NEW MEDICAID RULES Presented by Donald D. Vanarelli, Esq. Certified Elder Law Attorney Registered...

NEW MEDICAID RULESNEW MEDICAID RULES

Presented by Presented by Donald D. Vanarelli, Esq.Donald D. Vanarelli, Esq.

Certified Elder Law Attorney Certified Elder Law AttorneyRegistered GuardianRegistered Guardian

Accredited Professional MediatorAccredited Professional Mediator

Overview of Government Overview of Government Sources for Payment of Sources for Payment of Long Term Care CostsLong Term Care Costs

Long Term CareLong Term Care

Long Term Care refers to the kind of care a person needs when he or she is unable to care for himself or herself due to illness, frailty or cognitive impairment. Long Term Care is sometimes referred to as “Custodial Care”.

Custodial CareCustodial Care

Custodial Care (sometimes called Personal Care) is the level of care provided to residents of ALFs and NHs. Custodial Care is assistance provided with activities of daily living (ADLs). ADLs include bathing, eating, dressing, toileting, continence and transferring.

Compare:

Custodial Care vs. Skilled Nursing Care

If you cannot live independently, If you cannot live independently, what care options are available?what care options are available?

1. Stay at home - Home Health Care

2. Move in with Family

3. Assisted Living Facility

4. CCRC

5. Nursing Home

The Need for Long Term The Need for Long Term CareCare

• 1 of 2 women and 1 of 3 men who reach the age of 65 will use a nursing home at some point during their lives.

• 40% of nursing home residents are between 18 and 64 years of age.

• Average stay in NH - 2.9 years

• 7 in 10 individuals will need home health care.

The Cost of Long Term CareThe Cost of Long Term Care

Average cost of 24 hour Home Health Aides provided by an agency - $4,500 per month, or $54,000 per year.

Range of costs charged by Assisted Living facilities - $4,500 - $6,500 per month, or $54,000 - $78,000 per year.

Typical cost of Nursing Home care in New Jersey - $8,000 per month, or $96,000 per year.

Who Pays For Long Term Who Pays For Long Term Care?Care?

1. Private Pay 49%2. Medicaid 44%3. VA Benefits 4%4. Medicare 2%5. Private Long Term Care Insurance 1%

Compare Medicare and Compare Medicare and MedicaidMedicaid

• Medicare is an insurance program. Medicaid is a welfare program.

• Medicare is for elderly and disabled people regardless of their income or resources. Medicaid is for elderly and disabled people with low income and resources.

Long Term Care CostsLong Term Care CostsCovered by MedicareCovered by Medicare

1. Home Health Care

2. Nursing Home Care

Medicare - Home Health Care Medicare - Home Health Care AidesAides

• Covers up to 100 home visits per “spell of illness”.

• Preconditions to payment: prior hospital stay of at least 3 days and home health care initiated within 14 days of discharge.

• Beneficiary must be homebound and need skilled nursing care, physical or speech therapy, NOT custodial care.

Medicare Payment of Medicare Payment of Nursing Home CareNursing Home Care

• Immediate prior hospital stay of 3 days

• Admitted to NH within 30 days of hospital discharge

• Covers, skilled nursing care or rehabilitation only, NOT custodial care.

How Much Does Medicare How Much Does Medicare Pay?Pay?

• Maximum Coverage - 100 days

• Day 1-20 - Medicare pays 100% of covered charges

• Day 21-100 - Medicare pays all covered charges, except coinsurance amount. Year 2008 coinsurance payment = $128/day, or about $3,840/month

• Day 101 - on your own

Overview of the Nursing Overview of the Nursing Home Medicaid Program Home Medicaid Program

in New Jerseyin New Jersey

MedicaidMedicaid

Joint Federal and State Program

Provides medical assistance for financially eligible persons who are aged, blind or disabled.

