Change in Penalty Rate
Under both OBRA ’93 and the Deficit Reduction Act, the penalty period is determined by dividing the amount of the transfer by the applicable average nursing home costs. In addition, in January of each year, the penalty is increased retroactively to November 1 of the prior year. Therefore, the penalty rate through October 31, 2008 was $6,942. Subsequently in January 2009 the penalty rate was adjusted to $7,282 per month retroactive to November 1, 2008. Assume a transfer on November 15, 2008, of $100,000. If all the requirements of Medicaid have been met but for the transfer, the penalty due to the transfer would appear to be 100,000 ÷ 6,942 = 14.4 months.
See Post 15 for the starting date of the transfer penalty under the Deficit Reduction Act.
However, the newly instituted rate, which is retroactive to November 1, 2008, requires a divisor of 7,282. The actual period of ineligibility giving consideration to the retroactivity is 13.73 months.
Key point: If a transfer occurs on or after November 1 of a given year and an application is made for Medicaid, anticipate a lesser penalty due to the above retroactivity rule.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© August 2009, Post 51
Showing posts with label nursing home costs. Show all posts
Showing posts with label nursing home costs. Show all posts
Wednesday, August 12, 2009
Thursday, May 28, 2009
Significant Language in Power of Attorney Regarding Primary Residence
Significant Language in Power of Attorney Regarding Primary Residence
Prior Post 11 discussed the advantages of a jointly-held residence being transferred to the community spouse for Medicaid purposes. The general idea presented was that after the applicant receives Medicaid, the community spouse would be free to sell the residence and the funds received would not be part of the Medicaid “pot.”
Therefore, a power of attorney must currently include language that indicates that if an individual enters a nursing home, the residence should be transferred to the community spouse. Such language should be in the power of attorney currently.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2009, Post #38
Prior Post 11 discussed the advantages of a jointly-held residence being transferred to the community spouse for Medicaid purposes. The general idea presented was that after the applicant receives Medicaid, the community spouse would be free to sell the residence and the funds received would not be part of the Medicaid “pot.”
Therefore, a power of attorney must currently include language that indicates that if an individual enters a nursing home, the residence should be transferred to the community spouse. Such language should be in the power of attorney currently.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© May 2009, Post #38
Tuesday, April 21, 2009
Preserving the Community Spouse Resource Allowance
Preserving the Community Spouse Resource Allowance
A. The key to planning asset preservation with respect to the community spouse is to remember that although the community spouse resource allowance is determined as of the date of institutionalization, the date at which the community spouse cannot have resources in excess of this amount (subject to the 90-day rule), is the date of application (see Post 25). Therefore, in order to do appropriate Medicaid planning, consideration must be given to utilization of spousal resources from the commencement of planning to the projected date of Medicaid eligibility.
Factors to be considered in determining the amount retained by the community spouse include the following:
i. anticipated personal expenditures by community spouse prior to application;
ii. expenditures of “ill” spouse prior to institutionalization and, of course, nursing home costs prior to Medicaid eligibility;
iii. interest and earning on assets;
iv. any compensation to be received by the community spouse;
v. social security and pension payments of both spouses;
vi. projected date of Medicaid eligibility.
B. As indicated by the above factors, although the community spouse resource allowance is determined objectively, many factors must be considered as part of the planning process. For example, although the current maximum amount that can be protected is $109,560, generally a substantially greater amount can and should be retained by the community spouse. Living expenses of the community spouse and nursing home costs of the institutionalized spouse prior to Medicaid eligibility are major factors. Possibly the key factor is the projected date of Medicaid eligibility which, of course, cannot be determined with certainty.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #26
A. The key to planning asset preservation with respect to the community spouse is to remember that although the community spouse resource allowance is determined as of the date of institutionalization, the date at which the community spouse cannot have resources in excess of this amount (subject to the 90-day rule), is the date of application (see Post 25). Therefore, in order to do appropriate Medicaid planning, consideration must be given to utilization of spousal resources from the commencement of planning to the projected date of Medicaid eligibility.
Factors to be considered in determining the amount retained by the community spouse include the following:
i. anticipated personal expenditures by community spouse prior to application;
ii. expenditures of “ill” spouse prior to institutionalization and, of course, nursing home costs prior to Medicaid eligibility;
iii. interest and earning on assets;
iv. any compensation to be received by the community spouse;
v. social security and pension payments of both spouses;
vi. projected date of Medicaid eligibility.
