Navigating the Medicaid Maze The Changes of the Deficit Reduction Act of 2005

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Navigating the Medicaid MazeThe Changes of the
Deficit Reduction Act of 2005

• Martha C. Brown
• Oelbaum Brown, LLC
• 12166 Old Big Bend Rd., Suite 99
• St. Louis, MO 63122
• Telephone [phone]
• Fax [phone]

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Law Effective in Missouri,February 8, 2006

• Missouri has not made some changes to the system
• Lots of uncertainty in the new Care and
  Regulations

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Longer Look-Back Period

• New Look-Back is 60 months
• outright transfers
• transfers to trusts
• Current (old) Look-Back was
• 36 months - outright transfer
• 60 months transfers to and from trusts

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Look-Back ... (cont)

• Period Medicaid can review financial transactions
  to determine eligibility
• Begins on date of application - goes backwards in
  time

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Look-Back ... (cont)

• Financial transactions made before Look-Back
  period cannot disqualify you
• Transfers made after date of new law are governed
  by new law
• Date of new law February 8, 2006

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Date of Eligibility

• Beginning date for the period of ineligibility is
  first day of month during or after which assets
  have been transferred for less than fair market
  value
• 
  Or

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Date of Eligibility (cont)

• Date an individual is eligible for medical
  assistance and would otherwise be eligible based
  on an approved application for such care but for
  the application of the penalty period, whichever
  is later, and which does not occur during any
  other period of ineligibility

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Date of Eligibility (cont)

• Medically eligible as well as financially eligible

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Monthly Gifting

• In order for individual to be otherwise
  eligible, the following must occur
• In a Medicaid bed, or eligible for Home and
  Community Based services

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Monthly Gifting (cont)

• Have less than 1,000 of countable assets
  (assuming single applicant)
• Applied for Medicaid benefits through FSD (its
  possible to apply any time up to 3 months after
  the first two requirements are satisfied and have
  the effective date look back to the time when 1
  2 are satisfied)

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Monthly Gifting (cont)

• Its still possible to make small monthly gifts,
  its just significantly more involved, and there
  is a dead period where gifting doesnt make
  sense (i.e. Senior is in assisted living and
  everyone agrees she will need skilled care in the
  next 12-18 months)

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Monthly Gifting (cont)

• There is no requirement in the law that the
  individual is otherwise eligible for the entire
  penalty period just become otherwise eligible
  for a moment in time

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Monthly Gifting (cont)

• By gifting and returning part of the gift, or
  through gift and immediate annuity purchase, it
  is still possible to shelter assets

14
Hardship Waiver

• Transfer penalty shall not be imposed if it will
  cause an undue hardship
• DRA 2005 requires each state to institute a
  hardship waiver of the transfer penalty

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Hardship Waiver (cont.)

• For hardship waiver to apply
• Must show transfer of assets provisions would
  deprive the individual of either
• medical care that would endanger health or life
  of individual, or
• food, clothing, shelter, or other necessities of
  life

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Hardship Waiver (cont)

• Hardship procedure must provide
• notice to recipient that undue hardship exception
  exists
• timely process to determine if undue hardship
  waiver will be granted and ...

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Hardship Waiver (cont)

• Hardship procedure must provide
• a process under which an adverse determination
  can be appealed

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Hardship Waiver (cont)

• Facility may file hardship waiver on behalf of
  resident with consent of resident or residents
  representative

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Hardship Waiver (cont)

• While determination is pending, State may pay for
  care for resident for 30 days
• Missouri has not instituted hardship waiver
  provisions

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Annuities

• The annuity will be considered an improper
  transfer unless
• i) State is named as remainder beneficiary in
  first position for reimbursement of care provided
  by State to the institutionalized individual
• 
  ... or

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Annuities (cont)

• (ii) State is named as beneficiary in second
  position after community spouse, minor, or
  disabled child is named in first position if
  spouse or representative of child disposes of
  remainder for less than fair market value

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Annuities (cont)

• this provision makes annuities a bad planning
  device for single people

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Income First Rule

• Federal law will require all states adopt the
  income first rule
• MO adopted rule in August, 2005
• look to institutionalized spouse income first
  before community spouse is allowed to retain
  excess resources to generate income

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Home Equity

• Applicant will be denied benefits who has equity
  in a home exceeding 500,000
• Allows states to increase the 500,000 limit to
  750,000 or less
• MO has bill pending as part of Medicaid Reform to
  limit home equity to 500,000

