Medicaid Transfers: What are they and how do they work?

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edicaid became a part of the American landscape when on July 30, 1965 President Lyndon B. Johnson signed it and Medicare into law as part of the Social Security Act. It took nearly 20 years before it became available in every 1 state. Since that very early time, a lot of changes have occurred to Medicaid but one thing has remained the same. It continues to be a government program run by the individual states and intended to pay for medical care for people (children, seniors, people with disabilities and low income parents) who meet its financial guidelines, generally at poverty level. Because it is run by individual states, the amount of government involvement and even its name varies by state. Medicaid does not pay money to an individual but rather to health care providers. It can cover medical services in a person’s own home or in a residential care facility such as an adult family home or assisted living facility or in a nursing facility. To be eligible for Medicaid, both income and resources must meet certain limits that are set by law and generally change each year. Income includes Social Security benefits, VA Benefits and any wages. Since those limits vary by state, check with the state Medicaid office for more information. Washington state residents apply for Medicaid by contacting the DSHS office by calling 1-800-442-3263. Medicaid determines monthly resources by looking at what was available at the beginning of the month and comparing it to what was available in the previous month. Those resources might include real estate, bank accounts, stocks and bonds, retirement plans, life insurance policies, vehicles and land. Income from last month that is still around this month is also considered a resource. Medicaid’s five year look back is the rule that says gifts of more than $258 or any nonexempt assets for any reason to anybody (other than those listed below), Medicaid will count those assets against the cost of nursing home care for a period of five years. Was there a gift of money to a grandchild for education? That’s counted. How about for Washington a favorite charity? That’s counted. The point of the penalty state residents is to keep a person from qualifying for Medicaid by giving apply for Medicaid away the assets that could have been used to pay for their by contacting the own care. (For those that can demonstrate that the transfer DSHS office by was not made in order to qualify for Medicaid, there is no penalty.) So Congress has imposed a penalty for any assets calling 1-800that were transferred without receiving a fair market value. 442-3263. The penalty is the period of time Medicaid will not pay for care as a result of the transfer and it is figured by dividing the value of the asset by the average daily cost of care for the resident state.

1. GoMedicare.com. Medicaid History. http://www.gomedicare.com/medicare-information/medicaid-history.html

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Let’s look at a hypothetical case: In January 2011, Fred gave his grandson Barney a down payment of $50,000 for his home. In July 2013, Fred had a chronic health condition that forced him to move into a nursing home. When Washington state looked back at the previous five years, they found Fred’s gift of $50,000 to Barney. The state took the $50,000 gift and divided it by $258 a day to come up with 194 days. Based upon the five year look back, Fred would be ineligible for Medicaid until the middle of January 2014. Some resources are considered exempt and do not count toward the limit. Exempt resources include a home, household goods and personal effects, a car, life insurance with a face value limited to $1,500, burial plots and most prepaid burial plans. A home (which may be a house and all surrounding land, a condominium or a mobile home) may be an exempt resource as long as the recipient’s spouse or some dependent relatives continues to live in the home or the recipient intends to return to the home and states that intention to DSHS even if it seems unlikely that the resident will be able to return. The home would not meet the requirement for exemption if the Medicaid recipient has an equity interest of more than $536,000 unless either the application for Medicaid services was filed prior to May 1, 2006 or more likely the Medicaid recipient’s spouse or dependent child (either under 21, blind or disabled) resides in the home. To be considered disabled, the child must meet Social Security disability determinations. A married Medicaid applicant may still wish to transfer his or her interest in an exempt house to a spouse to prevent future recovery of Medicaid costs or to sell or otherwise dispose of the home. However, there may be tax consequences so it is advisable to consult with an elder law attorney before taking such a step. State Medicaid programs (in Washington state that is DSHS) are required to recover certain Medicaid benefits paid on behalf of an individual for services such as nursing home services, home and community-based services and related hospital and prescription drug services. They may also have the option of recovering payments for other Medicaid services except Medicare cost-sharing paid on behalf of Medicare Savings Program beneficiaries. In Washington, DSHS may file a lien or make a claim against any property including real property in order to repay the state for payments associated with Medicaid and long-term care services received prior to your death. However, like most rules associated with the federal and state governments, there are exceptions. For instance, a home can be transferred without penalty to a: Spouse, Any sibling with an equity interest in the home who has lived for at least one year in the home prior to the date of Medicaid eligibility, Dependent children under the age of 21 A blind or disabled child

