There are several methods by which a nursing home can be reimbursed for the stay of an individual, some of which are temporary and some of which are permanent. However, it is necessary to keep all of these in mind in projecting the date of eligibility.
Firstly, other than the various financial issues in obtaining a Medicaid eligibility letter, a necessary element of Medicaid eligibility is to obtain a PAS for the applicant. This is an examination by the county nurse which will be given almost immediately if a potential applicant is in a hospital. Otherwise, the family is at the mercy of the schedule of the nurses who often cover several counties. Financial eligibility without a PAS will result in eligibility being delayed until the PAS is obtained.
The methods of payment of a nursing home include Medicare (for a limited period of time), long-term care insurance and private pay.
There is a misconception that Medicare will pay for a long-term institutionalization. This is not the case. Medicare will pay for a limited stay at the nursing home if the following requirements have been met:
1. The individual has resided at a hospital for at least three days.
2. Medicare will make full payment for 20 days if an individual requires skilled nursing or rehabilitation and payment is made so long as sufficient progress is made by the applicant. Medicare will also pay for some or all of the next 80 days with a co-pay that is often covered by the individual’s Medigap insurance. The family must carefully monitor the progress of the potential applicant and the thinking of the nursing home. The nursing home often gives limited notice as to the time Medicare payment ceases. At this time, the family must make the decision as to whether the individual remains in the nursing home or returns home.
If an individual remains in a nursing home, the rules of Medicaid discussed in the various Medicaid postings become applicable.
Many nursing homes require private pay for a guaranteed period of time. Although this requirement is illegal, it is part of the Medicaid game and the family should make initial inquiry as to the policy of any given nursing home.
Also, upon the expiration of Medicare coverage, the family will be presented with a nursing home application, including the key document which is the agreement. Consulting an attorney regarding the terms of the agreement is advisable.
If an individual anticipates purchasing long-term care insurance, an expert should be consulted. The permutations of the type of policy are virtually infinite. Some of the areas that are to be addressed include care at home, increase with the C.P.I., time period for coverage (that is, set number of years or lifetime), waiting period (period before payments commence), etc. I intend to have an expert write an article for this blog discussing long-term insurance in detail.
There are basically two reasons why an individual would purchase long-term care insurance. Usually, the insurance is purchased because the individual or individuals are aware of the intricacies of Medicaid and desire to have monies to avoid such process. However, such insurance can be purchased for estate planning purposes. That is, a wealthy individual might not want a diminution of assets caused by nursing home costs and the insurance would avoid or at least ameliorate that possibility.
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 68
Friday, March 12, 2010
Monday, January 25, 2010
The Importance of a Carefully Prepared Transmittal Letter
Accompanying any Medicaid application should be a transmittal letter which serves as a map to the County Board of eligibility. The purpose of the transmittal letter is to avoid delay in time and confusion regarding eligibility, purposes of transfers and matters such as accounts closed out within the relevant look-back period.
In my transmittal letter, I initially set forth the documents listed by the respective County Boards. I also enclose any information or documentation you need for the case such as Caretaker Agreement (agreement pursuant to which applicant compensates child for previous services, see Post 17).
The second portion of my transmittal letter sets forth the monthly statements of any current accounts for the applicable time period. Currently, County Boards are looking at statements from the date of eligibility back to February 2006, which is the month of adoption of the Deficit Reduction Act. Of course, documentation must eventually be supplied for the anticipated eligibility date. Generally, an application is submitted prior to the eligibility date. However, if an individual is eligible prior to the submission of the application, eligibility can be retroactive for three months.
I then set forth in a separate folder the current assets of the applicant.
It is particularly important to show closed out accounts back to February 2006. Although I title such portion of my transmittal letter “closed out accounts,” the meaning is broader. Firstly, any closed out account should trace the proceeds of such account (i.e. another account of the applicant, an expenditure or a gift). Other closed out assets and the disposition of such assets during the look-back period would include, but not be limited to, IRA’s, sales of stock, payments pursuant to a caretaker agreement, sale of a residence, surrender of life insurance, monies expended on an excludable resource such as a home, etc.
