district court Medicaid case focused on the use, by the Arizona Medicaid agency, of the Health-e-Arizona Plus computer program, in processing welfare benefit applications.  Darjee v. Betlach, No. CV-16-00489-TUC-RM (DTF) (Dist. Ariz., September 5, 2018) was brought on behalf of multiple Medicaid enrollees, who argued that the computer programs placed them at risk of undue delays in the proper processing of their applications, in violation of the federal Medicaid Act.

Apparently, once their important information was entered into the Health-e Arizona Plus program, the information was accessible only within the Medicaid application it was entered on, and the software program did not import the missing information into a subsequent Medicaid application for the same individual. The result was that information entered on earlier Medicaid applications was not considered on subsequent ones, resulting in inadvertent decreases in benefit entitlements.  A federal lawsuit was filed on behalf of those Medicaid enrollees, whose welfare benefits were improperly reduced by Health-e-Arizona program.  Their benefits, however, were later restored. Plaintiffs alleged ongoing and systemic improper Medicaid benefit reductions in violation of the due process clause of the Fourteenth Amendment and the federal Medicaid Act, based on the use of the computer program.

As the Darjee case shows, even computer programs have their limits. Computers do not have empathy, do not care about fairness, will not always identify additional information needed to determine Medicaid eligibility, and will certainly not go the extra mile to obtain the necessary documents for the applicant.

Especially in New Jersey, where Medicaid eligibility denials for “failure to verify” are common, this can be problematic.  In A.F. v. D.M.A.H.S, No. A-2163-16T1 (N.J. Super., App.Div., July 23, 2018), the Morris County Board of Social Services terminated the Medicaid benefits previously authorized to a quadriplegic of many years, who was completely dependent on the personal care financed by the terminated Medicaid benefit. In an Orwellian twist (which you knew was coming), the reason cited for the termination was the alleged failure to verify two life insurance policies, neither of which was owned by A.F. and as to which no further details were revealed.

Because A.F. held no incidents of ownership in the policies, A.F. could have not verified the policies on a timely filed Medicaid eligibility redetermination.  Although the policy was ultimately revealed on Fair Hearing to be a term life insurance policy with no cash surrender value, the agency refused to waive a few weeks’ delay to re-instate benefits for A.F., who was a severely disabled individual.  The administrative law judge re-instated A.F.’s Medicaid eligibility on Fair Hearing, but the state Medicaid agency director reversed this decision, forcing A.F.’s attorney to challenge the decision of the agency director in the Appellate Division.  Fortunately, A.F. prevailed in the Appellate Division, but justice delayed can be justice denied.

My take-away from these decisions is that while artificial intelligence can be helpful, it remains critical to enlist the assistance of a seasoned Medicaid attorney to timely identify, gather and organize all of the financial documents needed to establish Medicaid eligibility.  While a computer program can definitely expedite a complex eligibility determination process easier, there is no substitute for the human touch in the Medicaid application process.

Questions? Let Jane know.

Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Medicaid and Gifts

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & GiftsLeave a comment

Medicaid in New Jersey

Medicaid will not pay for long term or home and community based care during a Medicaid penalty period. A penalty period will generally be imposed where uncompensated gifts have been made during the five years immediately preceding the filing of the Medicaid application. This period is known as the Medicaid lookback.  The length of the penalty period is computed based on the total amount of gifts during the look back period. Under the current Medicaid divisor, approximately one month of ineligibility is imposed for every $10,000 given away during the lookback period.

Many applicants are unaware that there is a rule, which applies to Medicaid applications filed in New Jersey after May 26, 2010, as well as to Medicaid applications filed in other states, including Ohio, preventing recalculation of the penalty period where some, but not all of the gifts made during the lookback period, were returned. The rule, as stated in New Jersey, is found in Medicaid Communication 10-06 and requires that the penalty period cannot be decreased for the returned gifts unless all of the assets given away have been returned.  This rule can have very harsh consequences, which are illustrated in a recent case from Ohio.

In Paczko v. Ohio Dept. of Job & Family Servs., (2017 OH 9024 (Oh. Ct. App., 8th Dist., Cuyahoga County, No. 105783, Dec. 14, 2017), an elderly woman transferred the sum of $146,122 to a trust, which would benefit her children. She later applied for Medicaid during the five year lookback period. The sum of $89,227.38 was returned from the trust to the elderly woman to pay for her care. She sought to reduce the original Medicaid penalty period computed on the total transfers during the preceding five years, by the sum of the returned gifts.  At the Board level, the Ohio Medicaid agency gave her limited for her returns, and denied her request for additional credit for all of the gifts returned. Her appeal was denied at both the Staff Hearing Officer and Court of Common Pleas levels.

While the Paczko case is not binding on the New Jersey courts, the case is a good illustration of what can happen when there is a partial return of gifts without further planning and a Medicaid application is filed within the five year lookback period. The take away from Paczko is that, in New Jersey, as in Ohio, applicants for Medicaid re well-advised to be mindful of the “no credit for partial returns” rule and to consult an attorney before filing any Medicaid application, or proceeding to a Medicaid Fair Hearing, to determine what solutions may be available.

Questions? Let Jane know.

Gifts and Medicaid: Gifting to Children and Grandchildren

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & Gifts, UncategorizedLeave a comment

Gifts and Medicaid in New Jersey

Clients often ask me, can they make gifts to their children and grandchildren without a problem concerning Medicaid?  Often, what they have in mind is the $15,000 annual exclusion, which is a federal provision, not a Medicaid regulation. The $15,000 annual exclusion permits a taxpayer to give up to $15,000 away per year without being required to file a gift tax return. Married couples may split gifts and currently give up to $30,000 per person per year if they both agree.

But the federal tax rules and the Medicaid rules are “apples and oranges” in this case. Different rules apply here for Medicaid than for tax purposes. While a gift of less than $15,000 would not require a federal gift tax return, even small gifts, payments of medical and educational expenses of others, and gifts to children and grandchildren and others, of any amount, can jeopardize Medicaid coverage for long-term care for New Jersey residents.  This is because of the rules which apply during the five year Medicaid look back period. If there are any gifts made by the Medicaid applicant within the five years immediately preceding the filing of the applicant’s first Medicaid application, all of the gifts made during that five year period will be totaled and a Medicaid penalty period corresponding to the value of the total gifts will be imposed. Due to the Medicaid penalty period, Medicaid will generally deny coverage for long-term care, for a period of time corresponding to the total amount of all of the gifts made during the five years immediately prior to the filing of the Medicaid application.  Under the current New Jersey policy, even if some of the gifts are returned, the total amount of all of the gifts made during the lookback period can be subject to a Medicaid penalty period. This can have disastrous results on a Medicaid application.

For example, assume that Billy and Sue are husband and wife and they together make $92,000 in gifts to their children between February 1, 2012 and January 31, 2017. If a Medicaid application was filed for Billy in the month of February, 2017, even if $90,000 of the gifts are returned by the children back to Billy and Sue, a Medicaid penalty in the sum of $92,000 can be imposed on Billy and Sue because that was the amount of the total gifts made during the five year Medicaid look back period for Billy.

Fortunately, there are sometimes strategies available to push back against this very harsh result.  When filing any Medicaid application in New Jersey, consulting with an experienced elder law attorney is advised.

Questions? Let Jane know.