Accelerating the Date of Eligibility

Accelerating the Date of Eligibility

1. While timely payment of debts is an important step in establishing the date of eligibility, it is often possible to accelerate such date by the prepayment of a future debt or by acquiring excludable resources.

2. Frequently in the planning process an income tax liability is generated due to the liquidation of assets. Typical examples are the redemption of E or EE bonds, sales of securities and the withdrawal of funds from an IRA. Payment of income taxes on these transactions on April 15 could delay the date of eligibility. Counsel should confer with applicant’s accountant to discuss maximum payment of estimated taxes.

3. If applicant is married and community spouse is residing in the marital home, monies can be utilized for mortgage payments or for home repairs.

4. Monies can be used to purchase excludable resources such as an irrevocable burial arrangement – N.J.A.C. 10:71-4.4(b)9.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© February 2009, Post #5

Significance of Payment of Debts and Expenses

Significance of Payment of Debts and Expenses

A. As indicated in the administrative regulations and the examples presented below, there are several key rules in the administrative regulations to be addressed with respect to the payment of debts and expenses and failure to consider these rules could delay the date of eligibility. The most significant administrative consideration is that the resource eligibility requirement of $2,000 (or $4,000 in limited circumstances) must be met on the first day of the month for which eligibility is sought. Relevant administrative regulations and federal statutes are included for reference.

B. Significant administrative regulations.

1. Resource eligibility is determined as of the first moment of the first day of each month - N.J.A.C. 10:71-4.1(e). The resource requirement must be met on the first day of every month for the recipient or eligibility can be lost. Of course, once eligibility is established, resources of the community spouse may exceed the Community Spouse Resource Allowance without loss of benefits by the recipient spouse – 42 U.S.C. 1396r-5(c)(4).

2. If an individual is eligible as of the first moment of the first day of the month, subsequent changes during that month in the amount of countable resources will not affect the original determination of eligibility – N.J.A.C. 10: 71-4.1(e).

3. A check drawn on the account of an applicant reduces the value of the account. However, the value of the account is not reduced by unpaid obligations for which a check has not been drawn – N.J.A.C. 10:71-4.1(e)2.

C. Eligibility can be denied or delayed by lack of compliance with the regulations.

Example 1: Applicant (single individual) has $5,000 in a checking account on September 30. There is an outstanding medical bill of $3,200. On October 1, application is made for Medicaid. Check is drawn in payment of medical bill on October 1. Application for Medicaid will be denied for October.

Note: Resources in excess of $2,000 will result in ineligibility for the month. Therefore, the nursing home is entitled to the private pay rate for that month. That is, missing the resource requirement by even a minimal amount has the same effect as missing the requirement by a larger amount.

Example 2: Same as above, except check is drawn on September 30. Medicaid will be granted.

Note: Check need not be negotiated to reduce available resources.

Example 3: Applicant has $1,500 in a checking account and qualifies for Medicaid on October 1. On October 15, individual receives a medical reimbursement check of $10,000, which is deposited in a checking account. Funds remain in the account. Medicaid recipient will lose eligibility on November 1.

Contrast: Medicaid recipient transfers the $10,000 on October 16 to a disabled child. Eligibility will be maintained.

Caution: Funds paid to the nursing home (which have not been applied against prior monthly charges) are a resource. Therefore, if one month’s deposit remains with the nursing home, the deposit should be applied to payment of nursing home costs in the month prior to eligibility.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© February 2009, Post #4

Life Insurance Issues

Life Insurance Issues

A. One of the most common oversights which can delay eligibility is the failure to inquire about applicant’s (or spouse’s) life insurance policies. References to the relevant New Jersey Administrative Code citations are included.

B. While the cash value of life insurance policies with a total face value of $1,500 or less is an excludable resource (N.J.A.C. 10:71-4. 4(b)4.), the existence of a life insurance policy(s) often presents a trap for the unwary. Often an elderly client will have a small policy with a substantial cash value. If the face value of such policy (or total face value of several policies) exceeds $1,500, the cash value constitutes a countable resource. Therefore, it is necessary to surrender the policy and spend the cash value.

