Top Tips For A Successful Medicaid Spend Down

Finding the best long-term care, and a way to pay for that care with public benefits, is of critical importance to the elderly, the disabled and their families.  The national median cost of long term care in a private room in a skilled nursing facility is over $9,000 per month, with the average statewide median cost ranging from over $10,000 to well more than $12,000 in other states, including New Jersey, New York, and as high as $24,000 monthly for a private room in Alaska.

Many seniors do not realize that Medicare will cover limited skilled care for a short period of time, and will not be an option to pay for the care they may need for the rest of their lives.  Fortunately, Medicaid and the Veteran’s Administration Improved Pension (or the Dependency Indemnity Compensation benefit for a surviving spouse), combined with the applicant’s income, are means-tested public benefits programs that can often pay for a lifetime of long term care facility and other medical care costs.

Benefit through these programs are limited to applicants with low assets and low income.  The rules for Medicaid eligibility are quite complex and vary somewhat from state to state based on the provisions of each state’s Medicaid plan.  For instance, in my home state of New Jersey, in order for a single individual to qualify for Medicaid, that individual’s countable assets must not be even one penny over the sum of $2,000.  In general, one cannot give away one’s money and receive institutional or waiver service Medicaid benefits within five years of the date of the gift without incurring a Medicaid penalty period.  (A Medicaid penalty period is the period of time during which Medicaid benefits will not be available to pay for custodial care. The length of the penalty period corresponds to the value of the total uncompensated gifts made during the five year Medicaid look back period. The Medicaid penalty period will not begin to run until the last of the following events to occur: there is a filed Medicaid application for the applicant, the applicant is clinically eligible for Medicaid, and the application is either already in a long-term care facility or other care setting permitted under any Medicaid waiver program in his or her state, such as the home or an adult medical day care facility.)

Elder lawyers refer to the process of legally reducing assets to a level below the Medicaid threshold as “spend down and conversion.”  Where one member of a married couple will apply for Medicaid, the spend down and conversion process must be carefully timed and for best results, should be started only after the prospective Medicaid applicant has entered into a nursing home or has a filed application for a Medicaid waiver program and has already been determined clinically eligible for Medicaid.  In order to avoid a Medicaid penalty period as a result of the spend down process, all payments should be for fair market value for the Medicaid applicant or his spouse.  A typical Medicaid spend down may include the repayment of debt for the Medicaid applicant or his or her spouse (but not for another adult, which would be an uncompensated transfer), the payment of legal fees for crisis Medicaid planning and a Medicaid application, payments for other services to the Medicaid applicant and his spouse, the payment of real estate taxes and other costs of home ownership, the purchase of irrevocable prepaid burial arrangements for the Medicaid applicant and his spouse, the payment of “key money” to facilitate the admission of the Medicaid applicant to the best long-term care facility available. (This can frequently require private payment for several months of long term care).  Where the applicant owns a home, he may consider repairs and deferred maintenance to the home, especially where there is a healthy spouse who will remain at home or if the home needs repairs and maintenance to facilitate its sale.  Many seniors may also consider buying a new car, or new household furnishing or personal goods.

The purchase of a life estate in a child’s home may be a suitable spend down strategy for an elderly parent who is presently independent but may need Medicaid in the next few years, the parent wishes to reside in the child’s home and the child is amenable.  A life estate is an undivided ownership interest in the real property and gives the holder the right to reside in the home during his lifetime as well as favorable capital gains income tax consequences and responsibilities for the home’s financial upkeep.  If the parent reside in the child’s home for a period of at least one year and the value of the life estate is properly computed and both parent and child execute a deed memorializing the life estate purchase, the parent’s payment to the child for the life estate will not result in a Medicaid penalty period.