Of course, if there is a community spouse, I enclose a separate folder showing the computation of the community spouse resource allowance. This separate folder would include all includable resources as of the first day of the first month of institutionalization. The period of institutionalization would include both the nursing home and a prior stay in a hospital if relevant. With respect to the community spouse resource allowance, see Post 8.
The initial transmittal letter should include sufficient information so that all that is necessary to provide at the date of eligibility, are subsequent statements of the applicant and/or spouse through the time of eligibility.
There are several posts which are relevant to the final time period between submission and the eligibility date. If submitting a transmittal letter, it is suggested that these posts be reviewed:
1. Post 4 – Significance of Payment of Debts and Expenses.
2. Post 5 – Accelerating the Date of Eligibility.
3. Post 7 - Rules of Medicaid Eligibility.
4. Post 8 - Community Spouse Resource Allowance.
5. Post 10 - Significance of the 90-Day Rule.
6. Post 16 - Qualifying for Medicaid.
7. Post 20 - Importance of Liquidating Assets in the Medicaid Planning Process.
8. Post 25 - Date of Application Could Be Fatal.
9. Post 31 - The Problem of Recurrent Disqualification.
10. Post 33 - The Problem of the Working Spouse.
In addition to supplementing the initial transmittal letter, projections should continually be made of the anticipated date of eligibility. With respect to this issue, pension and social security of a spouse or both spouses should be reviewed as should nursing home bills which delineate not only the cost of the nursing home (invoice generally covers subsequent month), but also expenditures such as medicines which a nursing home generally invoices for the prior month.
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 67
In my transmittal letter, I initially set forth the documents listed by the respective County Boards. I also enclose any information or documentation you need for the case such as Caretaker Agreement (agreement pursuant to which applicant compensates child for previous services, see Post 17).
The second portion of my transmittal letter sets forth the monthly statements of any current accounts for the applicable time period. Currently, County Boards are looking at statements from the date of eligibility back to February 2006, which is the month of adoption of the Deficit Reduction Act. Of course, documentation must eventually be supplied for the anticipated eligibility date. Generally, an application is submitted prior to the eligibility date. However, if an individual is eligible prior to the submission of the application, eligibility can be retroactive for three months.
I then set forth in a separate folder the current assets of the applicant.
It is particularly important to show closed out accounts back to February 2006. Although I title such portion of my transmittal letter “closed out accounts,” the meaning is broader. Firstly, any closed out account should trace the proceeds of such account (i.e. another account of the applicant, an expenditure or a gift). Other closed out assets and the disposition of such assets during the look-back period would include, but not be limited to, IRA’s, sales of stock, payments pursuant to a caretaker agreement, sale of a residence, surrender of life insurance, monies expended on an excludable resource such as a home, etc.
Of course, if there is a community spouse, I enclose a separate folder showing the computation of the community spouse resource allowance. This separate folder would include all includable resources as of the first day of the first month of institutionalization. The period of institutionalization would include both the nursing home and a prior stay in a hospital if relevant. With respect to the community spouse resource allowance, see Post 8.
The initial transmittal letter should include sufficient information so that all that is necessary to provide at the date of eligibility, are subsequent statements of the applicant and/or spouse through the time of eligibility.
There are several posts which are relevant to the final time period between submission and the eligibility date. If submitting a transmittal letter, it is suggested that these posts be reviewed:
1. Post 4 – Significance of Payment of Debts and Expenses.
2. Post 5 – Accelerating the Date of Eligibility.
3. Post 7 - Rules of Medicaid Eligibility.
4. Post 8 - Community Spouse Resource Allowance.
5. Post 10 - Significance of the 90-Day Rule.
6. Post 16 - Qualifying for Medicaid.
7. Post 20 - Importance of Liquidating Assets in the Medicaid Planning Process.
8. Post 25 - Date of Application Could Be Fatal.
9. Post 31 - The Problem of Recurrent Disqualification.
10. Post 33 - The Problem of the Working Spouse.
In addition to supplementing the initial transmittal letter, projections should continually be made of the anticipated date of eligibility. With respect to this issue, pension and social security of a spouse or both spouses should be reviewed as should nursing home bills which delineate not only the cost of the nursing home (invoice generally covers subsequent month), but also expenditures such as medicines which a nursing home generally invoices for the prior month.