Caution: While a group policy has no cash value, the aggregate face amount of all policies (including group) is considered in the determination of whether the cash value(s) is an excludable resource.

Note: Another solution to the cash value problem is for the owner of the policy (generally the applicant) to borrow against the policy. While this technique would reduce the death proceeds, the cash value would no longer be a resource. Hopefully, the borrowed funds can be used to pay debts or acquire excludable resources.

1. If the face amount of a policy is large and/or the death of an applicant is near, consideration should be given to a transfer of ownership of the policy to the community spouse. Of course, the cash value will then count toward the Community Spouse Resource Allowance.

2. Life insurance on the life of and owned by the community spouse could also present a problem. That is, the cash value on such policy counts toward the Community Spouse Resource Allowance and will result in a denial of eligibility if not considered. There is no express $1,500 exclusion in the regulations for a policy owned by and on the life of the community spouse.

Note: Again, policies need not always be surrendered. As indicated above, it might be advantageous to transfer a policy with a substantial death benefit to the community spouse, particularly if death of the applicant is near.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© February 2009, Post #3

Additional Post-Eligibility Considerations

Additional Post-Eligibility Considerations

Accounts Closed Out During the Look-back Period

In addition to providing history for all accounts during the relevant look-back period, documentation should be provided for any accounts terminated during such time. Also, tracing the proceeds of such accounts is necessary. Firstly, this process will allow you to detect unknown transfers. Secondly, such information is to be provided since the County Board does a crosscheck with the IRS of Forms 1099 of a Medicaid recipient prior to eligibility. Such crosschecks will reveal all interest bearing accounts held by a Medicaid recipient (and other assets such as stocks) during this time period. If such search reveals an account(s) not disclosed in the Medicaid application papers, the County will make a post-eligibility inquiry. By providing such documentation at the time of application, the family avoids the nuisance of subsequent inquiry by Medicaid with respect to accounts closed out and not mentioned.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.



© February 2009, Post #2

Methods of Payment of Medigap Insurance After Eligibility

Appointment of Representative Payee

1. Once eligibility is established, the nursing home receives the Medicaid reimbursement rate as payment. The actual amount paid to the nursing home by Medicaid is reduced by any recurring monies received by the individual such as social security and pension payments, which are to be remitted to the nursing home on a monthly basis.

2. Such payments received during any given month constitute resources on the “first moment of the first day” of the subsequent month.

3. The $2,000 threshold could be exceeded due to the lack of attention to automatic deposits of social security and pension payments to a Medicaid recipient’s checking account.

Planning Point: Once the date of eligibility is near, counsel should advise and assist the responsible family member to designate the nursing home as representative payee for social security benefits of the Medicaid recipient. Social security payments will then be made directly to the nursing home. The danger of disqualification due to inadvertent accumulation of social security monies will be eliminated.

Alternative Arrangements: If a recipient maintains Medigap insurance, Medicaid will subsidize such costs. In such case, it might be prudent not to designate the nursing home as representative payee since the recipient would have to rely on the nursing home to pay the Medigap premiums from the assigned monies. If Medigap insurance is to be maintained, the following possibilities exist:

(a) Designate nursing home as representative payee and arrange for home to pay Medigap premiums (risky).

(b) Continue Social Security payments to applicant’s account. Applicant (or attorney-in-fact) pays premiums directly and remits any excess funds to the nursing home.

(c) If pension payments can cover the Medigap premiums, designate nursing home as representative payee of Social Security, pay premiums from pension funds, remit any excess pension monies to nursing home.

4. Payments from qualified retirement plans cannot be assigned. Therefore, in the event of such payments, recipient should maintain a checking account for deposit of such funds. These monies are to be paid to the nursing home monthly.

5. At the point of eligibility or within ninety days of eligibility (the “90-Day Rule”), all joint accounts with community spouse should be terminated. The entire balance in a joint account will be treated as a resource of applicant. There should be a separate account for applicant. Also, a separate account in the name of community spouse should be the receptacle for pension and social security payments of community spouse and other monies.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© February 11, 2009, Issue 1