One of the most powerful spend down strategies is the purchase of a Medicaid compliant annuity. This is an annuity which meets strict criteria in the federal Medicaid statute.  The annuity can be funded with either non-qualified or qualified retirement funds. If the annuity is non-qualified, the annuity contract must provide for equal monthly payments (with no balloon payments), be irrevocable, non-assignable and the annuity term must be for a period longer than the actuarial life expectancy of the annuitant, as calculated according to actuarial life expectancy tables promulgated by the Social Security Administration or the state of residence of the Medicaid applicant. The annuity contract must name the state from which Medicaid benefits are sought as either the first remainder beneficiary to the extent of any Medicaid lien, or the state is named in the second position after the community spouse. If these requirements are satisfied, and assuming that the Medicaid applicant is otherwise eligible for Medicaid, the annuity contract cannot be treated as a countable asset and the annuity purchase cannot result in the imposition of any Medicaid penalty period.  See 42 U.S.C. 1396p(c)(1)(G); Carlini v. Velez, 947 F.Supp.2d 842 (D.N.J. 2013).

Similar rules apply for a qualified Medicaid-compliant annuity contract.

Here is an illustration of why the Medicaid compliant annuity purchase can be a powerful strategy to retitle a couple’s assets and preserve funds for the healthy spouse to remain for years in the family home.

Example.  Mary and James are ages 80 and 85, respectively. James needs nursing home care and Mary needs assisted living care. Mary’s only income is an estimated $600 monthly from her Social Security benefit. James’ income is comprised of $1,200 from Social Security, and he is not a veteran.  After their home is sold, the couple has $438,000 in liquid assets and James is ineligible for Medicaid due to the couple’s excess funds.  Without Medicaid planning, due to their home states’ maximum community spouse reserve allowance, Mary would have to spend down approximately $310,000, in order for James to become eligible for Medicaid.  Fortunately, she can spend the sum of $310,000 on a Medicaid annuity, which will enable James to become eligible for Medicaid in the following month and will provide her with sufficient monthly income to pay for her assisted living.  If the term of the annuity is for three years and for 36 equal monthly payments to Mary in the sum of over $8,600.  Mary is now able to pay for at least four years of assisted living care and can remain comfortably in the community. After the annuity term expires, Mary will likely be financially eligible for Medicaid herself.

Spend down is also important for United States military veterans and their spouses who are seeking the Veteran’s improved pension or the Dependency Indemnity Compensation for a surviving spouse or child.  In computing the applicant’s net worth for this means-tested benefit, federal law allows a deduction for unreimbursed medical expenses.

Medical expenses can include costs paid for services from health care providers, custodial care and must constitute a payment for an item or service that is medically necessary; improves the disabled individual’s functioning; or prevents, slows, or eases an individual’s functional decline.

Medical expenses may include care by a health care provider, i.e., someone who can only be an individual appropriately licensed by the state or country in which the service is provided to provide health care in that state or country.  In-home care providers are not always subject to licensure.

The definition of “health care provider” in the final rule incorporates a licensure requirement and the term may include, but is not limited to, a doctor, physician’s assistant, psychologist, chiropractor, registered nurse, licensed vocational nurse, and a physical or occupational therapist. Other categories of deductible medical expenses (to the extent not reimbursed) include medications, medical supplies, medical equipment and medical food, vitamins, and supplements if prescribed or directed by a health care provider authorized to write prescriptions, adaptive equipment, or service animals, including the cost of any veterinary care, used to assist a person with an ongoing disability; the cost of transportation for medical purposes, i.e., to and from a health care provider’s office, health insurance premiums, smoking cessation products; and institutional forms of care and in home care, including hospitals, nursing homes, medical foster homes, and inpatient treatment centers.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.

 

 

Do I Need A Physician Orders for Life- Sustaining Treatment?

POLST.jpgA POLST (physician’s orders for life sustaining treatment) is a portable medical order, signed by a doctor, which contains the treatment wishes of an individual who is either seriously ill, or medically frail. The physician’s orders help the individual exert some degree of control over their end of life care.

Some individuals nearing the end of their life do not want to receive emergency medical treatment.  If the individual is residing in a long-term care facility, the current standard of care during an emergency is that the facility must call 9-1-1 in an emergency and the emergency medical personnel must to take every reasonable means to safe a life.  In an emergency, the decisions makers under a health care power of attorney may not be able to be reached immediately, and emergency medical personnel will not have time to read a legal document.  If your loved one nearing the end of life wishes not to receive emergency medical services (such as intubation, cardiopulmonary rescuscitation, antibiotics, and other treatments), a POLST should be prepared and provided to the long-term care facility.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.

Restoration of Capacity?