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The Medicaid recipient does not need to be living in the home at the time of the transfer and DSHS cannot recover property solely owned by either a spouse or a child. There is one other time that a transfer can be made without penalty. About 44 million Americans provide unpaid care to their parents, friends or other family members each year.2 Many of those individuals have more than one or more chronic conditions and for many the care provided by a caregiver is the difference between being moved into a nursing home or being able to remain at home. A child who has lived at home and cared for the parent for a period of two years prior to the date of COPES coverage or institutionalization may also have a home transferred to him or her in exchange for that period of care. A child in this case is called the caretaker child. However, making an incorrect transfer can potentially cost you the money you thought you might save. There is no penalty for selling a home at fair market value but a parent cannot “sell” their child the family home for a value below its fair market value as in a case out of Massachusetts. The other thing the judge looked for in this case was a level of detail that didn’t exist in any of the evidence that the child presented as evidence of providing the type of care necessary to meet the requirements (housekeeping and cooking do not meet the level of care needed in this case). At least some of that detail could have been provided if the family had had a geriatric care manager do an assessment on the mother’s needs before attempting to use the caretaker child exception and if a physician or psychiatrist had indicated the care level needed required the kind of care she would have otherwise needed to get in a nursing home. Because they didn’t clearly understand the rules, the penalty cost them 548 days of ineligibility at a cost of $300 or more a day. It was a costly mistake. Reta Maguire sold her home valued at $140,300 to her daughter, Karen for $1. Karen had lived with her for two years prior to her mother being admitted to a nursing facility. Karen did provide care such as housecleaning, laundry, meal preparations and helping her mother with medications. However, she also worked various other jobs, including a full-time stint during that two year period. Just prior to being moved into the nursing home, Reta Maguire spent days at home alone. She did not require physical assistance with tasks and often received care from her three other children. Although a nurse practitioner stated for the record that Reta Maguire could not return to her home without significant assistance from her family, there was no record that the period of being unable to live independently extended the two years back in time for the period being questioned. MassHealth determined that the transfer did not meet the qualifications under the caretaker child exception. Reta Maguire vs Director of the Office of Medicaid No. 11-P-792 The criteria for disability in this case are the same as those used for Social Security disability determinations. If a child meets those conditions, there is no period of Medicaid ineligibility nor a penalty. It won’t work to simply state that a child has a disability. 2. Family Caregiver Alliance. Caregiving. http://www.caregiver.org/caregiver/jsp/content_node.jsp?nodeid=2313

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Nita Kaptchuk claimed her daughter was mentally ill. Over the course of four years, Kaptchuk made payments totaling $59,800 to cover her daughter’s rent. She then entered a nursing home and applied for Medicaid benefits. The state of Massachusetts argued that the transfers were intended to qualify Kaptchuk for Medicaid and the court affirmed and Kaptchuk appealed. The trial court affirmed and Kaptchuk appealed. The Massachusetts Court of Appeals affirmed the decision because Kaptchuk was unable to prove that her daughter was mentally ill and needed help with rent. Kaptchuk v. Director Office of Medicaid (Mass. Ct. App., No. 12-P-1279, June 4, 2013) There can be problems even when everyone is in agreement that a recipient matched the requirements for needing care for the specified time and care was provided, it is the state that determines whether the care met the requirement for keeping the parent out of a home. In 2009, a New Jersey resident A.N. transferred a home to T.N. under the Caregiver Child rules, claiming that T.N. provided care for the two years prior to A.N. was admitted to the home. The claimant suffered from dementia and an immobile knee joint that made him wheelchair bound and incapable of providing his own care. T.N. lived with A.N. and was his principle caregiver at a level exceeding normal care-administering medication, preparing meals, modifying his home to make it accessible and to guarantee his safety. What harmed this case was that T.N. continued to work full-time while providing this level of care and so the Director of the Division of Medical Assistance and Health Services found that because A.N. was left alone for at least eight hours per day, five days a week, the Petitioner failed to demonstrate that his physical or mental condition was to the point in which T.N.’s care prevented A.N. from needing institutional care for those two years. A.N. vs Division of Medical Assistance and Health services and Passaic County Board of Social Services, OAL DKT. NO. HNA 05980-07 The take away from these two cases is that if the family is planning to use the Caregiver Child exemption, the family must maintain credible and substantial evidence of the fact that the child is in fact providing care to the parent that keeps the parent out of the nursing home or care facility. Here’s another example but in this case, the family was prepared to prove their case. A New Jersey resident, V.P. lived with her son R.P. V.P. suffered a stroke and entered a nursing home as a consequence. When she entered the nursing home, she transferred her home to R.P. and applied for Medicaid benefits. New Jersey determined that V.P. improperly transferred her home and she was therefore subject to a penalty period. V.P. appealed, arguing that her house was not a countable asset because the transfer fell within the caregiver child exceptions. At the hearing, family members and V.P.’s doctor testified that R.P. helped V.P. with activities of daily living including bathing, walking, and cooking. The court determined

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the exception applied but New Jersey’s Medicaid director rejected the decision. V.P. appealed the decision and the New Jersey Superior Court, Appellate Division reversed the Medicaid director’s decision. V.P. vs. Dept of Human Services (N.J. Sup. Ct., App. Div., No. A-2362-09T1, Sept 2, 2011. If a lien is applied to real property, it is limited to the amount Medicaid paid for care. Recovery is delayed if at the time of death the recipient has a surviving spouse, registered domestic partner or a surviving child who is either under 21, blind or disabled. The sole property of a spouse or child cannot be claimed. Medicaid benefits are complex. Long term care is costly. Getting the right help when it comes to making decisions about Medicaid benefits and the transfer of assets may require an attorney specializing in Medicaid or elder law. He or she can also address any gift taxes or capital gains taxes that may apply.

