Medicaid for Pennsylvania Long-Term Care Facility

Residents1800 Grindley Park StreetSuite #6Dearborn, Michigan 48124313.563.4900

9853 Old Perry HighwayWexford, Pennsylvania 15090412.364.8600

John B. Payne, Attorneywww.law-business.com

Nancy Rupertwww.elderadvice.com

Medicaid• Federally subsidized grant-in-aid for low-

income individuals and families; i.e., welfare

• Varies from state-to-state• Covers medically necessary services and

most prescriptions• No cap on covered services• Stringent eligibility requirements

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Medicaid for Long-Term CareFinancial eligibility criteria for MANeed for long-term careNot necessary to qualify for "skilled

care," but must be verified that applicant cannot be cared for in community

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Limits on Countable AssetsNo Community Spouse–$2,400$8,000, if income less than $2,022

in 2011 (three times SSI amount)

2009-10 Community Spouse Resource Allowance

Calculate "total joint resources" on the day one spouse enters long-term care--the "snapshot.“

Half may be retained:Minimum $21,912maximum $109,560

Maximum automatic in some statesOnce institutionalized, spouse is approved for

MA, community spouse's assets are no longer counted.

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Community Spouse Spend Down

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Community Spouse Spend Down

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Community Spouse Spend Down

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Two Significant DatesDate institutionalized spouse enters LTC or

a hospital leading to long-term careDate community spouse spends down so

resource allowance is met

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Home is Exempt, but Planning is Necessary to Avoid Estate Recovery

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Household and Personal Goods• Household goods

– Customarily found in home– Used in conjunction with maintenance or

occupancy• Personal goods

– Incidental items intended for personal use by a household member

– Personal goods held for investment purposes not excluded

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Motor VehicleOne motor

vehicle of any value excluded

Most expensive excluded

Additional vehicle also excluded if homestead, or necessary for self-support

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Income-Producing Real Property and Assets Used in Trade or BusinessIncome producing real property (IPRP) and

personal property used in a trade or business may be excluded.

The extent of this exclusion is unclear, but it should apply if the property produces a reasonable rate of return.

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Prepaid Funeral May be Non-countable

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Funeral and Burial ArrangementsNo absolute limit but Agency may review amount

to determine whether it is “exorbitant for person’s situation.”

Higher amount justified for:Transport of body.Priest, minister or rabbi who is close friend or

relative to conduct services with cost of travel, food, lodging and honorarium to be paid from burial reserve.

Reasonable gift to church or synagogue for facilities.

Limits from $8,125 in Clinton County to $14,062.50 in Bucks County. 15

Other Types of Property Can be Used to Preserve Assets and Still Qualify

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Toys Jewelry

IRA Loophole (in some states)

The Community Spouse’s IRAs and 401(k)s are all exempt!

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Jointly-Held Liquid AssetsTotally available to MA applicant or

recipient.If joint tenant for estate planning, but

neither a current claim of right nor unrestricted access, unavailable and not counted.

Considered divested when funds removed.

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Jointly HeldReal and Personal PropertyUnavailable if held jointly with rights of

survivorshipNo sale not without consent of other owners

and the other owners do not consentCreation of joint tenancy divestment if

client’s ownership or control reduced

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Myth—You Can’t Give Anything Away and Get Medicaid

You can be disqualified for giving away property--in some cases. What is given away? To whom? When?

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Permissible TransfersDisabled childChild who has lived in claimant’s home for

two years and provided careSibling of claimant who has lived with

claimant for one year and has equity

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ConversionExchange of asset for property of equal

value not divestmentExample: purchase of $100,000

annuity for $100,000

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DivestmentGifts subject to five-year look-back.Penalty begins when donor is otherwise

eligible for Medicaid.

Example:Rosco, a widower, is in good health when he gives his grandson $25,000 for college. He keeps $75,000 in savings. Three years later, he suffers a stroke and enters a nursing home at $6,500 per month. Four years and three months after the gift, he runs out of money. He cannot get assistance for a number of months. Divide $25,000 gift by average cost of private-pay care in a nursing home. 24

Penalty PeriodBegins when patient is eligible but for the

penaltyAfter lapse of prior penaltyAmount divested divided by state average

daily private-pay nursing home rate, $247.06 in 2010

Length of disqualification measured in days

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Saving RoscoVital to act on entering LTCAdditional $25,000 giftAnnuitize or loan remaining funds

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Protecting Assets through Irrevocable Annuities

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Qualifying AnnuitiesIrrevocableUnassignableNo cash valuePurchased at fair market value Commercially availableAll required payments must be paid within

annuitant’s actuarial life expectancyState must be named as beneficiary on death

of annuitant in the amount of Medicaid payments

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Two Prongs of Spousal ProtectionAn individual shall not be ineligible for medical

assistance . . . to the extent that . . . assets were transferred to the individual's spouse or to another for the sole benefit of the individual's spouse, [or] were transferred from the individual's spouse to another for the sole benefit of the individual's spouse. § 1396p(c)(2)(B).

No income of the community spouse shall be deemed available to the institutionalized spouse. § 1396r-5(b)(1).

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Sole-Benefit Test: Transmittal 64Annuities are “usually purchased to provide a

source of income for retirement.”“In order to avoid penalizing annuities

purchased as part of a retirement plan . . . . If the expected return on the annuity is commensurate with a reasonable estimate for the life expectancy of the beneficiary, the annuity can be deemed actuarially sound.” State Medicaid Manual § 3258.9(B). http://www.cms.hhs.gov/Manuals/PBM/list.asp?listpage=2

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Contrary StatesStates that place restrictions on the use of

Transmittal 64-compliant annuities--generally limiting annuities to funds that are part of the CSRA:

Alabama Arkansas ColoradoConnecticut Indiana LouisianaMinnesota Nevada New JerseyNorth Dakota Ohio TexasWisconsin

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Protecting Assets through Irrevocable TrustsNot in the U.S. Third Circuit

New JerseyPennsylvaniaDelawareVirgin Islands

Check local Medicaid rules

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Strategies When Both Spouses Are in Long-Term Care Facilities

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Defining Characteristics“Institutionalized spouse” means an

individual who is in an institution or, if there is a waiver needs nursing care, and is married to a spouse who is not in a medical institution or nursing facility. §1396r-5(h)(1)(A).

“Community spouse” means the spouse of an institutionalized spouse. §1396r-5(h)(1)(B).

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Institutionalized Equals SingleWhen a couple ceases to live together, the

agency must count only the income of the individual spouse in determining his or her eligibility, beginning the first month following the month the couple ceases to live together. 42 CFR § 435.602(a)(3).

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Advantage: CoupleIn the case of eligible institutionalized

spouses who have shared the same room in a Medicaid institution, the agency has the option of considering these couples as eligible couples for purposes of counting income and resources or as eligible individuals, whichever is more advantageous to the couple. 42 CFR § 435.602(a)(4).

Viable Devices to Preserve Assets:

DivestmentInvestment in homesteadAnnuitiesSole benefit trusts (except Third Circuit)

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2011 Pennsylvania Medicaid LimitsCommunity Spouse Resource Allowance:

Minimum: $21,912 Maximum: $ 109,560One-person Asset Limit: $2,400 ($8,000 low-

income)Monthly Maintenance Needs Allowance:

Minimum: $ 1,822 Maximum: $ 2,739Shelter Standard: $ 547Standard Utility Allowance: $ 524Monthly Personal Needs Allowance: $ 45Transfer Penalty Divisor : $259.76/day