Restoration of Capacity

If an individual is determined unable to make her own decisions, a judgment of incapacitation and awarding guardianship may issue.

Sometimes, the conditions which led to a judgment of incapacitation are not permanent. In this case, the subject of the guardianship order may seek an order restoring her to legal capacity, which would allow her to resume making decisions for herself.

In the Matter of the Guardianship and Conservatorship of Lois Crist, No. 118-973 (Ct. App. Kansas, February 1, 2019)(per curiam), an 82 year old widow residing in a rural home requested an order restoring her to capacity.   At the time of the original impairment order, the ward’s home was uninhabitable due to mold and clutter, and she was dirty and unkempt, and suffering from a gait dysfunction, a vitamin B-12 deficiency, and a urinary tract infection.  She was removed from her home, adjudicated impaired, hospitalized, discharged to a nursing home, and then to assisted living, where she thrived. The total value of her estate was over $1.4 million.

Nearly two years after the original hearing, the ward had a falling out with her family and filed a petition for restoration. She argued that her impairment was temporary and attributable to an altered mental state from a urinary tract infection. She was evaluated several times, with disparate results, but two tests determined that she was unable to drive or to manage her housekeeping independently.

The trial court declined to restore her legal capacity for decision-making in part because her answers to the court’s questions regarding how she would live independently in a rural setting were unrealistic.

While we will never know all the facts, it is quite possible that with effective representation and thorough preparation, the petitioner might have been better prepared to anticipate and effectively answer the court’s questions and she might have successfully obtained a restoration of capacity order.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.

Have Medical Bills, Game Plan Needed

Unpaid Medical BillsIt’s important to have a game plan for medical bills, and the game plan should probably not involve suing the hospital as a preemptive strike. That is precisely what occurred in Pitell v. King County Public Hospital, No. 767720-8-1 (Court of Appeals of Washington, Div., 1, August 13, 2018).

Steven Pittell had over $50,000 in his bank account but was uninsured and ineligible for Medicare and Medicaid, when he was admitted to the hospital.  He signed a consent form that stated in part:

I agree, whether I sign as a representative or as a patient, that in consideration of the service to be rendered to the patient, I agree to be personally responsible for the balance due after any applicable insurance payments. 

After Mr. Pittell was discharged, he was billed over $32,000 for the medical services provided to him. His application for charity care was denied due to his bank balances. The hospital did reduce the charge by 20% to approximately $25,800, because Pittell was uninsured. A majority of the five largest commercial insurers would have paid a higher rate on the patient’s bill.

Rather than paying the bill, Pittell sued the hospital on behalf of a class of similiarly situated patients, claiming that the consent form was unenforceable because the hospital failed to disclose its chargemaster (i.e., the hospital’s standard price list for hospital services) at the time of treatment.

The trial court rejected this argument, dismissing Pittell’s case and issuing a judgment requiring him to pay the amount of the discounted bill, plus attorney’s fees and costs.  The Court of Appeals of Washington affirmed.

Had Mr. Pittell purchased insurance on the exchange, he would have had coverage. Even if he did not, an attorney could advise him of important options, such as filing for bankruptcy, whether any federal benefits he was receiving (such as Social Security, the Veteran’s Improved pension) or a military or civil service pension or salary are protected against garnishment under federal law. The attorney could also have negotiated a reasonable payment plan.  If for some reason, the bill was already covered to some extent by Medicare, Medicaid or other health insurance, an attorney could help obtain evidence of other payments from the medical provider, review the bill, determine whether the amounts paid were accurate, and require the hospital to reduce the amount outstanding by the amount of any prior payments. If there is some insurance coverage, an attorney can also advise whether your state prohibit balance billing.

For more information about the circumstances under which federal benefits are protected, see my blog, When Are My Federal Benefits Protected?

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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 I Keep My Small Business and Still Go on Medicaid?

small business.jpg

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 a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.

Support for New Jersey’s Unpaid Caregivers

Support for New Jersey’s Unpaid Caregivers

Caregiving, done well, can be the ultimate act of service and potentially a game-changer, enabling an elderly or functionally disabled individual to remain at home surrounded by their family, friends and happy memories.

