WHAT IS MEDICAID?..........
Medicaid is a Federal medical bills assistance program that pays medical bills for eligible, needy persons. It is administered by each state. All payments are made directly to the providers of medical and other health care services. The Medicaid-eligible person does not pay the health care provider for services. The only exception is a patient in a Medicaid-approved nursing facility who may be required to contribute part of his/her income toward the cost of care.
Medicaid Planning After Reform
By Thomas D. Begley, Jr.
Congress has passed the Deficit Reduction Act of 2005 which seriously curtails Medicaid Asset Transfers and makes it much more difficult for people to become eligible for Medicaid. The Bill was backed by the Insurance Industry and the Pharmaceutical Industry with AARP opposing the bill on the side of consumers. The vote was 216 to 214 in the House of Representatives and Dick Cheney had to break a tie in the Senate.
1. NEW LAW. The new law is known as the Deficit Reduction Act of 2005
1.1. 6011 - Lengthening Lookback Period; Change in Beginning Date for Period of Ineligibility.
1.1.1. Lookback. The lookback period is extended to 5 years.
1.1.2. Beginning Date. The beginning date of the period of ineligibility has changed from the date the transfer was made to the later of the date of the transfer was made or the date the individual:
would be eligible for medical assistance; and
would otherwise be receiving institutional level care based on an approved application for such care, but for the application of the penalty period, whichever is later; and
which does not occur during any other period of ineligibility.
1.1.3. Commentary. The effect of these provisions will be to make it much more difficult to transfer assets and to obtain Medicaid eligibility.
2. 6012 Disclosure & Treatment of Annuities.
2.1. Disclosure of Annuities.
2.1.1. Disclosure. At the time of a Medicaid application or re-certification of eligibility the applicant must disclose a description of any interest the individual or community spouse has in an annuity. The state may require the issuer to notify the state when there is a change in the amount of income or principal being withdrawn.
2.2. Treatment of Annuities.
2.2.1. State Named as Beneficiary. Transfer of an annuity shall be treated as a transfers of assets for less than fair market value unless:
Remainder Beneficiary. The state is named as remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the annuitant; or
Second Position. The state is named as a beneficiary in the second position after the community spouse or minor or disabled child and is named in first position if such spouse or a representative of such child disposes of any remainder for less than fair market value.
220.127.116.11. Design of Annuity. Annuities are not subject to the transfer of assets provisions if:
it is owned by IRA or purchased with the proceeds from an IRA, an SEP, or a Roth IRA; or
the annuity is:
_ actuarially sound as determined in accordance with the actuarial publications of the Office of Chief Actuary of the Social Security Administration; and
provides for payments in equal amounts during the term of the annuity with no deferral and no balloon payment.
Commentary. This means only that the purchase of an annuity is not subject to the transfer of asset penalties. The issue as to whether the annuity is a countable asset is not addressed.
3. 6013 Income First. States must follow the income first rule when calculating an expansion of the Community Spouse Resource Allowance.
Commentary. New Jersey has always followed the Income First Rule.
4. 6014 Home Equity.
4.1. Limits. A person is ineligible for Medicaid if he has equity in the home in excess of $500,000 or at state option $750,000. This number is indexed for inflation.
EXCEPTION: The maximum amount does not apply if the home is occupied by:
spouse child under age 21
child who is blind or permanently and totally disabled
4.1.2. Loan. The applicant is encouraged by the Act to obtain a reverse mortgage or home equity loan to reduce equity.
Commentary: This restriction is not as severe as it may first appear and may actually present some planning opportunities
5. 6015 CCRC Contracts. This section clarifies the treatment of CCRC Contracts and entrance fees.
5.1. Transfer Provisions. Provisions in CCRC contracts restricting transfers of assets are enforceable.
Commentary: Many lawyers simply ignored provisions in CCRC contracts restricting transfers. These are now clearly enforceable under the new law.
6. 6016 Additional Reforms of Medicaid Asset Transfer Rules.
6.1. Partial Month Penalties. Partial month penalties are mandated.
6.2. Accumulation of Multiple Transfers.
Fractional transfers of assets in more than one month are accumulated.
Transfers during all months are treated as one transfer.
Commentary: This makes small gifts impossible in many situations.
6.3. Notes and Other Loan Assets. For transfer of assets purposes promissory notes, loans and mortgages are included unless:
they include an actuarially-sound repayment term as calculated by the Office of the Chief Actuary of the Social Security Administration; and
payments are made in equal amounts with no deferral or balloon payment; and
the document prohibits the cancellation of the balance upon the death of the lender. 6.4. Purchase of Life Estates. The purchase of a life estate is not considered to be a transfer of assets if the purchaser resides in the home for a period of at least one year.
Commentary: There may be situations where this portion of the statute presents additional planning opportunities. There are some serious risks involving the due on sale clause in mortgages and capital gains tax considerations for the parent and child that need to be considered, but in the right situation this will present a planning opportunity.
