OLLI Medicaid Presentation Final

8/6/2019 OLLI Medicaid Presentation Final

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Medicaid Planning

Osher Lifelong Learning InstituteMay 4, 2011

David M. MeranusSchwartz, Manes, Ruby & Slovin441 Vine St., Suite 2900

Cincinnati OH 45202(513) 345-1412

MEDICAID BACKGROUND AND OVERVIEW

Medicaid is federal-state matching entitlement program that pays for medical assistancefor certain vulnerable and needy individuals and families with low incomes andresources.

The Ohio Department of Job and Family Services (ODJFS) administers the program inOhio.

MEDICAID BY THE NUMBERS

In 2009, over $300 billion was spent on long-term care. Of this $300 billion, 50% waspaid by Medicaid, approximately 19% by Medicare, 19% was private-paid, and 7%was paid by long term care insurance. The average yearly cost of nursing homecare was $83,585.

Most elderly enter a nursing home between the ages of 83 and 86. But 83% of people

requiring long-term care are still at home, according to statistics. Medicaid nowrealizes that it can take care of five people at home for the same cost as one in anursing home. Further, now that Medicaid is paying for assisted living, it realizesthat it can take care of two people in an assisted living facility for the same cost asone in a nursing home.

As of 2010, one out of five people will be over the age of 65. One out of two people overthe age of 65 will require some nursing home care in their lifetime, either rehab oras a permanent resident. At the rate of increasing costs of long-term care, no onecan afford a facility for long.

There are 101 million households in the United States. Of these households: 63.3 million have assets less than $100,000.

19.5 million have assets of $100,000 to $250,000

10.1 million have assets of $250,000 to $500,000

8.0 million have assets over $500,000, with most being between$500,000$750,000.

MEDICAID PURPOSE


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Medicaid is welfare.

If one needs nursing home care and has no money to pay for it, Medicaid will pay aslong as the individual meets all of the criteria.

The care that the individual will receive in the nursing home will be identical to the careof a private-pay resident.

The state may not discriminate by providing care to one Medicaid recipient while it failsto provide care afforded to another recipient.

MEDICAID NOT MEDICARE

Too often Medicaid is confused with Medicare. Medicaid is welfare. Medicare isinsurance. Other differences are:

Medicaid Medicare

Welfare insuranceNeed based based on quarters worked

Functional need disability

No co-pay co-pays and deductibles

Many services limited standard services

Long term care rehabilitation only

A. The Categorically needy are individuals who receive Medicaid services byreason of poverty and age or disability. These individuals must be age 65or older or must have a disability that meets the Social Security criteria.Disability is defined by federal law as the inability to engage in anysubstantial gainful activity by reason of any medically determinablephysical or mental impairment which can be expected to result in death orhas lasted or can be expected to last for a continuous period of not lessthan twelve months, or blindness.

B. The medically needy are older adults and individuals with disabilities whoare considered in need of medical care. These individuals may haveincomes greater than those permitted for the categorically needy, but theirout of pocket costs for medical care reduce or spend down their income tothe eligible amounts.

MEDICAID SERVICES

C. Mandatory Medicaid Services that every State must cover are: Inpatient hospital care;

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Outpatient hospital and Federally Qualified Health Center services; Laboratory and x-ray services; Nursing facility services for individuals age 21 and older who

require daily nursing care or other rehabilitation services that canonly be provided in a nursing facility on an inpatient basis;

Physicians services; Medical and surgical services performed by dentists; Home health care services (including durable medical equipment)

for nursing home care; and Clinic services.

D. Optional services include: Dental services; Physical therapy; Diagnostic screening, preventative and rehabilitative services that

are recommended by a physician for: Maximum reduction of physical or mental disability; and

Restoration of an individual to the best possible functional level; Drugs that are not covered by Medicare D, dentures, prosthetics

and eyeglasses; Services in an intermediate care facility for individuals with mental

retardation; Hospice care; Targeted case management; and Transportation, which is required by federal regulation.

E. One of the problems with receiving the care required is thatthere must be providers to administer the care, and to electto be paid by Medicaid often pays less than private pay.

MEDICAID ELIGIBILITY

In order to be eligible for Medicaid, a person must meet both medical andfinancial requirements.