There are three main parts to applying for Medicaid. They are: An application-(You can get the six page application by either calling 1-800-442-3263 or by picking up an application at a Home and Community Services (HCS) office or by downloading and printing a copy at: http://www.dshs.wa.gov/pdf/ms/forms/14_001.pdf.) A financial review-Once you have completed an application, a financial services specialist from HCS will work with you either in person or on the phone to determine whether or not you meet eligibility requirements. Because HCS employees cannot provide advice, it’s in your best interest to hire an elder law attorney for any assistance. Information you’ll need for this part of the application includes: A Social Security number Proof of identification Proof of income Documentation of resources such as bank statements, property tax statements and life insurance policies Immigration or alien documentation Proof of citizenship if you do not receive Medicare, Supplemental Security Income (SSi) or Social Security Disability Benefits Any transfer of resources over the previous 60 months A personal care assessment-An HCS social worker will come to your home to interview you and evaluate what kinds of assistance if any are needed in your day-to-day life. Based on the assessment, the social worker will make a determination of what options are available to you. A personal care assessment An HCS social worker will come to your home to interview you and evaluate

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what kinds of assistance if any are needed in your day-to-day life. Based on the assessment, the social worker will make a determination of what options are available to you. Most elder law attorneys will have knowledge of what the assessment contains and can provide guidance prior to the assessment.

About AgingOptions AgingOptions is a holistic elder care company helping families plan for, pay for, and coordinate the long-term care of elderly loved ones. AgingOptions’ services are geared towards retirees and those thinking about retirement and concerned about: •Losing independence & having to move to a nursing home. •Losing your assets to uncovered medical or long term care costs. •Becoming a burden on your loved ones.

AgingOptions www.AgingOptions.com 31919 Sixth Avenue South Federal Way, WA 98003

1-877-76-AGING (762-4464

PROTECTING ASSETS

PRESERVING QUALITY OF LIFE 1-877-76-AGING (762-4464) [email protected]

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WASHINGTON STATE MEDICAID & RESOURCE STANDARDS As of July 1, 2013

Single Person Allowable Assets

Value Limit

1.

House (Limit applies Only if no minor or disabled child continues to reside in the home)

2.

One vehicle

3.

Either of the following: Cash set aside for burial or exempted insurance

Exempt, no limit

OR An irrevocable prepaid funeral plan 4.

Burial plots for immediate family members

5.

Cash surrender value of life insurance Personal items (sofa, jewelry, household furnishings etc.)

6. 7.

Up to $536,000

Cash and other countable assets

$1,500 Exempt, no limit Exempt, no limit $1,500 Exempt, no limit $2,000

Generally, all income of a single Medicaid recipient must be paid to the health care facility where the individual resides. The following are allowable deductions from the amount to be paid to the health care facility where the Medicaid recipient resides. The amount to be paid to the facility is called the “participation amount.”

Income Rules 1. a. b. c. 2. 3. 4.

Personal Needs Allowance (PNA) In a Nursing Facility In an Adult Residential Facility In your Home Medical insurance is deductible Maximum income for COPES applicant Transfer penalty calculation amount per day (divided into gifts made during look back period)

31919 Sixth Ave. S., Federal Way, WA 98003

$57.28 $62.79 $958 Actual cost $2,130 $258

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WASHINGTON STATE MEDICAID & RESOURCE STANDARDS As of July 1, 2013

Married Couple Allowable Assets

Value Limit Exempt, no limit

1.

House

2.

One vehicle (Additional vehicle may be exempt regardless of value if is the only source of transportaExempt, no tion for the individual or if the vehicle has been modi- limit fied; e.g. wheelchair lift)

3.

Either of the following: Cash set aside for burial, (for husband and wife). Funds must be separate from other funds and identified as burial funds. (May be limited by face amount of exempt life insurance)

OR

An irrevocable prepaid funeral plan

4.

Burial plots for immediate family members

5.

Cash surrender value of life insurance Personal items (sofa, jewelry, household furnishings etc.)

6. 7.

$1,500 each Exempt, no limit Exempt, no limit $1,500 Exempt, no limit

Cash and other countable assets a.

For a Nursing Facility (between $48,639 and $115,920 $48,639 to +$2,000) $115,920

b.

For COPES ($48,639 + $2,000)

$50,639

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WASHINGTON STATE MEDICAID & RESOURCE STANDARDS As of July 1, 2013

Married Couple-con’t Income Rules 1.

Minimum Monthly Maintenance Needs Allowance (MMMNA)

$1,939

2.

Maximum Monthly Maintenace Allowance

$2,898

3.

Standard Utility Allowance

$394

4.

Maximum Excess Shelter Allowance

$582

5.

Maximum income for COPES applicant

$2,130

6.

Personal needs allowance for institutionalized persons (PNA)) a.

In a Nursing Facility

$57.28

b.

In an Adult Residential Care Facility

$62.79

c.

In your own home

$710

7.

Home mainenance allowance (for 6 months)

$931

8.

Transfer penalty calculation per day (divided into gifts made during look back period)

$258

Aging Options

31919 Sixth Avenue South Federal Way, Washington 98003 Telephone: 253.941.7200  Fax: 253.941.7202

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