7. PLANNING OPPORTUNITIES ELIMINATED. Opportunities that have been eliminated include the following:
Transfer Assets/Wait Three Years
Transfers from Retirement Plans within a Lookback Period
SCIN - By definition a SCIN is a loan that cancels on the death of the lender.
8. CONCLUSION. There are a number of planning opportunities that remain under the new law, but many of them will not have been tested. Clients may be required to apply for Medicaid, be rejected, apply for a Fair Hearing and in some instances appeal to the New Jersey Appellate Division and possibly even the New Jersey Supreme Court before these strategies are validated. Medicaid Planning is no longer for the faint of heart. Elder Law will become much more of a litigation practice than a transactional practice. Clients should consult an experienced Elder Law attorney who is not easily intimidated.
About the Author: Begley & Bookbinder, P.C. is an Elder & Disability Law Firm with offices in Moorestown, Stone Harbor and Lawrenceville, New Jersey and can be contacted at 800-533-7227. The firm services southern and central New Jersey and eastern Pennsylvania.
Thomas D. Begley, Jr. lectures with Kenneth Vercammen for the NJ State Bar Association. Thomas D. Begley, Jr. provides services in connection with protecting assets from nursing home costs, Medicaid applications, Estate Planning and Estate Administration, Special Needs Planning and Guardianships. If you have a legal problem in one of these areas of law, contact Thomas D. Begley, Jr. at 800-533-7227. Mention you were referred by Kenneth Vercammen. Esqs email newsletter.
Resource and Income Limitations for Spouses of Medicaid Applicants
by Dana E. Bookbinder, Esquire
Now that the President has signed the Deficit Reduction Act of 2005, it is even more crucial for families to be proactive in protecting their loved ones health care options and financial savings. Often individuals are lulled into thinking that the government will not aggressively pursue their assets if they dont engage in legal planning, but the opposite is in fact true. In cases of married couples, the healthier spouse often mistakenly believes that his or her assets are safe while only the ill spouses assets have to be paid to a nursing facility for that spouses care. Again, this is incorrect, and early legal planning can save the family much grief in addition to substantial assets. While both married and single individuals can substantially benefit from early legal planning, under Congress new budget saving scheme, married couples, in particular, would be passing up the opportunity to protect their savings if they failed to seek legal counsel since the asset and income limitations they would face for Medicaid eligibility are low.
The resource allowance permitted to be retained by the spouse of a benefits recipient is known as the Community Spouse Resource Allowance (CSRA). This allowance was established by the Medicaid Coverage Catastrophic Act (MCCA), enacted to apply to individuals institutionalized on or after September 30,1989 to protect spouses against impoverishment.
The amount of the community spouse resource allowance is generally based on one half (1/2) of the couples combined total countable resources as of the first period of continuous institutionalization. A resource assessment of the couples countable assets as of the first period of continuous institutionalization of one of the spouses will be undertaken when a Medicaid application is filed. By law, it must also be done upon the request of the Medicaid applicant, the applicants spouse, or the personal representative of the applicant or the spouse. A continuous period of institutionalization is broken by absences from the institution for thirty consecutive days. For 2006, the CSRA is subject to a maximum of $99,540 and a minimum of $19,908. These numbers are adjusted on an annual basis.
In addition to a resource allowance, the spouse of a Medicaid recipient is entitled to a monthly income allowance. Generally, the income of an individual who is institutionalized must be forwarded to his nursing home on a monthly basis. However, this spouse is allowed to retain her own income plus, depending on the amount of her income, a monthly allowance to be taken from the institutionalized spouses income. This allowance is called the Minimum Monthly Maintenance Needs Allowance (MMMNA). Currently, the amount is based upon the difference between $1,604 and the community spouses income plus an additional amount to cover shelter expenses for the community spouse. The shelter expenses are based upon the actual mortgage and real estate taxes that must be paid plus certain allowances for utilities. These figures upon which the MMMNA calculation are based are adjusted annually.
Failure to plan ahead for the long-term care costs of a spouse can severely impact the healthy spouses financial status. However, elder law attorneys can increase both the spouses resource and income allowances through agency hearings. Additionally without a hearing, elder law attorneys can help their clients maintain their standards of living, enabling them to continue living independently in their homes.
Begley & Bookbinder, P.C. is an Elder & Disability Law Firm with offices in Moorestown, Stone Harbor and Lawrenceville, New Jersey and can be contacted at 800-533-7227. The firm services southern and central New Jersey and eastern Pennsylvania.
The Firm provides services in connection with protecting assets from nursing home costs, Medicaid applications, Estate Planning and Estate Administration, Special Needs Planning and Guardianships. If you have a legal problem in one of these areas of law, contact Begley & Bookbinder at 800-533-7227.
WHO QUALIFIES FOR MEDICAID?........
-Aged persons 65 and over, blind persons or disabled persons who apply through their Social Security District Office and who receive monthly Supplemental Security Income (SSI) checks. -Aged persons 65 and over, blind persons or disabled persons who may not be eligible for SSI due to excess income but who meet the income and resource criteria for New Jersey Care.... Special Medicaid Programs. -The Medically Needy segment of New Jersey Care....... Special Medicaid Programs provides limited services to certain needy individuals who are not eligible for Medicaid due to excess income but may not be able to afford health care services. Contact the Department of Human Services for other eligible requirements.