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 67
Monday, January 11, 2010
Rules Often Overlooked in the Medicaid Application Process
Very often an apparently complete application is submitted to Medicaid with the appropriate documentation described in the transmittal letter. However, there are some simple rules that are not always followed that can delay Medicaid eligibility. These rules are discussed briefly below:
1. The prepaid funeral arrangements must be irrevocable. Very often applicant has purchased burial insurance years ago which is in revocable form. This is not acceptable to Medicaid. The solution is to convert the policy to irrevocable. It is extremely important to work with an experienced funeral director.
2. The exemption for the home for an applicant and a community spouse relates to the Primary Residence. A secondary home is an available resource. Similarly, if the primary residence of the parties is an apartment and they have a separate house, this house does not constitute the primary residence.
3. The individual resource requirements of $2,000 for an individual of modest income and $4,000 for an individual meeting the income cap of $2,022 must be met exactly on the first day of the first month for which Medicaid is sought. Resources of $2,001 does not mean that the individual misses by a day, but rather does not qualify for Medicaid until the resource limit is met. Therefore, carefully monitoring all checks during the last several months is a necessity.
4. Nursing homes often ask for a deposit upon entry. The typical deposit is two months nursing home costs. Therefore, if an individual and/or an individual and a spouse meet the applicable resource requirements (see Post 7), a deposit of two months will delay the letter of eligibility until the deposit is utilized. One reason for this approach is that the deposit until used constitutes a resource. Another reason is that the nursing home cannot receive private pay from the family and also receive the Medicaid reimbursement rate. Keep in mind in analyzing the effective date of Medicaid eligibility that pension and social security should be considered.
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 66
1. The prepaid funeral arrangements must be irrevocable. Very often applicant has purchased burial insurance years ago which is in revocable form. This is not acceptable to Medicaid. The solution is to convert the policy to irrevocable. It is extremely important to work with an experienced funeral director.
2. The exemption for the home for an applicant and a community spouse relates to the Primary Residence. A secondary home is an available resource. Similarly, if the primary residence of the parties is an apartment and they have a separate house, this house does not constitute the primary residence.
3. The individual resource requirements of $2,000 for an individual of modest income and $4,000 for an individual meeting the income cap of $2,022 must be met exactly on the first day of the first month for which Medicaid is sought. Resources of $2,001 does not mean that the individual misses by a day, but rather does not qualify for Medicaid until the resource limit is met. Therefore, carefully monitoring all checks during the last several months is a necessity.
4. Nursing homes often ask for a deposit upon entry. The typical deposit is two months nursing home costs. Therefore, if an individual and/or an individual and a spouse meet the applicable resource requirements (see Post 7), a deposit of two months will delay the letter of eligibility until the deposit is utilized. One reason for this approach is that the deposit until used constitutes a resource. Another reason is that the nursing home cannot receive private pay from the family and also receive the Medicaid reimbursement rate. Keep in mind in analyzing the effective date of Medicaid eligibility that pension and social security should be considered.
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 66
Wednesday, December 23, 2009
Differences Amongst County Boards Regarding Medicaid Issues
Although we have two federal statutes that basically govern Medicaid eligibility, OBRA ’93 and the Deficit Reduction Act, the State does not often honor pre-emption and that the rules of the federal government are to govern. Further, County Boards have different interpretations of various issues.
It is my policy to consult with a Medicaid supervisor before submitting an application so that I can review any issues and get the benefit of their expertise. For example, Post 6 indicates that in certain circumstances if a child resides with an applicant and the care by the child allows the applicant to remain at home, the home can be transferred to the child without penalty. However, each County Board has its own interpretation of the necessary care to be provided by the child.
Posts 27 and 28 discuss the effect of inheritance on the community spouse and the applicant, respectively. Basically, an inheritance is deemed to be an “inaccessible resource.” However, each County treats a delay in distributing an inheritance differently since once an inheritance is distributed it becomes a resource. The Internal Revenue Code in discussing the fiduciary income tax for the estate treats an estate closed and distributed after an unreasonable delay.
Another related area is Post 42 which discusses assets transferred to a disabled child. To qualify as a disabled child, the individual need not have an eligibility letter from Social Security. The State will make an independent determination. This does not exactly comply with the title of different approaches of each County Board, but I think the importance of the issue is relevant.
