Protecting Assets While Qualifying for Medicaid

Amelia Crotwell, CELAElder Law of East Tennessee

903 N. Hall of Fame Dr. • Knoxville, TN 37920865-951-2410

www.elderlawetn.com

Crisis Planning and Assistance

Amelia Crotwell, CELAElder Law of East Tennessee

903 N. Hall of Fame Dr. • Knoxville, TN 37920865-951-2410

www.elderlawetn.com

Strategies Involving Purchases

• Purchase something that benefits either spouse/individual• Single premium long-term care insurance policy for younger

spouse• Remodel the home

• Add living quarters for caregiving adult child and family• HVAC unit or new roof or windows

• Purchase a DRA compliant annuity for community spouse• Purchase a DRA compliant promissory note from child

Married Couples: Annuities• If applicant owns a non-DRA annuity, consider that:

• Technically it may be a transfer and result in a penalty• Generally, most TC workers don’t know this• If they figure it out, cash it, then gift and cure

• DRA annuity must meet certain requirements:• Irrevocable and Non-assignable• Actuarially sound• Equal payments with no deferral or balloon• State named as beneficiary after community spouse or minor child up to

the amount of medical assistance (state rule provides that state must be first regardless- should challenge)

• Still evaluated as income/resources

Gift and DRA Annuity Strategy

• Generally (not always) used for single client• Appropriate for Choices 1; not for Choices 2 or 3• Purchase DRA/Medicaid qualified commercial single

premium annuity to pay for care during penalty period• Base annuity payment on life expectancy of annuitant to

avoid Medicaid disqualification

Gift and Cure CalculatorSpend Down: $ 25,000.00 less 2000 to keep $ (2,000.00)Cost of Cure (annuity or pooled trust fee) $ (1,200.00)Total to Gift and Cure $ 21,800.00 Monthly expenses (Facility + Insurance + meds + home expenses): $ 4,500.00 less Gross Income $ (2,500.00)EqualsMonthly Shortfall $ 2,000.00 plus Penalty Divisor (created by TennCare) $ 5,472.00 Equals Gift Divisor $ 7,472.00

Penalty Period (Total to Gift and Cure/Gift Divisor) $ 2.92 Round to whole month $ 3.00 Gift Amount (Penalty Period*Penalty Divisor) $ 16,416.00 Total Gift $ 16,416.00 Amount to Cure $ 5,384.00

Strategies Involving Purchases (cont.)

• Purchase prepaid burial and funeral plan, itemized and irrevocable for individual/spouse

• Purchase burial plots for individual/spouse and all immediate family members

• Purchase a home or a more expensive homestead• Purchase land contiguous to the homestead• Purchase vehicle• Purchase a life estate in another person’s homeplace

Strategies Involving Payments• Pay off debt (mortgage, etc.) – timing is everything• Pay for an elder law attorney to assist; a CPA to advise• Pay for medical and health related needs for the caregiving spouse

who has been neglecting self needs – dental, vision, etc. • Pay for needed care• Create a personal services agreement with caregiving adult child(ren)

to provide services for parent• If cash flow is an issue, create a promissory note and perhaps deed of trust

securing payment

• Not all transfers result in problems or penalties• Federal law sets forth the basic requirements here• State law cannot be more restrictive• If TennCare fails to follow the federal rule, go to fair hearing

Asset Transfer Strategies

Exceptions to Penalized Transfers• Transfers between spouses (even after application?

Remember Hughes v. McCarthy?)• Home to certain immediate relatives (spouse, child under

21, sibling, resident caregiver child 2 years)• Outright gifts to blind or children w/ permanent and total

disabilities• Transfer to sole benefit trust for spouse or blind or disabled

individuals

Exceptions to Penalized Transfers• Assets belonging to individual with disability transferred into

payback trust for that individual (if under age 65)(d4A)• Assets belonging to individual with disability transferred into

pooled trust (if over age 65)(d4C)• Income to Qualifed Income Trust (QIT or “Miller” trust) for

applicant (d4B)

How to Transfer Residence to Caregiver Child• Establish that the child has resided in the residence for the

2 year period• Prove with documentation from child – bills sent to

residence address, tax return filed with residence address• Obtain an affidavit from the physician treating parent that

states that but for the assistance of the child for that 2 year period, the parent would have required nursing home care

• Create a deed transferring home to child, sign and record• Send in with your application

