2014 - Recent Developments in Medicaid and Health Care Planning

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Attorney Robert Longstreet of Longstreet Elder Law & Estate Planning, P.C. shares insight on recent developments in the Medicaid, health care and elder law area.

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2014 - Recent Developments in Medicaid and Health Care Planning

  1. 1. BY ROBERT J. LONGSTREET, ATTORNEY AT
  2. 2. 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 REQUIREMENTS  COOPERATIVE FEDERAL & STATE PROGRAM  FEDERAL LAW PROVIDES BROAD PARAMETERS, STATE PROVIDES SPECIFIC RULES AND ADMINISTERS ELIGIBILITY
  3. 3. 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
  4. 4. • 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)
  5. 5. 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 2014 for 1 month in a nursing home in the State of Michigan? $7,867.00
  6. 6. 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 ($7,867) • An applicant cannot own more than $2,000 of countable assets (individually or with spouse)
  7. 7. 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
  8. 8. THIS SOUNDS HORRIBLE!!!!
  9. 9. 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
  10. 10. 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 $536,000 IN EQUITY VALUE • NO VALUE CAP IF OCCUPIED BY SPOUSE, DISABLED CHILD, OR CHILD UNDER 21.
  11. 11. • OF ANY VALUE ONE AUTOMOBILE
  12. 12. PERSONAL PROPERTY CLOTHING JEWELRY HOME APPLIANCES FURNITURE
  13. 13. PRE-PAID FUNERAL CONTRACTS MUST BE IRREVOCABLE FOR HUSBAND AND WIFE CAN INCLUDE BURIAL PLOTS FOR ENTIRE FAMILY
  14. 14. EVERYTHING ELSE IS A “COUNTABLE ASSET” • CHECKING ACCOUNTS • SAVINGS ACCOUNTS • CERTIFICATE OF DEPOSITS • OTHER REAL ESTATE (BESIDES HOMESTEAD) • STOCKS, BONDS, ETC.
  15. 15. 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
  16. 16. 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.
  17. 17. EXTRA EXEMPTION FOR “COMMUNITY” SPOUSE OF REMAINING ASSETS, SPOUSE IS ENTITLED TO KEEP: ½ THE COUNTABLE ASSETS UP TO A MAXIMUM OF $117,240 **UNLESS A HIGHER AMOUNT IS ESTABLISHED BY THE COURT**
  18. 18. 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 cd (Mr. Brown) • $20,000 savings (Mrs. Brown) • $35,000 CDs (joint) • $7,000 checking (joint)
  19. 19. IF MR. BROWN APPLIED FOR MEDICAID: • MR. BROWN COULD KEEP $2,000 • MRS. BROWN (THE COMMUNITY SPOUSE) COULD KEEP: THE HOUSE THE CAR THE PREPAID FUNERAL PERSONAL PROPERTY $80,000 IN CASH
  20. 20. 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)
  21. 21. WHAT ABOUT THE REMAINING $80,000 THE BROWNS OWN?
  22. 22. WHAT ABOUT THE REMAINING $80,000 THE BROWNS OWN? • THEY COULD SPEND IT ON THETHEY COULD SPEND IT ON THE NURSING HOME (APPROX. 1 YEAR)NURSING HOME (APPROX. 1 YEAR) • OR THEY MIGHT BE TEMPTED TOOR THEY MIGHT BE TEMPTED TO GIFT THE MONEY TO RELATIVES…..GIFT THE MONEY TO RELATIVES…..
  23. 23. 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 / $7,867 = Penalty Time
  24. 24. IF MR. BROWN GIFTS REMAINING $80,000 TO CHILD • AND MR. BROWN APPLIES FOR MEDICAID WITHIN 60 MONTHS OF GIFT • $80,000 / $7,867 = 10.2 MONTH PENALTY • RESULT: MR. BROWN WILL NEED TO GET THE MONEY BACK TO PAY FOR NURSING HOME STAY!
  25. 25. SO WHAT IS LEFT FOR CLIENTSSO WHAT IS LEFT FOR CLIENTS TO DO?TO DO? FOR A SINGLE CLIENT CONVERSION: Transfer countable assets to an exempt asset. EX: Purchase a pre-paid funeral. TRANSFER TO DISABLED CHILD: A transfer to a *disabled individual* is not a “divestment.” **interestingly, MI does not distinguish between child and individual**
  26. 26. 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 8.5 MONTH PENALTY PERIOD.
  27. 27. 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
  28. 28. AS AAS A REVIEW…REVIEW… REMEMBERREMEMBER MR. AND MRS.MR. AND MRS. BROWN?BROWN?
  29. 29. 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 cd (Mr. Brown) • $20,000 savings (Mrs. Brown) • $35,000 CDs (Jointly) • $7,000 checking (Jointly)
  30. 30. Mr. Brown is Medicaid Eligible MR. BROWN • GETS TO KEEP $2,000 • $60 PER MONTH OF HIS INCOME FOR MISCELLANEOUS
  31. 31. 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
  32. 32. POST PLANNING IS KEYPOST PLANNING IS KEY FOR MRS. BROWN…FOR MRS. BROWN… HER ESTATE PLANHER ESTATE PLAN NEEDS TO SUPPORT MR.NEEDS TO SUPPORT MR. BROWNBROWN’S CONTINUED’S CONTINUED MEDICAID ELIGIBILITYMEDICAID ELIGIBILITY •Community Spouse TrustCommunity Spouse Trust •Testamentary TrustTestamentary Trust
  33. 33. Estate Recovery • Only applies to: – Persons on Medicaid in Nursing Homes or receiving care through long term care programs including: • MI Choice Waiver Services • Home Help • Home Health • PACE – Over the age of 55
  34. 34. Estate Recovery • Normally talking about the house, as that is typically the only asset of significant value owned by a Medicaid beneficiary
  35. 35. Estate Recovery • Every state is different. • 2007 Michigan law provides favorable exceptions: – Only applies to “probate assets” – Exclude 50% of average value of home in the county. – Spouse or disabled child residing in home delays implementation. – Caregiver relative residing in home delays implementation.
  36. 36. What We Do • Avoid probate by using ladybird deeds and other non-probate arrangements. • Transfer homes to disabled or caregiver children where possible. • Where no estate, provide minimal information and return questionnaire with death certificate and cover letter. • Where there is an estate, complete questionnaire with nominal information (sign it? not required). • Disallow the claim when filed.
  37. 37. Two Powerhouse Methods You Can Do NOW • Power of Attorney with Extraordinary Powers – Authority to make gifts – Authority to create trusts • Community Spouse Estate Planning – Nursing home spouse should not be beneficiary – Create testamentary trust to care for NH spouse
  38. 38. IF YOU HAVE A NURSING HOME ISSUE…. ROBERT J. LONGSTREET GEE & LONGSTREET, LLP 269-945-3495 607 N. BROADWAY HASTINGS rlongstreet@geelongstreetlaw.com www.longstreetlegalservices.com LongstreetElderLaw.com (269) 945-3495

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