A very common issue is the exemption from the transfer rules for a transfer for purposes other than to qualify for Medicaid. It is particularly difficult to show that a transfer by an elderly person was solely for another purpose. However, I have succeeded in this area by pointing out the uniqueness of the situation of the transfer, the health of the elderly person at the time and the need of funds by the transferee. Generally, County Boards will not consider this exemption.
Of course, what one County Board may consider an “inaccessible resource” might be considered available by another County Board. For example, a parcel of land that is too small to meet the zoning requirements should be treated as “inaccessible.” I have had different County Boards treat this differently. My personal opinion is, that if a potential resource cannot be “converted to money,” it is “inaccessible.”
Post 53 discusses the fact that allowable expenses and such expenditures are limited by the concept of reasonableness. Obviously, this area and the decision made with respect to such expenditures would vary from County Board to County Board.
The above examples are for illustrative purposes and this article could be extended into a book as the differences by the County Boards are infinite.
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 65
It is my policy to consult with a Medicaid supervisor before submitting an application so that I can review any issues and get the benefit of their expertise. For example, Post 6 indicates that in certain circumstances if a child resides with an applicant and the care by the child allows the applicant to remain at home, the home can be transferred to the child without penalty. However, each County Board has its own interpretation of the necessary care to be provided by the child.
Posts 27 and 28 discuss the effect of inheritance on the community spouse and the applicant, respectively. Basically, an inheritance is deemed to be an “inaccessible resource.” However, each County treats a delay in distributing an inheritance differently since once an inheritance is distributed it becomes a resource. The Internal Revenue Code in discussing the fiduciary income tax for the estate treats an estate closed and distributed after an unreasonable delay.
Another related area is Post 42 which discusses assets transferred to a disabled child. To qualify as a disabled child, the individual need not have an eligibility letter from Social Security. The State will make an independent determination. This does not exactly comply with the title of different approaches of each County Board, but I think the importance of the issue is relevant.
A very common issue is the exemption from the transfer rules for a transfer for purposes other than to qualify for Medicaid. It is particularly difficult to show that a transfer by an elderly person was solely for another purpose. However, I have succeeded in this area by pointing out the uniqueness of the situation of the transfer, the health of the elderly person at the time and the need of funds by the transferee. Generally, County Boards will not consider this exemption.
Of course, what one County Board may consider an “inaccessible resource” might be considered available by another County Board. For example, a parcel of land that is too small to meet the zoning requirements should be treated as “inaccessible.” I have had different County Boards treat this differently. My personal opinion is, that if a potential resource cannot be “converted to money,” it is “inaccessible.”
Post 53 discusses the fact that allowable expenses and such expenditures are limited by the concept of reasonableness. Obviously, this area and the decision made with respect to such expenditures would vary from County Board to County Board.
The above examples are for illustrative purposes and this article could be extended into a book as the differences by the County Boards are infinite.
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 65
Income Taxes and Medicaid Eligibility
Post 20 discusses the importance of liquidating assets in the Medicaid planning process. Events such as distribution of IRA’s, sales of securities and surrender of life insurance give rise to tax consequences. Therefore, prepayment of taxes is one of the spenddown techniques.
It is important to realize that nursing home costs may qualify for the medical deduction under Section 213 of the Internal Revenue Code. The applicant must have a “cognitive impairment” or fail two out of the four activities of daily living.
There are also unique sources of income that could have an effect on Medicaid eligibility. For example, Post 27, discusses the fact that although property in probate is treated as an “inaccessible resource,” the distributions made by an estate to a beneficiary result in taxable income. Fiduciary income tax is a course unto itself, but basically, the distributions result in income tax to the extent of the income of the estate for that year (technically called distributable net income).
Previously, County Medicaid Boards did not ask for verification of income for prior years (Forms 1099). Now such inquiry is made. The reason for this, is that Medicaid is looking for closed out accounts and the disposition of such accounts and also assets that may have inadvertently been omitted.
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 64
It is important to realize that nursing home costs may qualify for the medical deduction under Section 213 of the Internal Revenue Code. The applicant must have a “cognitive impairment” or fail two out of the four activities of daily living.