B. As indicated by the above factors, although the community spouse resource allowance is determined objectively, many factors must be considered as part of the planning process. For example, although the current maximum amount that can be protected is $109,560, generally a substantially greater amount can and should be retained by the community spouse. Living expenses of the community spouse and nursing home costs of the institutionalized spouse prior to Medicaid eligibility are major factors. Possibly the key factor is the projected date of Medicaid eligibility which, of course, cannot be determined with certainty.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2009, Post #26
Monday, March 23, 2009
New Transfer Rules and Their Effect
New Transfer Rules and Their Effect
When I commenced writing articles for my blog, I promised I would not immediately discuss the new transfer rules as it is my opinion that the basics should be understood first. This article compares the prior transfer rules to the new transfer rules in a general sense as I feel the time is appropriate to have such discussion.
However, before discussing the current rules, I will review the prior transfer rules as a comparison.
I. Transfers – Prior Law
A. Transfers within 36 months of application are scrutinized by Medicaid; may or may not give rise to a period of ineligibility.
B. Transfer Penalty = amount transferred divided by penalty rate (assume $6,525). Example: individual transfer $30,000 to daughter upon entering nursing home. Penalty is $30,000/6,525 = 4.59 months (rounded down to 4 months).
C. New Jersey Medicaid has adopted the favorable rule that penalty periods are “rounded down”. For example, if a transfer gives rise to a period of ineligibility of 4.9 months, treat it as a penalty of 4.0 months. This favorable rule has been changed by the new law as will be discussed.
D. Numerous Exemptions to the Transfer Rules – Typical exemptions are transfers to spouse, real estate to designated individuals, transfer for sole purpose other than Medicaid eligibility, transfers to disabled child or trust for disabled child, transfers to a trust for a disabled individual under age 65 (the applicant), assets transferred that are returned to the individual.
II. The New Law (Transfers)
A. Transfers – deemed to have been made on date individual would otherwise be eligible for Medicaid but for the new law. Example considers only single applicant.
1. five-year lookback.
2. individual in nursing home.
3. assets down to $2,000 (except if income exceeds the income cap of $2,022 in which case the number is $4,000).
B. Basically, transfers within 60 months treated as made when assets reduced to $2,000. That is, the penalty commences when an individual is out of funds, and has no money to pay the nursing home. Statute makes no sense in that the period of ineligibility commences when individual has no funds to pay for nursing home.
C. Major Effects of New Transfer Law
1. Individual has no funds but has obligation to pay nursing home until end of penalty period.
2. Nursing home does not receive Medicaid nor payments from individual who has exhausted his or her assets. New law creates burden on nursing home to review resident’s records prior to admission to determine any transfers within 60 months. Nursing home might face financial problems as fewer people might apply to nursing homes in light of the onerous transfer rules.
3. Families will be seeking alternative living arrangements such as day care and home care.
4. Children might have to pay for nursing home costs till end of penalty period.
5. Long-term care insurance will increase in popularity, and the typical period of coverage will increase from 36 to 60 months. In addition, individuals will be more likely to purchase long-term care insurance options such as cost of living adjustment.
6. People will be transferring assets to children at younger ages (possibly when in good health to beat the 60-month rule).
7. Hardship waivers will be sought by applicant or by nursing home on behalf of applicant. Individual could qualify for hardship waiver for Medicaid when application of transfer rules would deprive individual of medical care such that individual’s health or life would be endangered or is deprived of food, clothing or necessities of life. Nursing home could apply for waiver on behalf of individual. States have the option to pay nursing home costs for 30-day period while application is pending.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2009, Post #15
When I commenced writing articles for my blog, I promised I would not immediately discuss the new transfer rules as it is my opinion that the basics should be understood first. This article compares the prior transfer rules to the new transfer rules in a general sense as I feel the time is appropriate to have such discussion.
However, before discussing the current rules, I will review the prior transfer rules as a comparison.
I. Transfers – Prior Law
A. Transfers within 36 months of application are scrutinized by Medicaid; may or may not give rise to a period of ineligibility.
B. Transfer Penalty = amount transferred divided by penalty rate (assume $6,525). Example: individual transfer $30,000 to daughter upon entering nursing home. Penalty is $30,000/6,525 = 4.59 months (rounded down to 4 months).
