Medicaid Planning 2009

Elder Law and MedicaidRichard J. Shapiro, J.D.

Mindy Menke, J.D.Blustein, Shapiro, Rich & Barone, LLP

90 Crystal Run Rd., Suite 409Middletown, New York 10941

(845) 692-0011www.mid-hudsonlaw.com

Medicaid (generally)• Joint Federal-State medical

assistance program• “Means-tested” program

providing payment for institutional and community medical care

• Payer of last resort

© 2009 Richard J. Shapiro

Residency/Citizenship• Medicaid applicant/resident must be

resident of the state to which he or she is applying

• Medicaid applicant/recipient must be a legal resident of the U.S. (i.e. citizen or qualified resident alien)


Financial Eligibility• Applicant is required to seek all income

benefits to which he or she is entitled• In “spend-down” states (including New York),

applicants who possess excess income will be eligible for Medicaid provided that all excess income is paid to the Medicaid provider

• In “Income-Cap” states, applicants who possess excess income will NOT be eligible for Medicaid


Medicaid Income andResource Levels

2009


Medicaid Financial Eligibility Requirements

• Limits on resources– Individual = $13,800

• Limits on income– Non-institutionalized

• Individual = $767/month

– Institutionalized individual = $50/month plus premiums for Medicare and Medicaid


Medicaid Financial Eligibility Requirements

• Community Spouse– Resources = $74,820 to max. of $109,560– Maximum Income = $2,739 per month


Transfer of Assets Under Medicaid

– Look Back Period– Penalty Period– Exempt Transfers– Pre-paid funeral arrangements– Supplemental Needs Trusts


Deficit Reduction Act

• On February 8, 2006, President Bush signed into law the “Deficit Reduction Act” (DRA)

• The DRA drastically changed the qualification requirements for Medicaid Long-term coverage.


The Look-Back Period


Look-Back Period for Asset Transfers

– 60-month look-back period for both outright transfers and transfers to certain trusts

– Before the DRA, outright transfers were subject to a 36-month look-back period


The Penalty Period


Commencement of Penalty Period

• Under Deficit Reduction Act signed into law on February 8, 2006, the Penalty Period begins to run on the date the Medicaid application is filed, provided that the applicant were otherwise qualified; under prior law, Penalty Period began to run the first day of the calendar month after the transfer was made.


Calculation of the Penalty Period

The total value of all uncompensated transfers divided by the average monthly cost of

nursing home care as established by New York State


2009 Regional RatesCentral

Long Island

New York City

Northeastern

NORTHERN METROPOLITAN

Rochester

Western

$6,938

$10,852

$9,838

$7,766

$9,439

$8,720

$7,0418


Transfers by Spouse

• A transfer by one spouse to a third person will affect the nursing home eligibility of the other spouse


Rules Protecting the Community Spouse


Rules Regarding Income

• In 2009, Community Spouse allowed a maximum monthly income of $2,739

• This amount (called “MMMNA”) may be increased by Court order– Community Spouse must show “exceptional

circumstances resulting in significant financial distress”


Rules Regarding Resources

• Community Spouse entitled to maximum resources of $109,560 (2009)

• This sum may be enhanced to increase spouse’s income to the MMMNA level


Spousal Refusal• Community spouse may retain amounts in

excess of CSRA and MMMNA

• Institutionalized remains eligible for Medicaid

• DSS will “request” contribution of 25% of Community Spouse’s income in excess of MMMNA

• DSS retains right to file suit additional contribution


Advantages of Spousal Refusal

• Community Spouse may not get sued

• Medicaid reimbursement rate is a percentage of the private pay rate

• DSS usually settles for less than the full amount paid by Medicaid


Exempt Transfers of Home

• A home can be transferred, without penalty, to:– A spouse– A child under the age of 21– Blind or disabled child of any age– Sibling with an equity interest who has lived in the

home at least one year– “caretaker” child who has lived in parent’s home

at least two years


Planning Ideas – Annuities and Loans

• Use of short-term immediate annuities can be used in crisis planning– Example: parent with $100,000 gifts $50,000 to

children. Parent purchases an immediate annuity with remaining $50,000 for a term shorter than parent’s life expectancy. Penalty period of about 5.5 months begins to run because parent now retained assets below Medicaid level. Annuity payments and other income pays for Nursing Home care through expiration of 5.5-month penalty period


Planning Ideas – Annuities and Loans

• As an alternative to an Annuity, parent can make a loan to child(ren), combined with a gift

• Repayment under note must be made within parent’s life expectancy

• Note cannot be “cancelled” upon parent’s death, and must be non-assignable

• Use revocable trust as lender to avoid estate recovery


Personal Service Contracts

• Agreement between parent and a child for compensation to child for providing certain type of care and assistance

• Must be written agreement for reasonable compensation

• Requires good record keeping, payments made “on the books”

• Child pays income taxes on payments© 2009 Richard J. Shapiro

Irrevocable Trusts

• Irrevocable Trust cannot provide trustmaker access to principal, but can permit access to income

• Under DRA, funding an Irrevocable Trust today will “start the clock” running so that the five-year look back may expire


IRTTrustmaker(s)

Transfer $ + house?

Subject to 5-year look back Trustees (often one or more children)

Principal distributionsto class of beneficiaries?

INCOME

NO PRINCIPAL

C1 C2

Protective trustProtective trust

Capital gains exemptionpreserved if house sold (Subject to limited power

of appointment)

Trustmakers may replace trustees

(after 2nd death)

Powers of Appointment?


Client Action Plan• Compare options for long-term care insurance

– premiums, daily benefit, number of years for benefits

• Integrate long-term care insurance with well-designed estate plan, preferably including revocable trust for disability planning and well-crafted power of attorney

• If long-term care insurance is not feasible, consult with elder law attorney to review options before care is needed

• Especially important to act while person retains mental capacity; otherwise, Guardianship proceeding (which is time consuming and expensive) may be required


Elder Law and MedicaidRichard J. Shapiro, J.D.

Mindy Menke, J.D.Blustein, Shapiro, Rich & Barone, LLP

90 Crystal Run Rd., Suite 409Middletown, New York 10941

(845) 692-0011www.mid-hudsonlaw.com


Documents

Medicaid Planning 2009