The following acts are crimes under Federal and State Law and persons found guilty of the acts can be fined up to $10,000 or put in prison for up to 3 years or both. -Lending your Medicaid card; - Giving any information known to be false in order to gain Medicaid benefits; - Hiding any information about the occurrence of an event that you know will bear on your right to Medicaid benefits or the right of another person for whom you applied and who is receiving Medicaid coverage; - Applying for Medicaid for another person and using the benefits for yourself or someone else who is not eligible. See Medicaid, what is it by NJ Department of Human Services, Division of Medical Assistance.
Your Responsibilities when applying for Medicaid
You must give complete and factual information on the application. You must provide or apply for a Social Security Number. You must promptly notify the county welfare agency whenever there is a change in your existing income, or an additional income or resource, such as:
* income from a new job or loss of an old one * change in wages from full or part-time job * Workers Compensation * unemployment or temporary disability benefits * Social Security or Veterans benefits * pension or other retirement benefits * Supplemental Security Income (SSI) * interest on savings * accident claims or settlements * support payments * an inheritance of money or property * money from the sale of property * funds received in settlement of s claim or legal suit * lottery winnings or other awards * any other change in income or resources * court action related to any of the above See Medicaid, what is it by NJ Department of Human Services, Division of Medical Assistance.
If you are residing in a nursing facility, you must also report:
* when you obtain or drop health insurance coverage * changes in health insurance premiums * changes in spousal income, if you are paying spousal maintenance
The Law requires that all health and accident insurance benefits, including Medicare, Workers Compensation and No Fault Auto Insurance must be used before Medicaid in the payment of health care.
You must agree to assign to the Commissioner any rights to payment from any third party.
When applying to the county welfare agency for special institutional services including nursing home care, you must make an accurate report of your actual income. Normally, that income ( except for a personal needs allowance and certain disregards, if applicable) must be applied to the cost of your care.
You must authorize the county welfare agency to contact any source that may have knowledge about your circumstances ( including IRS, Social Security wage and benefits files, and state wage and employment files), for the sole purpose of verifying the statements that you make on the application. See Your Rights and Responsibilities when applying for Medicaid by NJ. Department of Human Services, Division of Medical Assistance and Health Services.
If you or a spouse have to enter a nursing home to receive custodial type care, your assets (other than your residence and various personal items which may be exempt under certain circumstances) are worth less than $2,000, and the income of the person entering the home (including Social Security) is no more than $1,410 per month for 1996, then you may be eligible for this government program which can pay for substantially all of the cost of the nursing home. Moreover, it is possible for a married spouse who remains at home to preserve a significant portion of the assets of the couple if the other spouse is institutionalized. In 1996, the law permits a minimum of $15, 348 of such assets to be protected. And, depending upon the amount of such assets, a maximum of one-half (but not exceeding $76,740) may be preserved. In addition, in the case of married persons, it may be possible to have some of the income of the spouse in the nursing home paid to the at home spouse without affecting eligibility for Medicaid Only.
When considering an application for Medicaid, one should bear in mind that the rules are fairly complicated, and that transfers of assets to third parties (such as gifts to children) in order to become eligible for the program can result in a penalty period being imposed during which payments by the State will not be made for nursing home care.
____ The penalty is a period of ineligibility for Medicaid, determined by dividing the value of the assets transferred by the average cost of a nursing home in New Jersey. States must apportion the period of ineligibility between spouses so that only one penalty applies. In the case of joint assets, a withdrawal by one party is considered a transfer. The new law subjects transfers of income to a period of ineligibility. Transfer penalties can be avoided by returning all of the assets which were transferred. The law made significant changes in the area of trusts. However, certain types of trusts are still permitted. The Secretary of Health and Human Services was directed to promulgate regulations concerning annuities. As of this writing, those regulations have not yet been promulgated. States are now mandated to recover payments from the estates of Medicaid recipients.
If your application for Medicaid benefits is denied, if your Medicaid eligibility is terminated, or if Medicaid refuses to pay a claim, you have a right to a fair hearing before a New Jersey Administrative Law Judge. At that hearing you have a right to be represented by counsel and to present evidence including testimony to support your case. The judge makes a recommendation to Medicaid regarding your case. Then, if Medicaid still denies your claim, you have a right to appeal to the Appellate Division of the Superior Court of New Jersey. In a situation where Medicaid has advised you that it intends to discontinue the payment of benefits, you may have a right to have benefits continued until your appeal has been decided. At the time of this printing, the Federal and State Governments are considering substantial changes in both Medicare and Medicaid. See New Jersey State Bar Foundation, Law Points for Senior Citizens. We recommend the purchase of Long Term Health Insurance/ Nursing Home Insurance]
For more information, go to http://njwillsprobatelaw.com/medicaid2006nursinghomes.html?id=601&a=