F. MEDICAL ELIGIBILITY OHIO

In order to be eligible for Medicaid benefits for long-term nursing care inOhio, an individual must be resident of Ohio, must have a medical needand also fall within one of the categories of covered persons. Thesecategories are:

age 65 or older; blind; or disabled.

1. Level of Care.

i. Medical need is established through a level ofcare assessment which establishes that the

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person needs an intermediate or skilled level ofnursing care. OAC 5101:1-37-01(A).

ii. Medical eligibility for Medicaid depends on theextent to which the person needs assistance

with the tasks of daily living (eating, dressing,bathing and toileting) and also the extent towhich he requires skilled care.

iii. To be medically eligible he must requireassistance with at least two of the tasks of dailyliving and one skilled nursing activity. If hedoes not require at least this level of care,Medicaid will not pay for his nursing homeexpenses. On application for Medicaid, thestate will determine whether the personrequires a level of care that will be covered, orthe applicant may seek certification of medicaleligibility in advance of application.

iv. Even if the potential resident can perform all ofthe activities of daily living, if the person hasdementia, he or she may qualify instantly. Withdementia, the person may not have thereasoning to do the activities of daily livingwhen they should be done, which makes himor her automatically an approved nursing homecandidate.

G. INCOME ELIGIBILITY

The second step is to become qualified financially. The income of theapplicant must be below the cost of nursing home care, otherwise theapplicant doesn't need Medicaid to pay for the cost of long-term care in anursing home.

1. Countable Income.

If an individuals countable income is equal to or less than the

monthly cost of care, the individual meets the income eligibility test.A persons countable income is his or her gross income lesscertain disregards, such as up to $20 per month is unearnedincome.

2. Patient Liability.

Beginning with the month in which an individual becomes eligible

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for Medicaid benefits, all of his or her countable income, exceptseveral allowances discussed below, must be paid to the nursingfacility. This is the persons patient liability. Only the individualsincome is used to establish the patient liability; it does not includethe income of his or her spouse. OAC 5101:1-39-22.

3. Allowances.

In calculating the individuals patient liability, several deductions arepermitted:

i. Personal needs allowance of $40 each month.

ii. Monthly Income Allowance. If the CommunitySpouses (CS) income is below a certainlevel, which is currently a minimum of $1,821

(the Minimum Monthly Maintenance NeedsAllowance or MMMNA), the communityspouse may retain enough of theinstitutionalized spouses income to reachmonthly minimum. This additional amount ofincome from the institutionalized spouse iscalled the Monthly Income Allowance (MIA).OAC 5101:1-39-22.1.

iii. Medical insurance premiums.

iv. Past Medical Expenses.

v. Family Allowance.

H. RESOURCE ELIGIBILITY - LONG-TERM NURSING CARE BENEFITS

1. Single Individuals.

A single individual must have no more than $1,500 in countableresources to be eligible for nursing home Medicaid benefits. OAC 5101:1-39-05.

2. Married Individuals.

A married person must, also, have no more than $1,500 incountable resources to be eligible for Medicaid benefits. However,where a married couple is involved, the community spouse isentitled to retain a Community Spousal Resource Allowance, orCSRA, which is equal to one-half of the couples countableresources as of the first day of institutionalization, with a minimum

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amount of $21,912 and a maximum amount of $109,560. OAC 5101:6-7-02.

EXAMPLE

Paul and Mary, both age 75, are married. Paul enters a nursing home onOctober 20, 2010. As of October 20, 2010, Paul and Mary own their ownhome, a 2002 Buick and have about $225,000 in countable resources.Paul will be eligible for Medicaid benefits to pay for his nursing care whenthey have spent their countable resources down below $110,060 sinceMary is entitled to retain a CSRA of $109,560 and Paul is entitled to retainup to $1,500.

3. Countable Resources.

Countable resources include all of a persons or a couples cash,

savings, brokerage accounts, stocks, annuities, IRAs (from whichan individual is not drawing an irrevocable stream of periodicpayments), the cash value of life insurance policies, real property,promissory notes, life estates which can be transferred, and anyother asset which can be liquidated. OAC 5101:1-39-05.