There are also unique sources of income that could have an effect on Medicaid eligibility. For example, Post 27, discusses the fact that although property in probate is treated as an “inaccessible resource,” the distributions made by an estate to a beneficiary result in taxable income. Fiduciary income tax is a course unto itself, but basically, the distributions result in income tax to the extent of the income of the estate for that year (technically called distributable net income).
Previously, County Medicaid Boards did not ask for verification of income for prior years (Forms 1099). Now such inquiry is made. The reason for this, is that Medicaid is looking for closed out accounts and the disposition of such accounts and also assets that may have inadvertently been omitted.
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 64
Wednesday, December 2, 2009
Life Insurance Issues Revisited
In prior Post 3, I discussed life insurance issues. This post will discuss them in greater detail with an emphasis on life insurance planning.
As indicated in Post 3, the cash value of a life insurance policy has an effect on Medicaid eligibility with the cash value being a resource. The solution to this problem is to borrow against the cash value or surrender the policy. As indicated, in a community spouse situation, a transfer to the community spouse might make sense.
"Paid up" insurance may or may not have cash value. Similarly, if dividends are used to increase the value of insurance, there may or may not be cash value. Keep in mind that the surrender of a policy is a taxable event with the gain being the difference between the amount realized and premiums paid. This results in ordinary income.
There are many uses for life insurance in today's world that do not have a direct bearing on Medicaid. For example, in the last twenty years, term insurance has become popular. Term insurance is used for purposes such as buy-sell agreements and to cover the costs of a child's college education. Such policies have no cash value.
As pointed out in Post 3, the key problem to avoid is the situation where there is group insurance ( no cash value) and the cash value policy is under $1,500. The rule is that the policies are aggregated for these purposes and the cash value counts towards eligibility.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
As indicated in Post 3, the cash value of a life insurance policy has an effect on Medicaid eligibility with the cash value being a resource. The solution to this problem is to borrow against the cash value or surrender the policy. As indicated, in a community spouse situation, a transfer to the community spouse might make sense.
"Paid up" insurance may or may not have cash value. Similarly, if dividends are used to increase the value of insurance, there may or may not be cash value. Keep in mind that the surrender of a policy is a taxable event with the gain being the difference between the amount realized and premiums paid. This results in ordinary income.
There are many uses for life insurance in today's world that do not have a direct bearing on Medicaid. For example, in the last twenty years, term insurance has become popular. Term insurance is used for purposes such as buy-sell agreements and to cover the costs of a child's college education. Such policies have no cash value.
As pointed out in Post 3, the key problem to avoid is the situation where there is group insurance ( no cash value) and the cash value policy is under $1,500. The rule is that the policies are aggregated for these purposes and the cash value counts towards eligibility.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
Child Moving In with Parent to Satisfy Caretaker Requirement
Post 6 and 23 discuss the planning technique of an applicant transferring property to a child whose care allowed the parent to remain at home for at least a two-year period prior to institutionalization. These articles assume the time period had been met.
However, as can be seen Medicaid planning requires creativity. For example, a parent/ possible applicant may be living at home and needs the care of a child (assumes single). If the child moves in and provides the necessary care, Post 6 sets forth the procedure for transferring the home to the caretaker child (i.e. transfer at Medicaid hearing). Therefore, i have had a client (potential applicant) request her daughter to move into the home and hopefully the parent will not go into a nursing home for at least two years. For a more detailed analysis, see Post 6.
This plan resulted from a lengthy discussion with the client of numerous possibilities regarding the home ( for such discussions, see Post 18 and 41).
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
However, as can be seen Medicaid planning requires creativity. For example, a parent/ possible applicant may be living at home and needs the care of a child (assumes single). If the child moves in and provides the necessary care, Post 6 sets forth the procedure for transferring the home to the caretaker child (i.e. transfer at Medicaid hearing). Therefore, i have had a client (potential applicant) request her daughter to move into the home and hopefully the parent will not go into a nursing home for at least two years. For a more detailed analysis, see Post 6.
This plan resulted from a lengthy discussion with the client of numerous possibilities regarding the home ( for such discussions, see Post 18 and 41).
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
Subscribe to:
Posts (Atom)
