Elder Law IssuesMedicaid and Long-Term Care

Nathan Ziegler & AssociatesLee Franks, Associate

IntroductionA little personal background:

1. B.Sc. Geological Eng., Colorado School of Mines, 1987

2. Exploration Geologist, Indonesia – gold, TX – sulfur, 1992

3. Accounting & Finance Student TTU, 1993

4. M.A. Energy & Min. Resources, UT, 1994

5. Underemployed, Earned Teaching Certificate, 1997

6. Secondary Science Teacher, 2005

7. J.D. Texas Tech School of Law, 2008

8. Attorney practicing elder law, Present

Who Should be Concerned About Medicaid?

A Little ContextAging populationFewer children per coupleMobile society – distance separates

generationsMajor medical advances, at least physicalMore people living into incapacitySerious growth in living facilities catering to

seniors

Who Should be Concerned About Medicaid?

Some Cost Figures

Nursing home care in Texas exclusive of medicines and medical care, semi-private room - $3,990/mo

Lubbock Area Costs: Small town - $2,700; Plainview - $3,800; Lubbock - $4,200

Private facilities – single room, lots of amenities, $5,000+

Who Qualifies for Medicaid Long-Term Care?(Warning: this general overview does some violence to

precision)

Single Person

Under 65 & disabled or over 65 with Medical Necessity

Income less than $2,022/moCountable resources (assets) less than $2,000Medicaid recipient (client) keeps $60/mo

allowance if in N.H., $85 if CBA, rest of income to vendor (may be different for clients with VA benefits)

Must Spend Down Excess Countable Resources

Who Qualifies for Medicaid Long-Term Care?Married Person

(IS = Institutionalized Spouse, CS = Community Spouse)

Under 65 & disabled or 65 with medical necessity

IS income limited to $2,022If CS income less than $2,739, can have

enough of IS’s income to reach that figureProtected Resource Amount (PRA): CS

keeps between $21,912 and $109,560 of CS’s share of combined countable resources (community-separate distinction irrelevant). IS keeps up to $2,000.

Must Spend Down Excess Resources

So What Is Spend Down?NOT Spin Down - no planning default, i.e.

assets sold or used up until Applicant eligibleSpend Down – Converting countable

resources into exempt resources (or occasionally into income)

When are countable resources determined? 12:01 a.m. the first day of the month the application is filed

This date also establishes the Look Back Date (later)Application Date Is Critical & in Applicant’s

Control

What Are Exempt Resources?Things Applicant Can Spend Countable

Resources On

The homestead – up to $500,000 equityA car regardless of value (Medicaid

Cadillac)Personal effects (no Picasso’s, no Ming

vases, etc)Prepaid funeral contract – must be

irrevocableBurial accounts – up to $1,500 each

family memberCemetery plots – for Applicant & family(For now) transfers made under UTMA

But be wary of Uncompensated Transfers

What Is an Uncompensated Transfer?

Simple definition: Gift made to qualify for Medicaid

Medicaid presumption: All gifts are for that purpose

Look Back Period: Five years from Look Back Date

Partial Uncompensated Transfer: Overpayment for goods or services

Transfer for FMV: Not uncompensated, not a gift (May include irrevocably contracted future services)

Consequences of Uncompensated Transfers?

Penalty period: one day of private pay for every $130.88 given away, or 1 month for every $3990

Example: $130,880 gift = 1000 day penalty (2 yr & 9 mo)

Period runs from date Applicant otherwise qualifies

Applicant entitled to Medical Assistance Only (MAO), but not nursing home care – must pay for the bed

Status in Medicaid vernacular: “Mason Manor”

Consequences of Uncompensated Transfers?Dealing With Gifts

Gifts can be returned in full, in part, on installment

Penalty reduced by time served AND by return from donee at rate of 1 day/$130.88

This Give Back Strategy can be critical part of Medicaid and estate planning

Gifts into irrevocable common law trusts priorto Medicaid need may offer asset protection

opportunity

What is Medicaid Estate Recovery?The State Can Get Its Money Back

The State may recover funds expended on a Medicaid client from deceased client’s probate estate

If probate estate includes the home, the State may encumber the home

Revocable living trusts (RLTs) not good, no homestead exemption on homes in RLTs

What About Long Term Care Insurance?Basics

Long-term care could be necessary at any age43% of claims for folks under 65

May cover skilled care or personal care (ADLs)

Duration of care unpredictableOn average, 65+ will need 3 yrs of long-term

careNeeds may change over timeNot just for nursing homes

Most recipients live at home or with relatives

Long Term Care InsuranceTime to Buy – relatively young & healthyBenefit Triggers – usually 2 ADLs for 90 days,

cognitive impairment, care by licensed health care proElimination period – period after trigger before pmtsBenefit amount – depends on premium and whether

home health care rider, check care costs your areaBenefit period – more premium, more periodGuaranteed renewable – subject to usual issuesPremium Increase – Policies w/variable rates have

rate increases, but only if everyone in class treated same

Tax Qualification – If tax qualified, premiums may be part deductible (esp C-Corp), benefits not subject to income tax

Long Term Care InsuranceTexas required options (may be waived in

writing) Inflation protectionNonforefeiture benefit – some benefits received

despite lapse or cancellation Additional options

Waiver of premium – no premium while on claim

Restoration of benefits – specified period after pmts end

Refund of premiums – only by rider, terms vary

Texas Partnership LTC InsuranceDollar-for-dollar resource protection –

countable resource limit increased per dollar spent by insurer AND same resource amount MERP-protected

Inflation protection – all Partnership policiesTax qualification – all Partnership policiesState-to-state coverage – About 35 states

have reciprocity agreement

Texas Partnership LTC Insurance Companieswww.tdi.state.tx.us/consumer/hicap/partnershipcomp.html

American GeneralAssurityBerkshireGenworthJohn HancockLifesecure

Massachusetts Mutual

Physician’s MutualPrudentialSterlingTransamericaUnited Security

Long Term Care InsuranceGood for whom?

Resources in excess of $75,000, besides house and car

Annual retirement income of at least $25,000 - $35,000 individual, and $35,000 - $50,000 couple

Able to withstand modest premium increases over time

C-Corps may expense premiums

Strategies to Maximize Preserved Assets Under Medicaid

1. Optimize the Spend Down process

2. Keep the Homestead out of probate

3. Utilize effective gifting strategies4. Investigate Long Term Care

Insurance

Philosophy of Nathan Ziegler & Associates“Traditional” estate planning effectively

distributes assets upon death and avoids estate taxes, but

“Traditional” estate planning is not as effective at planning for incapacity, e.g., POAs, personal care plans, and

“Traditional” estate planning does not contemplate Spend Down or MERP should Medicaid become necessary

Philosophy of Nathan Ziegler & AssociatesWe also think that:Clients facing the possible need for

Medicaid find value in a firm that understands the application process and the complex and ever-changing eligibility rules

Clients find value in a firm that offers the real possibility of extending their control over how and when their remaining assets will be used for their final care, if that indeed becomes necessary

Elder Law IssuesMedicaid and Long-Term Care

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