RECENT DEVELOPMENTS IN MEDICAID AND HEALTH

CARE PLANNING2010

BY

ROBERT J. LONGSTREET, ATTORNEY AT LAW

MEDICAID VS. MEDICAREMEDICAID VS. MEDICARE

MEDICAID IS A LARGE GOVERNMENT HEALTH INSURANCE PROGRAM

DIFFERENT FROM MEDICARE IN THAT MEDICAID ELIGIBILITY REQUIRES AGED OR DISABLED + STRICT FINANCIAL ELIGIBILITY REQUIRMENTS

COOPERATIVE FEDERAL & STATE PROGRAM

FEDERAL LAW PROVIDES BROAD PARAMETERS, STATE PROVIDES SPECIFIC RULES AND ADMINISTERS ELIGIBILITY

MEDICAID

• In Michigan, Medicaid implemented by county DHS (Department of Human Services) Offices.

• Many Medicaid Programs for various populations.

• Medicaid Long Term Care Programs: Nursing Home (NH) Medicaid MI Choice Waiver

• MEDICAID DOES PAY FOR LONG TERM NURSING HOME STAYS FOR SENIORS WHO QUALIFY

• BUT MEDICAID IS ‘MEANS TESTED’, MEANING THE STATE WILL LOOK AT ASSETS AND INCOME

(FOUR TESTS TO PASS… WE’LL DISCUSS IN A FEW MINUTES)

WHY DO WE CARE ABOUT MEDICAID ELIBILITY?

• 0ver 6,000 people turn 65 every day, and 40% of these people will spend time in a nursing home.

• The average cost in 2009 for 1 month in a nursing home in the State of Michigan?

$6,362

• 66% of all single people will be "broke" after 13 weeks in a nursing home.

• 90% of married couples with one spouse in a nursing home will be "broke" after two years.

MEDICAID QUALIFICATION REQUIREMENTS

• Must be 65 years or older or disabled, blind or receiving SSI

• Must be a resident of the State of Michigan

• Income must be below the monthly private pay cost of the nursing home ($7,000)

• An applicant cannot own more than $2,000 of countable assets (individually or with spouse)

AND IF YOU QUALIFY…

• The nursing home patient is allowed to keep $60.00 per month for ‘personals’

• The remainder of the patient’s income goes to the nursing home

• MEDICAID will pay the remainder of the nursing home bill

THIS SOUNDSHORRIBLE!!!!

SOME GOOD NEWS

• NOT ALL ASSETS ARE “COUNTABLE”

• THESE ARE ASSETS A PERSON CAN OWN AND STILL RECEIVE MEDICAID BENEFITS

HOMESTEAD

ONE AUTOMOBILE

PERSONAL PROPERTY

PREPAID FUNERAL CONTRACTS

HOMESTEAD EXEMPTION

• HOMESTEAD INCLUDES HOME AND ANY CONTIGUOUS LAND• CAN BE SEPARATED BY ROAD OR RIVER, BUT NOT BY

ANOTHER’S LAND• NEED NOT BE IN MICHIGAN• FOR A SINGLE PERSON: LESS THAN $500,000 IN EQUITY VALUE• NO VALUE CAP IF OCCUPIED BY SPOUSE, DISABLED CHILD, OR

CHILD UNDER 21.

• OF ANY VALUE

ONE AUTOMOBILE

PERSONAL PROPERTY

CLOTHING

JEWELRY

HOME APPLIANCES

FURNITURE

PRE-PAID FUNERALCONTRACTS

MUST BE IRREVOCABLEFOR HUSBAND AND WIFE

CAN INCLUDE BURIAL PLOTSFOR ENTIRE FAMILY

EVERYTHING ELSE IS A “COUNTABLE ASSET”

• CHECKING ACCOUNTS

• SAVINGS ACCOUNTS

• CERTIFICATE OF DEPOSITS

• OTHER REAL ESTATE (BESIDES HOMESTEAD)

• STOCKS, BONDS, ETC.

VALUING COUNTABLE ASSETS

Joint Assets• Joint with Spouse = All counts• Joint with Non-Spouse

For Bank Accounts = All counts unless demonstrate contribution Real Estate, Stocks and Mutual Funds = valued in proportion to ownership

Valuing Countable Assets

• Joint Assets may have $0 value if:

– Nature of joint ownership requires all joint owners to sell, and

– One or more joint owners refuse to sell.

Valuing Countable Assets

• Retirement Funds and Annuities– If the owner can make a withdraw, the value is the

amount that can be withdrawn, reduced by any withdrawal penalty (but not reduced for taxes owing).

– Annuity in pay status or pension that pay monthly benefit (with no right of withdrawal) in treated as income.

EXTRA EXEMPTIONFOR “COMMUNITY” SPOUSEOF REMAINING ASSETS, SPOUSE IS

ENTITLED TO KEEP:

½ THE COUNTABLE ASSETS

UP TO A MAXIMUM OF $109,500

EXAMPLE: Mr. Brown is entering a long term care facility. Mr. and Mrs. Brown own the following assets:

• HOME ($180,000)

• ONE CAR

• PERSONAL PROPERTY

• PRE-PAID FUNERAL

• $100,000 IRA (Mr. Brown)

• $20,000 savings (Mrs. Brown)

• $35,000 CDs (joint)

• $7,000 checking (joint)

IF MR. BROWN APPLIED FOR MEDICAID:

• MR. BROWN COULD KEEP $2,000• MRS. BROWN (THE COMMUNITY SPOUSE)

COULD KEEP:

THE HOUSETHE CAR

THE PREPAID FUNERALPERSONAL PROPERTY

$80,000 IN CASH

WHAT ABOUT INCOME?

