Health Insurance for long term and nursing care

MEDICAID LONG TERM CARE COVERAGE - Medicare provides very limited benefits for long term nursing care and elders with limited resources often use the Medicaid program to pay for this care. Your eligibility for this program is dependent on your other income and assets. The rules are very complicated and it is often worthwhile to seek the advice of a lawyer before you reach age 65 to determine whether you should make specific changes to your financial arrangements in order to plan ahead to be eligible for this coverage.

IN GENERAL

If you should need long term nursing home care, you may need help to pay its cost. An average nursing home may charge a private patient approximately $5,000 per month, or $60,000 a year. The Medicaid program, administered by the Office of Medicaid (MassHealth) will pay for some long term nursing home care. In order to be eligible for Medicaid to pay for long term care, an applicant must be 65 years old, a citizen or an eligible alien, and certified to be in need of nursing home care. Before DMA will begin paying for long term care, it requires the patient to spend almost all of his or her money. This handout explains how DMA decides which assets and income can be kept and which must be spent, which the recipient's spouse may keep, and what happens when a Medicaid recipient dies.

ASSETS OR RESOURCES

Assets include all the money, real estate, stocks, bonds, etc. which you own. Not all assets are counted; this is explained later on. An applicant will not be approved for Medicaid until he/she owns no more than $2,000 in countable assets plus a $1,500 account set aside to pay for burial. When one member of a married couple applies for Medicaid, all of the couple's assets are considered together. The spouse left in the home (or the "community spouse") will be allowed to keep a significant portion of the couple's pooled assets. If the assets total $80,000 or less, the community spouse can keep all but $2,000. However, if the assets exceed $80,000 the community spouse keeps the first $80,000 and the Medicaid applicant must spend down the remainder to $2,000. If the community spouse needs more income than is otherwise available, then special provision may be made for keeping more assets than ordinarily allowed. This will be discussed in the section on INCOME below. Assets of a person without a spouse are not divided with anyone. The nursing home patient must spend all of his/her countable assets until they are worth no more than $2,000 before Medicaid will pay for nursing home costs.

WHICH ASSETS ARE COUNTABLE

Certain assets are not counted. For example, personal property such as household goods, clothes, jewelry, and books are not counted. A car is not counted if it is needed by the recipient or a member of his/her household to go to work or for medical treatment, or if it is modified for accommodation of a handicapped person. It is our understanding that the car will not be counted if used by the community spouse to visit the institutionalized spouse. If none of these apply, then only a car with an equity value of $4,500 or less is not counted. If the equity value exceeds $4,500, then the excess is countable toward the applicant or recipient's assets. The value of a prepaid funeral is not counted; a Medicaid applicant may be better off paying now for a funeral from a reputable funeral home than setting aside $1,500 for a burial account.

However, all liquid assets are counted, such as stocks, bonds, cash value of insurance policies, bank accounts, certificates of deposit, IRA's. Any other real estate besides the home is counted.

Assets to which the applicant has no access are not counted. Thus, if the applicant holds a bank account jointly with someone whose signature is required for access to the funds, and that person refuses to sign, the account is not counted. If the applicant's signature is required and he or she is not mentally competent and has no court appointed guardian, those assets are not counted. State regulations force nursing homes to seek guardianships over incompetent patients. Concerned relatives should be involved in any court proceeding to be sure that the incompetent patient is well represented. Please call our office if you have questions about guardianship actions.

WHEN THE HOUSE IS COUNTED

Federal law prohibits states from counting the "principal place of residence" as an asset. The principal place of residence is a specific legal term which means the place where one has been and to which one intends to return. Many nursing home patients are not likely to return home but genuinely intend to do so. Medicaid cannot count the home of such a patient as an asset.

On the other hand, if the patient admits that he has no intention of returning home, DMA can count the home as an asset. Presently, the regulations do not count such a home as an asset if certain relatives are living in it. The rules in this area are complicated. Be sure to ask for more details if you have a concern about it. You should also refer to the section below on LIENS AND ESTATE RECOVERY.

TRANSFER OF ASSETS

If you give away assets to make yourself eligible for long term care Medicaid, you will be disqualified from receiving benefits for some period of time. The time will be the length of time the assets would have purchased nursing home services. To determine the length of time, DMA assumes a daily nursing cost of $150. The period of ineligibility begins on the date that the first asset is transferred. All uncompensated transfers are combined to determine the number of months of the penalty period.