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Disclosure of Resources

• Deals with application for admission to, as well
  as treatment of entrance fees that are held by
  such entities for
• Continuing Care Retirement Community
• Life Care Community

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Disclosure of Resources (cont)

• Does not define
• Continuing Care Retirement Community
• Life Care Community
• Relies on States to determine what entities meet
  these definitions
• Missouri has not instituted rules about this

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Disclosure of Resources (cont)

• In general these entities offer the individual
  life care in one setting...
• (i.e.) individual moves onto campus where
  independent living, assisted living and nursing
  home care are available as the individuals care
  needs change

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Facilities and Gifting

• The entitys residential contract may require a
  resident to spend on his or her care, the
  resources declared on residents admission
  application before applying for Medicaid

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Facilities and Gifting (cont)

• If a resident is eligible for refund of an
  entrance fee held by facility, such fee is
  considered an available resource for Medicaid to
  the extent

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Facilities and Gifting (cont)

• 1. That the resident has the ability to use the
  entrance fee, or the contract provides for the
  use of the entrance fee, to pay for care if other
  resources of the individual are insufficient to
  pay for such care,

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Facilities and Gifting (cont)

• 2. The individual is eligible for a refund when
  the individual dies or terminates the contract
  and leaves the community, and ...

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Facilities and Gifting (cont)

• 3. The entrance fee does not provide an ownership
  interest in the community

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Rounding Penalty Periods

• States are no longer allowed to round down the
  penalty period to the lowest whole number

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Rounding Penalty Periods (cont)

• Example
• if a transfer is made creating a transfer penalty
  period of 4.25 months, the applicant will be
  ineligible for 4 months and 8 days
• Partial month penalties

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Inclusion of Notes Loans

• Assets will include funds used to purchase a
  promissory note, loan, or mortgage unless such
  note, loan, or mortgage ...

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Inclusion-Notes Loans (cont)

• (i) has an actuarially sound repayment term
• (ii) provides for payments to be made in equal
  amounts during term of loan, with no deferral and
  no balloon payments made, and
• (iii) prohibits the cancellation of the balance
  upon the death of the lender

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Inclusion-Notes Loans (cont)

• In the case of a promissory note, loan, or
  mortgage that does not satisfy these
  requirements, the value of such note, loan, or
  mortgage shall be the outstanding balance due as
  of the date of the individuals application for
  medical assistance

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Inclusion-Notes Loans (cont)

• Annuities are still used in spousal cases

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Life Estate Purchase

• New Medicaid planning technique that was not
  accepted by all states prior to DRA 2005

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Life Estate Purchase

• Funds used to purchase a life interest in the
  home of another individual will be regarded as
  assets which have been transferred unless the
  purchaser resides in the home for a period of at
  least one year after the date of purchase

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Effective Date

• Amendments made by this Section shall apply to
  payments under Title XIX of the Social Security
  Act for calendar quarters beginning on or after
  the enactment, and final regulations do not need
  to be in place by such date

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Effective Date (cont)

• Exceptions to amendments made by this Section
  shall not apply to medical assistance provided
  prior to enactment and to assets disposed of or
  trusts established on or before the date of the
  enactment

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Effective Date (cont)

• If any State Plan requires state legislation to
  implement this Act, then a limited amount of time
  is allowed for the states to do so

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Effective Date (cont)

• Missouri had implementation legislation on the
  books before DRA 2005

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Care-Giver Agreement

• In Missouri, there is no legal requirement for a
  child to provide any services towards the care of
  a parent

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Care-Giver Agreement (cont)

• Children /Friends are often providing substantial
  services for the senior and receiving no
  compensation

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Care-Giver Agreement (cont)

• Any transfer to a child will be presumed to be a
  gift unless there is substantial evidence to the
  contrary

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Care-Giver Agreement (cont)

• Care-giver agreement is a way to rebut
  presumption that service was performed for free

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Care-Giver Agreement (cont)

• Two types of Care-giver agreements
• periodic (hourly, monthly)
• lump-sum (care for life or term)

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Care-Giver Agreement (cont)

• Amount of compensation must not exceed the fair
  market value of such services
• i.e. hourly care-giving 18-25 per hour
  depending on location through home-health agency

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Care-Giver Agreement (cont)

• All income received through a care-giver
  agreement is taxable to the child as ordinary
  income
• Self-employment taxes may also be due

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Care-Giver Agreement (cont)

• Agreements must speak as to tax withholding
  responsibilities as well as detailed description
  of duties to be performed