4. Exempt Resources.

Certain resources are not included in the definition of countableresources:

i. The principal residence, if occupied by theindividual (and for first 13 months in nursinghome), spouse, dependent (under 21), blind ordisabled child; child over age 65; or a siblingwith a verified equity interest in the home whohas lived there at least a year. OAC 5101:1-39-31.

ii. Household goods and personal effects.

iii. One motor vehicle regardless of value if forcommunity spouse or for medicaltransportation; otherwise value is limited to$4,500

iv. Life insurance with a face (cash) value lessthan $1,500.

v. Irrevocable funeral arrangements for both

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spouses, plus burial spaces for familymembers.

vi. Income producing property with a value of upto $6,000 which produces at least 6% return on

equity.

vii. Non-transferable life-estates

viii. Certain retirement accounts

ix. Long-term care insurance partnership

I. RESOURCE ASSESSMENT, SNAP SHOT & SPEND DOWN

When a married individual applies for Medicaid, ODJFS will conduct aresource assessment to determine a couples countable resources. This isknown as the Snap-shot Date. All countable assets are pooled togetheron the snapshot date for a married couple. There is only one snapshotdate.

1. Snap-shot Date

The snapshot day is the first day of the first 30-day stay in a nursinghome of the institutionalized spouse (IS). The hospital stay prior tothe transfer directly to a nursing home counts in the 30 days. Allassets owned by the husband, wife and those assets held jointly bythe couple or by the individual and a third party are counted as

available assets.

Once the snapshot date has been reached, the assets are dividedbetween the spouses. For single people, the assets are whateverhe or she has on the snapshot date. The community spouse (CS)can have half of the assets or $104,400. The IS in either case canonly have $1,500. The amounts over these figures must be spentdown before the applicant can be approved to receive Medicaidbenefits to pay for his or her care in a nursing home.

2. Spend Down

Once the snapshot date has been reached, the assets are dividedbetween the spouses. For single people, the assets are whateverhe or she has on the snapshot date. The community spouse (CS)can have half of the assets or $109,500. The IS in either case canonly have $1,500. The amounts over these figures must be spentdown before the applicant can be approved to receive Medicaidbenefits to pay for his or her care in a nursing home.

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3. Medicaid approves the following for a proper spend down:

i. Any expenditure spent on the applicant, the applicantsspouse or a dependent of the applicant;

ii. Any transfers to exempted persons or trusts;

iii. Any conversion to income in approved limitedcircumstances;

iv. Any allocation to a community spouse in whole or in part asa result of a fair hearing or court order.

J. TRANSFERS OF ASSETS

Even if all other eligibility requirements have been met, a person might notbe eligible for Medicaid benefits if the applicant or his or her spouse has

transferred assets in an attempt to hasten Medicaid eligibility.

1. Look-Back Date.

The look-back period for all applicants will be five years from thedate of application for Medicaid benefits for an institutionalizedindividual, or the date on which the individual applies for Passportassistance. The previous look-back period was three years or if atrust was involved, five years. The look-back period began on theday that the potential Medicaid recipient applied for Medicaidbenefits. Now the look-back period will be five years for all

transfers, regardless if a trust is involved or not. One thing to makeclear, however, is that this new five-year look-back is only fortransfers on or occurring after February 8, 2006. So really, therecan be no full five-year look-back until February 8, 2011.

2. Improper Transfer.

If there is a transfer, it is rebuttably presumed to have been made inorder to hasten Medicaid eligibility and is, therefore, an impropertransfer. Again, the presumption is rebuttable. If a large transfercan be shown to have been made for non-Medicaid related

reasons, it will not be treated as improper.

3. Calculation of Penalty Period.

If an improper transfer has been made, a period of restrictedcoverage for Medicaid benefits is calculated. The period ofrestricted coverage is calculated by dividing the amount of theimproper transfer by the current average monthly private cost of

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care in a nursing facility which is currently $ by $6023, which is theaverage private pay rate of nursing home cost per month,according to Medicaid as of the writing of this presentation. OAC 5101:1-39-07.

EXAMPLE

Paul is applying for nursing home Medicaid benefits on October 15, 2010.On April 20, 2007, he gave his son $115,000, hoping to qualify forMedicaid as soon as possible if he needed nursing care. Since thetransfer was within 5 years prior to the application date, it is an impropertransfer. The period of Medicaid restricted coverage is 19 months (thecalculation is always rounded down to the next whole month). The penaltyperiod starts when the applicant is in the nursing home requiring care, andwould be approved for Medicaid benefits but for the ineligibility due to animproper transfer.