However noble and important, caregiving often imposes a heavy financial, physical and emotional toll on unpaid caregivers, who statistically face a higher incidence of missed time from work, loss of employment, and of developing adverse emotional conditions such as anxiety, depression, and burn out, adverse health conditions and even physical injury.

The value of self-care on the part of the caregiver is essential. At a minimum, caregivers should take regular breaks, get physical exercise, maintain good nutrition and get plenty of rest, which is often easier said than done. With the number of elderly and disabled individuals reliant on care from unpaid caregivers projected to double by 2020, unpaid caregivers will face unprecedented challenges.

The state of New Jersey has taken up the challenge of supporting caregivers with recently enacted Public Law 2018, c166. Passed by the New Jersey legislature and signed by Acting Governor Sheila Oliver on December 28, 2018, the new law establishes the New Jersey Caregiver Task Force. The purpose of the task force is to evaluate existing supports for New Jersey caregivers and to develop recommendations for the improvement and expansion of caregiver support services within our state. The task force will take testimony from caregivers regarding the care duties performed, the sufficiency of caregiver training programs, the costs which caregivers face and their own personal caregiving experiences.  The task force will prepare a report with recommendations for new laws and regulatory or program changes to improve, expand and supplement existing caregiver support programs and systems within the state.

New Jersey’s new focus on caregivers is not unprecedented. In 2017, the state of Hawaii passed the Kapuna Care Act, which established the Kapuna Caregivers Assistance program to provide family caregivers who work with resources to help pay for care services for elderly individuals over age sixty residing in the community and requiring assistance with at least two activities of daily living or having substantial cognitive impairment.  Under the Hawaiian model, cash payments are available to help working caregivers defray some care-related costs.

At the federal level, the RAISE Family Caregivers Act was signed into law on January 8, 2018, and directs the Department of Health and Human Services to develop, maintain and update a National Family Caregiving Strategy and to convene a Family Caregiving Advisory Council. The Act defines family caregivers as adult family members or other individual having a “… significant relationship with” and providing “a broad range of assistance to an individual with a chronic or other health condition, disability or functional limitation.” The bill is designed to specify recommended actions which can be undertaken by federal, state, and local governments, communities, health care providers, and long term services and supports to assist family caregivers.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.

When Are My Federal Benefits Protected?

electronic money.jpgSenior citizens and disabled persons are particularly susceptible to debt and money issues. For those living on a fixed income, losing part or all of the federal government benefit on which the recipient depends on food and shelter and everyday living expenses can be devastating.

If an individual owes certain types of federal debt, (for example, unpaid taxes, interest and penalties due to the Internal Revenue Service, an overpayment by the Social Security Administration, student loan debt and debt from Base Exchanges on military installations), federal benefits can be reduced to repay these obligations.  Fortunately, there are protections in place under federal law for important government benefits.

For example, the first $9,000 in Supplemental Security Income (SSI) benefits paid to an individual each year is protected from any offset. Veteran’s benefits generally cannot be offset, except to recoup an over payment from Veterans’ benefits. Federal student loan payments, other payments by the Department of Education, the Black Lung Act, and “tier two” Railroad Retirement benefits, are also protected.

Under an interim Treasury Rule, the most recent two months of electronic deposits from federal benefit payment for SSI, federal Civil Service Retirement Benefits, Veteran’s Benefits, and payments by the Railroad Retirement Board, Treasury Department, and the Office of Personnel Management, are protected against garnishment. Once the federal benefit is deposited electronically into the account, it cannot be taken by the government for a period of at least two months. During this time, the electronically deposited funds must available to the account holder.

Only funds electronically deposited into the account are protected under this rule.  If money is deposited via a check, money order or inter-account transfer, such funds are not protected by this rule and can be subjected to garnishment.

One solution is to use a Direct Express prepaid debit card.  Funds can be electronically deposited to the card. The funds on the card are available to the cardholder, and cannot be garnished. However, the cards are highly regulated and tend to have high fees.

State law may offer additional consumer protections. Other protections may be available under the federal Consumer Credit Protection Act (CCPA), Chapter 7 or 13 bankruptcy petitions, the Fair Debt Collection Practices Act, and state statutes of limitations.  Consultation with a bankruptcy, consumer protection and/or an elder law attorney is recommended before debt or garnishment becomes an issue.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.