C. New Jersey Medicaid has adopted the favorable rule that penalty periods are “rounded down”. For example, if a transfer gives rise to a period of ineligibility of 4.9 months, treat it as a penalty of 4.0 months. This favorable rule has been changed by the new law as will be discussed.
D. Numerous Exemptions to the Transfer Rules – Typical exemptions are transfers to spouse, real estate to designated individuals, transfer for sole purpose other than Medicaid eligibility, transfers to disabled child or trust for disabled child, transfers to a trust for a disabled individual under age 65 (the applicant), assets transferred that are returned to the individual.
II. The New Law (Transfers)
A. Transfers – deemed to have been made on date individual would otherwise be eligible for Medicaid but for the new law. Example considers only single applicant.
1. five-year lookback.
2. individual in nursing home.
3. assets down to $2,000 (except if income exceeds the income cap of $2,022 in which case the number is $4,000).
B. Basically, transfers within 60 months treated as made when assets reduced to $2,000. That is, the penalty commences when an individual is out of funds, and has no money to pay the nursing home. Statute makes no sense in that the period of ineligibility commences when individual has no funds to pay for nursing home.
C. Major Effects of New Transfer Law
1. Individual has no funds but has obligation to pay nursing home until end of penalty period.
2. Nursing home does not receive Medicaid nor payments from individual who has exhausted his or her assets. New law creates burden on nursing home to review resident’s records prior to admission to determine any transfers within 60 months. Nursing home might face financial problems as fewer people might apply to nursing homes in light of the onerous transfer rules.
3. Families will be seeking alternative living arrangements such as day care and home care.
4. Children might have to pay for nursing home costs till end of penalty period.
5. Long-term care insurance will increase in popularity, and the typical period of coverage will increase from 36 to 60 months. In addition, individuals will be more likely to purchase long-term care insurance options such as cost of living adjustment.
6. People will be transferring assets to children at younger ages (possibly when in good health to beat the 60-month rule).
7. Hardship waivers will be sought by applicant or by nursing home on behalf of applicant. Individual could qualify for hardship waiver for Medicaid when application of transfer rules would deprive individual of medical care such that individual’s health or life would be endangered or is deprived of food, clothing or necessities of life. Nursing home could apply for waiver on behalf of individual. States have the option to pay nursing home costs for 30-day period while application is pending.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2009, Post #15
Thursday, March 5, 2009
Community Spouse Resource Allowance - Importance of Timing Payment of Expenditures
Community Spouse Resource Allowance
Importance of Timing Payment of Expenditures
A. Expenditure of resources in excess of the Community Spouse Resource Allowance.
Assume husband is the institutionalized spouse. Must resources that are not part of the Community Spouse Resource Allowance be used for nursing home costs? It is a common misconception that resources that are not part of the Community Spouse Resource Allowance must be expended on nursing home costs. There is no such requirement in the statute.
Planning Point: If institutionalization is imminent, try to delay expenditures until after institutionalization in order to maximize asset protection.
B. Assume $100,000 in spousal resources (excluding the home) and home needs repairs and improvements of $20,000. If costs are incurred before institutionalization, the Community Spouse Resource Allowance will be $40,000. However, if costs are incurred after institutionalization, treat such costs as reducing the husband’s share, and the Community Spouse Resource Allowance will be $50,000.
Attorney’s fees would be another expenditure that should be paid after institutionalization.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2009, Post #8
A. Expenditure of resources in excess of the Community Spouse Resource Allowance.
Assume husband is the institutionalized spouse. Must resources that are not part of the Community Spouse Resource Allowance be used for nursing home costs? It is a common misconception that resources that are not part of the Community Spouse Resource Allowance must be expended on nursing home costs. There is no such requirement in the statute.
Planning Point: If institutionalization is imminent, try to delay expenditures until after institutionalization in order to maximize asset protection.
B. Assume $100,000 in spousal resources (excluding the home) and home needs repairs and improvements of $20,000. If costs are incurred before institutionalization, the Community Spouse Resource Allowance will be $40,000. However, if costs are incurred after institutionalization, treat such costs as reducing the husband’s share, and the Community Spouse Resource Allowance will be $50,000.
Attorney’s fees would be another expenditure that should be paid after institutionalization.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© March 2009, Post #8
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