For example, if you give a son $4,500 so you will not have to use it for nursing home costs, you would be disqualified for only a month. However, if you give your son and daughter $9,000 each you will be disqualified for four months. DMA will "look-back" at all transfers the applicant made during the 36 months before the date he or she was both in an institution and receiving or applying for Medicaid. Transfers from a Trust are treated differently. Please see section below on OUR

ADVICE ON TRUSTS AND MEDICAID.

Transfers for other reasons are not disqualifying. It will not affect your eligibility if you give your nephew a generous wedding gift. However, you will have to prove to DMA that you gave away the money for reasons other than your Medicaid eligibility. In determining this, they consider whether you knew about the regulations, whether you knew about your need for nursing care, whether you left yourself enough money to live on, and other factors.

Your eligibility will also be affected if you give away your home for less than fair market value to protect it from Medicaid. You still may give it to certain people without affecting your Medicaid eligibility. Those protected people are your spouse, your brother or sister who has been living with you for one year and is a part owner of the house, or your child who has been living with you and helping to take care of you for two years.

WHAT IS A TRUST?

One can establish a trust by giving assets to someone else to look after them. The person establishing the trust is called the donor or settlor; the person looking after the assets is called the trustee; those persons who have income or principal available to them under the trust are beneficiaries. The trust document states what happens to the principal and the income. The trust may be revocable, which means that the settlor can change his or her mind and demand the return of the assets. Alternatively, the trust may be irrevocable, which means the donor has put the assets permanently beyond reach. A trust may be drafted narrowly and give the trustee no discretion about what to do with the assets or the income. On the other hand, the trustee may be given broad powers over the assets and income and may decide what is best for the beneficiary. Depending on the donor's wishes, a trust may have any combination of features (revocability, irrevocability, broadly or narrowly drafted powers for the trustee). The trustee is required to act according to the terms of the trust and in the best interests of the beneficiaries. If one establishes a trust to benefit his or her children, the trustee is legally obliged to be concerned only with the interests of those children and is not allowed to take into account the interests of the settlor.

OUR ADVICE ON TRUSTS AND MEDICAID

The general rule is that the trust principal is a countable asset if it can be accessed for the Medicaid applicant or recipient. Although there is no final rule in this area, most attorneys warn clients that a transfer into an irrevocable trust is seen as a disqualifying transfer. The person setting up the trust gives away title to the property. Essentially he or she does not own it any more. You might, therefore, be ineligible for Medicaid for some time after establishing a trust even if you can no longer get at the trust assets.

We rarely suggest using a trust in this way. Putting assets beyond your reach means that you have lost control over them. This not only limits your choices in the future, but may also subtly affect your relationships within your family. Your concern to preserve property for the next generation may cost you more than it is worth. If you value your independence, think carefully about how your financial arrangements can foster or undermine that independence.

Two recent rulings from the Massachusetts Supreme Judicial Court (SJC) have suggested that even trusts which have been set up in the manner of a Medicaid Qualifying Trust may no longer be permitted as a way of protecting assets from the Medicaid system. In Mary Cohen v. Commissioner of the Division of Medical Assistance (August 2, 1996), the court ruled that "exculpatory clauses" in Medicaid qualifying trusts created prior to August 10, 1993, do not protect trust assets from being counted in determining the beneficiary's eligibility for Medicaid. The ruling does not apply to trusts created after the August 10, 1993, enactment of the Omnibus Budget Reconciliation Act of 1993 because there is no question that the corpus of such trusts with exculpatory clauses would be countable.

Prior to this ruling, under the Medicaid Qualifying Trust rules, funds in the trust are considered available to the applicant for Medicaid to the extent the trustee has discretion to use them on behalf of the applicant. These trusts attempted to limit that discretion by including language that permits the trust to spend trust funds in ways that will not interfere with the beneficiary's eligibility for Medicaid, called "exculpatory clauses". The SJC read the statute to permit Medicaid to count the assets of the trust as available to the extent the trustee has discretion to distribute them at any time and for any purpose, not only for the applicant's medical and nursing home care. The result is that the entire trust funds are countable and, since they exceed the asset limit of $2,000, the applicants are not eligible for Medicaid (whether or not under the terms of the trust the trustees may pay for the applicants' care.)

These new rulings greatly narrow and may eliminate the use of trusts in protecting assets from Medicaid. We suggest that you consult with a private attorney who specializes in estate planning if you have questions on trusts and your eligibility for Medicaid.