• MR. BROWN GETS TO KEEP $60.00 PER MONTH

• IF MR. BROWN WERE SINGLE, THE REMAINDER OF HIS INCOME WOULD GO TO THE NURSING HOME BILL

• MRS. BROWN GETS TO KEEP ALL OF HER INCOME

• PLUS, ENOUGH OF MR. BROWN’S INCOME TO PAY HER MONTHLY BILLS (APPOX. $1,500 - $2,500 PER MONTH)

WHAT ABOUT THE REMAINING $80,000 THE BROWNS OWN?

WHAT ABOUT THE REMAINING $80,000 THE BROWNS OWN?

• THEY COULD SPEND IT ON THE THEY COULD SPEND IT ON THE NURSING HOME (APPROX. 1 YEAR)NURSING HOME (APPROX. 1 YEAR)

• OR THEY MIGHT BE TEMPTED TO OR THEY MIGHT BE TEMPTED TO GIFT THE MONEY TO RELATIVES…..GIFT THE MONEY TO RELATIVES…..

MEDICAID PENALIZES GIFTS

• ON MEDICAID APPLICATION, ASKED IF MEDICAID APPLICANT HAS GIVEN AWAY ASSETS IN LAST 60 MONTHS

• FOR TRANSFERS BEFORE FEBRUARY 8, 2006, ONLY ASKED ABOUT LAST 36 MONTHS

• IF YES, APPLICANT PENALIZED FOR AMOUNT OF TIME GIFTED MONEY COULD HAVE PAID FOR NURSING HOME STAY

• GIFT AMOUNT / $6,362 = Penalty Time

IF MR. BROWN GIFTS REMAINING $80,000 TO CHILD

• AND MR. BROWN APPLIES FOR MEDICAID WITHIN 60 MONTHS OF GIFT

• $80,000 / $6,362 = 12.57 MONTH PENALTY

• RESULT: MR. BROWN WILL NEED TO GET THE MONEY BACK TO PAY FOR NURSING HOME STAY!

SO WHAT IS LEFT FOR CLIENTS SO WHAT IS LEFT FOR CLIENTS TO DO?TO DO?

FOR A SINGLE CLIENT

CONVERSION: TRANSFER COUNTABLE ASSETS INTO EXEMPT ASSETS

EX: $25,000 IN CASH PUT INTO HOME FOR NEW ROOF, AIR CONDITIONING AND KITCHEN. $8,000 SPENT ON PRE-PAID FUNERAL ARRANGMENT.

FOR A SINGLE CLIENT

• “HALF-A-LOAF” METHOD

• GIFT APPROXIMATELY 60% OF ASSETS

• REMAINING 40% USED TO COVER THE PENALTY PERIOD

• EX: MR. X HAS $100,000 IN COUNTABLE ASSETS. WE HELP HIM GIFT $60,000 AND USE $40,000 TO COVER THE 10 MONTH PENALTY PERIOD.

FOR MARRIED CLIENT

• TAKE ADVANTAGE OF FULL COMMUNITY SPOUSE ALLOWANCE (1/2 OF COUNTABLE ASSETS)

• WE THEN DRAFT AN “IRREVOCABLE ANNUITY TRUST” TO HOLD REMAINING ASSETS FOR SPOUSE

• TRUST PAYS OUT REMAINING FUNDS TO SPOUSE BASED ON LIFE EXPECTANCY

AS A AS A REVIEW… REVIEW…

REMEMBER REMEMBER MR. AND MRS. MR. AND MRS.

BROWN?BROWN?

EXAMPLE: Mr. Brown is entering a long term care facility. Mr. and Mrs. Brown own the following assets:

• HOME ($180,000)

• ONE CAR

• PERSONAL PROPERTY

• PRE-PAID FUNERAL

• $100,000 IRA (Mr. Brown)

• $20,000 savings (Mrs. Brown)

• $35,000 CDs (Jointly)

• $7,000 checking (Jointly)

WE CAN GET MR. BROWN ON MEDICAID IMMEDIATELY!

MR. BROWN

• GETS TO KEEP $2,000

• $60 PER MONTH OF HIS INCOME FOR MISCELLANEOUS

MRS. BROWN

• HOUSE, CAR, PRE-PAID FUNERAL AND PERSONAL PROPERTY

• COMMUNITY SPOUSE ALLOWANCE (1/2 COUNTABLE ASSETS) $80,000

• REMAINING $80,000 IN IRREVOCABLE TRUST PAID TO HER ANNUITY STYLE

• ALL OF HER INCOME, PLUS ENOUGH OF MR. BROWN’S INCOME TO PAY MONTHLY BILLS

MR. AND MRS. BROWN MR. AND MRS. BROWN SAVE 100% OF THEIR SAVE 100% OF THEIR

SAVINGS AND ESTATE SAVINGS AND ESTATE ASSETSASSETS

ESTATE RECOVERYESTATE RECOVERY

• Signed on October 1, 2007 at 2:14 a.m. by Granholm• Based on the language, will only apply to a Medicaid

recipient’s “probate estate”• It is likely that the only assets most people would

own, and still have been eligible for Medicaid coverage, would be their homes.

• The state will only seek to recover a portion of the value of the home: based on the average price of a home in the county where located.

• WE KNOW NOTHING MORE AT THIS TIME!

IF YOU HAVE A NURSING HOME ISSUE….

• ROBERT J. LONGSTREET

• GEE & LONGSTREET, LLP

• 269-945-3495

• 607 N. BROADWAY, HASTINGS

• rlongstreet@geelongstreetlaw.com or www.longstreetlegalservices.com

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