General EligibilityGeneral Eligibility

1. U.S. Citizen or legal alien

2. New Jersey Resident

3. Age 65 or older, blind or disabled

4. Financial Limitations

Income and Resources Income and Resources LimitsLimits

Income - all income is counted in determining eligibility

Income cap - Community Medicaid programs which pay for home health aides and care in Assisted Living facilities have an income cap. In 2008, the cap is $1,911/month. No cap for Nursing Home Medicaid.

Resource LimitsResource LimitsCountable resources - all assets in the

sole name of applicant, in the sole name of spouse, or in joint names, either with the spouse or another person. Includes pension and retirement assets of BOTH the applicant and spouse.

Resource Limits - $2,000 for an individual and $3,000 for a couple.

Excess resources - must be spent down.

Excludable Excludable ResourcesResources

Home

Automobile

Personal Effects and Household Goods

Life Insurance - Face Value under $1,500.00

Medical Equipment

Inaccessible Resources

Irrevocable Burial Fund

Transfer of Resources Transfer of Resources RulesRules

“Look-back period” - Period which Medicaid examines upon the submission of a Medicaid application to determine an applicant’s countable assets, and the disposition of an applicant’s assets.

Transfer of Resources Transfer of Resources RulesRules

Applicable Look-back Periods -

a. 36 months for most transfers.

b. 60 months for transfers to a trust.

Transfer of Resources Transfer of Resources RulesRules

“Penalty period” - Period of Medicaid ineligibility imposed as a result of a transfer of assets for less than fair market value during the look-back period.

Transfer of Resources Transfer of Resources RulesRules

The length of the penalty period is theoretically equal to the number of months that the transferred assets would have paid for care in a nursing home.

Transfer of Resources Transfer of Resources RulesRules

Duration of Penalty Period - Determined by dividing the uncompensated value of the transferred resource by the average monthly cost for nursing home care as calculated by Medicaid = $6,942.00 as of November 1, 2007.

Exempt TransfersExempt Transfers Transfer Home ToTransfer Home To

• CSCS• Disabled ChildDisabled Child• Caregiver ChildCaregiver Child• Sibling with an equity interestSibling with an equity interest

Transfer Non-Home Assets ToTransfer Non-Home Assets To• CSCS• Disabled ChildDisabled Child

Exempt Transfers,Exempt Transfers,cont’dcont’d

Transfer To Trust for Disabled ChildTransfer To Trust for Disabled Child• Disability Annuity TrustDisability Annuity Trust• (d) (4) (A) Trust(d) (4) (A) Trust• Pooled TrustPooled Trust

Spousal Anti-Spousal Anti-Impoverishment ProvisionsImpoverishment Provisions

Medicaid rules designed to avoid impoverishing the Community Spouse:

1. Income of the Community Spouse is not deemed available to the Institutionalized Spouse to pay for the cost of care.

Spousal Anti-Spousal Anti-Impoverishment ProvisionsImpoverishment Provisions

2. MMMNA - Community Spouse is entitled to a

Minimum Monthly Maintenance Needs Allowance

(MMMNA). The MMMNA is $1,711.25 through July 1,

2008. The income of the community spouse is subtracted

from the MMMNA. The MMMNA may come from the

income of the Institutionalized Spouse.

Spousal Anti-Spousal Anti-Impoverishment ProvisionsImpoverishment Provisions

3. Excess shelter allowance - Community Spouse

is entitled to an excess shelter allowance to the

extent that the shelter expenses exceed $514.00 per

month in 2008. Shelter expenses include rent or

mortgage, taxes, insurance and utilities.

Spousal Anti-Spousal Anti-Impoverishment ProvisionsImpoverishment Provisions

4. CSRA - Community Spouse is entitled to a

Community Spouse Resource Allowance

(CSRA) equal to one-half of the countable

assets, subject to limitations. Effective January 1

2008, the minimum which the Community Spouse

may retain is $20,880 and the maximum is

$104,400.

Spend-DownSpend-Down

Contrary to popular belief, the amount in excess of the CSRA need not be spent on the Institutionalized Spouse. Rather, the “spend-down” can be spent for the benefit of the Community Spouse, or otherwise preserved for the heirs.

This is the heart of Asset Preservation Planning.