SPENDDOWN

After the assets have been divided between spouses, the portion assigned to the institutionalized spouse must be "spent down" until the Medicaid applicant has no more than $2,000. If you plan to set up a burial account, call Legal Services for more information. When you spend money in this way, you must receive fair market value in return. For example, you cannot pay your grandson $1,000 to mow your lawn. The patient may spend it on exempt assets as well as on nursing home expenses. Repairs to the home are an acceptable way to spend the money. The car may also need repairs or replacement. Utilities may be paid in advance or debts eliminated. All these transactions should be documented for DMA.

INCOME

As a rule, each spouse keeps his or her own income. The patient (or "institutionalized spouse") must spend his or her income on nursing home costs per month after certain deductions are made. First, the patient is allowed $60 for the "Personal Needs Allowance" (also called the "PNA") which pays for clothes, haircuts, cigarettes, and other sundry nonmedical costs.

Then an amount may be deducted per month for the benefit of the community spouse if his or her income is less than $1,562.00. For example, let us suppose that the wife, left at home, has an income of $840 and the husband, a patient in a nursing home, has an income of $805. First the $60 will be deposited in his PNA account, leaving $745. Then the wife needs $722.00 to bring her income up to $1,562.00. The patient has $83.00 left to pay for nursing home costs. This amount is called the "Patient Paid Amount" by DMA. Medicaid pays the balance of the nursing home bill. If the wife's housing costs are high, then a higher amount may be deducted for her. If there is not enough income between the two of them to bring her income up to the proper level, then a larger share of the assets may be set aside to generate interest income for her. Other deductions are also allowed for the benefit of certain dependent family members and for health insurance premiums.

Community spouses with costly shelter or utility needs within specific limits can keep some additional monthly income as an "excess shelter allowance." The total monthly income that a community spouse can have cannot exceed $2,016.50 unless a higher limit is established by a fair hearing or court order.

LIENS AND ESTATE RECOVERY

After a nursing home patient dies, Medicaid may pursue his or her estate as a creditor. If a spouse or disabled or minor child survives the patient, Medicaid may not pursue an estate recovery so long as such spouse or child lives. Most couples own their homes as "joint tenants" or as "tenants by the entirety." This simply means that the home passes directly to the joint owner without becoming part of an estate which is settled by the Probate Court. Presently, recovery is made only from assets which are part of the probate estate. This may change in the near future.

Under state regulations, DMA will place a lien on any real estate the Medicaid patient owns. Again, if the lien will fall on the patient's "principal place of residence," DMA must first determine that the patient is unlikely to return home. However, if a spouse, minor or disabled child lives in the home, no lien can be placed on the real estate. Neither can this be done when a sibling has an ownership interest in the house and has been living in it for at least one year before the patient's admission into the nursing home. The lien should be removed if the patient returns to live in the home. In addition, no recovery can be made if the patient purchased Long Term Care Insurance, approved to be sold in Massachusetts, before the date of admission to the nursing home.

The revised federal Medicaid law permits estate recovery against any real or personal property or other assets in which the Medicaid recipient had any legal title or interest at the time of death, specifically including the home. The new law applies only to the estates of Medicaid recipients dying on or after October 1, 1993 and only to Medicaid benefits paid on or after that date. Each state though has discretion to adopt their own estate recovery plan. To date, Massachusetts has not changed its estate recovery plan since the federal Medicaid law was revised in August of 1993.

APPLYING FOR MEDICAID

If you think that you or a family member may need to be placed in a nursing home, you may apply for Medicaid immediately. Even if the applicant will not be eligible right away, he or she can request an assessment which will describe how the assets and income would be divided if he/she entered a nursing home at that time. You can apply for Medicaid by calling 1-888-665-9993. You will need to show your birth certificate, proof of citizenship or eligible immigration status, passbooks, bank statements and other evidence of your financial situation.

The process of applying for Medicaid can be confusing. For example, the rules of eligibility for receiving Medicaid in the community are different. Often you will receive conflicting advice from hospital or nursing home social workers, friends, family, or DMA itself. You should feel free to be assertive in seeking a full explanation of how the system works and how it applies to you. Do not hesitate to file an appeal if you are wrongfully denied assistance or if you disagree with DMA's calculations of assets or income. If you do not file an appeal within 30 days of receiving a notice of denial, you will have lost your appeal rights. If you have further questions or need assistance with an appeal, call your local legal services office. Click here to find that office.