It is very important for a person who is considering making gifts to retainsufficient assets to privately pay through any period of ineligibility.

EXAMPLE

Contemplating needing nursing care, Paul gave his son his entire lifesavings of $235,000 on January 15, 2011. Paul enters a nursing home inFebruary, 2011 and applies for Medicaid immediately. Paul has monthlyincome of $1,000 and a cost of care at the nursing home of $7,000. Paulsperiod of restricted Medicaid coverage will last a total of 39 months. Evenif Pauls son pays the additional $6,000 in nursing home costs each monthwhich Paul cannot pay for himself, the gifted funds will run out after 39months.

Had Paul thought about the optimum gift in January, 2011, he probablywould have come up with a gift of around $117,500 or so. An $117,500transfer would have created a penalty period of 19 months. Paul wouldhave kept $117,500 which he could have used to pay his own way for thatperiod of time. This would have put Paul on Medicaid after 19 months,with his son being able to keep all of the $117,500 gift.

4. Exceptions to the Improper Transfer Rule.

The following are permissible transfers:

i. Transfers of non-homestead property to a blindor disabled child.

ii. Transfer of the residence to the community

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spouse.

iii. Transfers to a trust established for the solebenefit of an individual under age 65 who isblind or totally disabled.

iv. Transfers of the residence to the individualsspouse, child under age 21, adult child who isblind or disabled, sibling who had an equityinterest in the residence for at least one year,or adult child who lived with applicant for atleast 2 years and provided care which delayedinstitutionalization. OAC 5101:1-39-07.

TRUSTS

Because of the use, or misuse, of trusts in Medicaid planning, there are a

number of rules specific to trust planning:

A. MEDICAID QUALIFYING TRUSTS

These trusts, established prior to August 11, 1993, are not treated ascountable resources if there is no discretion to invade principal for theapplicant.

B. SELF-SETTLED TRUSTS AFTER AUGUST 11, 1993.

These trusts are considered countable resources to the extent income

and/or principal can be used for the applicants benefit. To the extentirrevocable transfers are made into such a trust and cannot be used forthe applicants benefit, an improper transfer has occurred.

C. EXEMPT TRUSTS.

1. Special Needs Trusts. These are established for adisabled person under age 65. Requires Medicaid payback. SeeOAC 5101:1-39-27.

2. Qualifying income trusts. These trusts are used to

provide supplemental benefits for a Medicaid recipient if therecipients income exceeds the Medicaid income limit).

3. Pooled Trusts. A trust established by a non-profit entityin which all participants assets are pooled and used forsupplemental benefits. There is a Medicaid payback provision.

4. Supplemental Services Trusts. Established by a third

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party (parent, usually) for the benefit of a person receiving benefitsthrough MR/DD or county board of mental health. Maximum limit of$220,000 (increases by $2,000/year). At least 50% of trust assetsmust be paid to State at beneficiarys death.

5. Trusts established by someone else for the applicantsbenefit and which are totally discretionary.

6. Trusts established by Will for the benefit of the survivingspouse.

ANNUITIES

Because of a great deal of abuse with regard to annuity purchases, new annuityrules were promulgated last year. These rules clarify what planning can be donewith commercial annuities. Annuities, as planning tools, are important becausethey can be converted from a countable resource to a stream of income. Thiscan significantly hasten a persons eligibility for benefits. OAC 5101:1-39-22.8.

A. ANNUITY OWNED BY COMMUNITY SPOUSE ATSNAPSHOT DATE

If the community spouse owns a commercial annuity prior to the otherspouses institutionalization, it is treated as a countable resource. If thecommunity spouse irrevocably annuitizes it over his or her life expectancybefore the snapshot date, the annuitization of the annuity will NOT betreated as an improper transfer to the community spouse. The languageof the new annuity rule is still less than clear in many respects and a

community spouse may even be able to annuitize the annuity after thesnapshot date. However, the Department of Job and Family Servicesdoes not agree to that interpretation of the statute.

B. ANNUITY PURCHASED AFTER SNAPSHOT DATE

If the annuity is purchased AFTER the snapshot date for the benefit of thecommunity spouse, the annuitization will be treated as an impropertransfer to the extent the annuity amount was in excess of the CSRA.