Estate Planning When An Estate Planning When An Individual is Facing Individual is Facing

Catastrophic Nursing Home Catastrophic Nursing Home CareCare

Medicaid Planning for an individual facing catastrophic nursing home care typically involves the strategic transfer of the Medicaid applicant’s assets.

Estate Recovery:Estate Recovery:The Medicaid LienThe Medicaid Lien

Federal and State law requires the States to seek, from the estate of a deceased Medicaid recipient, recovery of all Medicaid benefits paid when the recipient was 55 years of age or older when the Medicaid benefits were received.

New Medicaid RulesNew Medicaid Rules

Increased Spousal Allowance Increased Spousal Allowance in “Exceptional in “Exceptional Circumstances”Circumstances”

Before 1988, nearly all of a married couple’s assets had to be depleted before either could be eligible for Medicaid, leaving the spouse who remained in the community essentially destitute.

Increased Spousal Increased Spousal Allowance in “Exceptional Allowance in “Exceptional Circumstances” (Con’d.)Circumstances” (Con’d.)

In response, Congress enacted MCCA, designed to end the CS’s pauperization by assuring that the CS had a sufficient amount of income and resources available while the spouse was in a nursing home receiving Medicaid.

Increased Spousal Allowance in Increased Spousal Allowance in “Exceptional Circumstances” “Exceptional Circumstances”

Cont’d.Cont’d.

In H.D. v. DMAHS, Docket No. A-1113-03T2, New Jersey’s appellate court held in May 2005 that the CS resource allowance could be increased “due to exceptional circumstances resulting in financial duress”. Expenses which could lead to an increase in the CS allowance include noncovered medical expenses; amounts to maintain or repair the home; and amounts necessary to preserve an income-producing asset.

Increase in the Average Increase in the Average Monthly Cost of Nursing Monthly Cost of Nursing

Home CareHome Care

Recently, the New Jersey Medicaid agency increased the average monthly cost of nursing home care, thereby increasing the penalty divisor, to $6,942.00 per month.

Medicaid Lien on Medicaid Lien on Testamentary Trust AssetsTestamentary Trust Assets

Under federal and state Medicaid laws, assets left to a Medicaid recipient in a testamentary trust are not countable.

Medicaid Lien on Medicaid Lien on Testamentary Trust Assets Testamentary Trust Assets

(Cont’d.)(Cont’d.)

In the recent case of DeMartino v. DMAHS, 373 N.J. Super. 210 (App. Div. 2004), the New Jersey appellate court held that assets in a testamentary trust established under the CS’s will for the benefit of the IS receiving Medicaid were subject to the Medicaid lien.

AnnuitiesAnnuities

For years, New Jersey state law has prohibited the use of annuities to protect family assets for the CS even though the use of annuities for this purpose is permitted under federal law. Specifically, assets in annuities which exceed the CSRA are countable and must be spent-down before the IS is eligible for Medicaid.

Annuities (Cont’d.)Annuities (Cont’d.)

Two recent cases, Estate of FK v. DMAHS, 2005 WL 13252 (Jan. 4, 2005) and A.B. v. DMAHS, Docket No. A-4773-02T2 (Jan. 21, 2005), held that NJ’s prohibition on annuities violates federal law.

Annuities (Cont’d.)Annuities (Cont’d.)

Now, single premium, immediate annuities with pay-outs equal to or less than the life expectancy of the CS which exceed the amount of the CSRA may be used to protect assets and improve the quality of the CS’s life.

Medicaid Planning by Medicaid Planning by GuardiansGuardians

Until recently, NJ Courts would not permit guardians to engage in estate planning for Medicaid eligibility on behalf of their wards even though such planning strategies would have been permissible if done by a ward during his or her competency.

Medicaid Planning by Medicaid Planning by Guardians (Cont’d.)Guardians (Cont’d.)

In re Keri, 181 N.J. 50 (2004) - The NJ Supreme Court held, for the first time, that guardians could engage in Medicaid planning on ward’s behalf, and placed Medicaid planning on a par with traditional estate planning.

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