C. IRAs AND QUALIFIED RETIREMENT ACCOUNTS

RISAs

IRAs and other qualified retirement accounts are generally consideredcountable resources, without any reduction for income taxes which maybe due when distributions are taken. These types of accounts are referredto in the Medicaid regulations as retirement and income supplementingaccounts or RISAs. A RISA will be considered exempt only if it cannotbe cashed-in or if an individual must terminate employment to cash it in.

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See OAC 5101:1-39-22.7.

ESTATE RECOVERY

A. PROBATE AND NON-PROBATE ASSETS ARE NOW

SUBJECTOhio is required by the federal government to seek recovery for what it has paid

in Medicaid benefits. Prior to July 1, 2005, Ohio sought recovery onlyfrom a decedents probate estate, although the State had been veryaggressive in asserting that any transfers which avoided a probateadministration were fraudulent as to the States claim for reimbursement.As of July 1, 2005, however, the State is authorized to seek recovery fromboth probate and non-probate assets that pass from a Medicaid recipientor his or her surviving spouse. See ORC 2117.061 and 5111.11.

However, there are still several open issues with regard to the States ability to

collect against non-probate assets:

1. First, while there are forms as part of the probate process which areused to notify the State as to its right to make a claim for recovery,no such notification requirement seems to be present with regard tonon-probate assets. In a probate estate, the State must assert aclaim no later than one year after the date of death or 90 days afterreceiving notice from the estate fiduciary, whichever is later. Wherethere is no probate estate, does the States right to file a claim everexpire?

2. Second, the new Ohio statute dealing with this, ORC 5111.11(A)(1)(b), only authorizes the State to seek recovery against non-probate assets. It does not give the State any special claim tothose assets. Presumably, the State is in the position of any othergeneral creditor with regard to non-probate assets. Absent fraud,general creditors are typically unable to collect against non-probateassets.

B. OTHER ESTATE RECOVERY REQUIREMENTS

In order to be entitled to recovery, the Medicaid recipient must have been at least55 years old when services were rendered and lived in a nursing facility orreceived home and community-based services. Recovery is soughtagainst the estate (which includes non-probate assets) of the survivor ofthe Medicaid recipient and his or her surviving spouse. Recovery can onlybe sought if there is no surviving child under age 21 or who is blind orpermanently disabled. Estate recovery can also be waived upon ademonstration of undue hardship.

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Ohio Medicaid Spend-Down Rules

Medicaid spend-down applies when an individual or a couple have countable resourcesin excess of the eligibility limits. Before the individual or couple will be entitled to OhioMedicaid assistance, the excess resources must be expended in some permissiblemanner. Most expenditures, other than gifts, will qualify for this purpose.

When a couple is involved, this will generally mean that the countable resources mustbe reduced by half, subject to a "floor" and "ceiling." The floor is currently $21,912. Theceiling is currently $109,560. In determining values, the assets of the couple at the timethe first of the them had a period of institutionalization of thirty days or more is utilized.Accordingly, if the countable assets were $100,000 when the one spouse entered thenursing home, this amount is cut in half and the assets must be spent down to $50,000.If the original amount was $300,000, the ceiling comes into play and more than halfmust be spent (maximum that can be retained by the healthy spouse is $109,560).Similarly, if the original amount was $15,000, then there is no required spend downbecause of the $21,912 floor.

An example will illustrate the importance of understanding these rules. Take twocouples with a pending nursing home stay on the part of the husband. The wives,Jennifer and Kimberly, are in the exact financial situation. Each has a home worth$150,000, subject to a $25,000 mortgage, assets in the bank worth $50,000, and creditcard debt of $15,000.

Jennifer decides that she should take care of a few things before her husband entersthe nursing home. So she sells their home, places the proceeds from the sale in thebank, and pays off her debts. She now has $160,000 in the bank. Jennifer's husbandthen is placed in the nursing home, and upon application for Ohio Medicaid, she is toldthey must spend down $80,000.

Kimberly does nothing until after her husband enters the nursing home. She has$50,000 of countable assets, so she must spend down $25,000. She does this bypaying off the mortgage. Kimberly does not have to spend any money on the nursinghome and the facility begins to receive Ohio Medicaid vendor payments immediately.Medicaid law and practice should allow Kimberly to later sell the home and place theproceeds in investments. She could then pay off the other credit card debt and end up

with $160,000 in investments, whereas Jennifer would only have $80,000.

(181049_1)

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Documents

OLLI Medicaid Presentation Final