How to Transfer Residence to Sibling with Equity Interest• Sibling must have resided in the home at least one year and

have an equity interest in the home• Prove with documentation from sibling -bills sent to

residence address, tax return filed with residence address• Create a deed transferring home to sibling, sign and record• Send in with your application

How to Transfer Residence Subject to Life Estate• Draft a deed and reserve in the deed for the grantor the

lifetime right to occupy the homestead• Use tax appraised value and Social Security Life tables to

calculate the value of the life estate if needed

Personal Service Contract

• Formalizes payments to family members or others who provide personal services

• Method of “spending down” without making a gift• May use promissory note to reduce home equity subject to

estate recovery (certain DRA requirements to avoid disqualification)

• Counts as a medical expense for VA purposes

• Administrative Appeal before agency• Followed by review before department commissioner• Followed by judicial review of decision

Contesting/Appealing Penalty Period Dates & Other Adverse Medcaid Decisions

Right to Appeal

• Right to appeal, not to a hearing

• The Agency need not grant a hearing if the sole issue is a Federal or State law requiring an automatic change adversely affecting some or all beneficiaries.

• Practice tip: be sure your notice of appeal alleges a factual dispute

Issue: No “Valid Factual Dispute”• Lately TennCare automatically denies some appeals and

hearings due to a supposed lack of “valid factual dispute.”

• Based on the consent decree in Binta.• Arose out of TennCare's position that they were overwhelmed

processing appeals from people whose enrollments were being cut because an entire category, program, or particular benefit was being eliminated. TennCare argued they should not have to hold evidentiary hearings on those problems.

• Supposedly "a screening process for claims not based on a valid factual dispute; and remedy defects in notice requirements and missed appeal deadlines" (from state's brief in Binta)

• TennCare may seek to take advantage of this rule• If you receive a notice of no “valid factual dispute,” you

must fax in your appeal again. It must be RECEIVED by the 10th calendar day from the date of the letter.

Issue: Where to File an Appeal

• Use TennCare Eligibility Appeal form and • Send it to: Tennessee Health Connection, PO Box 305240,

Nashville, TN 37230-5240• Fax it to: Tennessee Health Connection, 855-315-0669

(keep fax transmission verification)• Include a Permission to Release Protected Health

Information (TC form)• Include a Tennessee Health Care Finance and

Administration Authorization of Representative Organization

Right to a Hearing• Agency must grant hearing to an applicant whose

claim is denied or is not acted upon with reasonable promptness when there is a valid factual dispute

• State must “provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied or is not acted upon with reasonable promptness”

Rules Ensuring a Fair Hearing• Agency must serve Notice of Hearing ten (10)

days prior to hearing if a telephone hearing; presumed delivered at the record of address five (5) days after mailing.

• Evidence is not as restrictive as in normal court.• Should attempt informal discovery. Ask state for

its evidence packet.

Burden of Proof at a Hearing

• Standard of proof is “preponderance of the evidence” • defined as the greater weight of the evidence, or • according to the evidence, the conclusion sought by the party with

the burden of proof (appellant) is the more probable conclusion• When the issue is a denied application, the burden of proof

is on the applicant.• File briefs a week in advance of the hearing• File witness list and exhibit list in advance of the hearing

What Happens at a Hearing• Administrative Law Judge (ALJ) opens record and introduces

process and allows for brief opening statements. • State calls its witness to verify case notes and enter them in

evidence. Usually case record from TennCare is the entirety of the State’s evidence packet.

• Appellant’s attorney can cross examine the State’s witness. • State closes its proof. • Appellant can present its case by calling witnesses, entering

evidence into the record, and filing briefs. • State may cross examine any witnesses for the Appellant. • Hearing Officer may ask questions of witnesses. • Appellant closes its proof.

What happens at a hearing (cont.)

• Each side makes closing arguments. • ALJ may request briefs filed on particular issues. If briefs

are requested, the ALJ may hold open the record for a given period of time (usually several weeks) for each side to prepare its brief on the highlighted issue.

• Once the briefs are in or if no briefs are requested, the record is closed. Several weeks later, the ALJ submits an Initial Order with his or her ruling on the case.

Appeal of Initial Order

Option 1: File a Petition for Reconsideration requesting that ALJ reconsider decision• within 15 days of the date of the entry of the IO• 20 days after receiving petition, grant, or deny; if

no action = denial

Option 2: File a Petition for Appeal to the Commissioner’s Designee• within 15 days of the date of entry of the IO• can submit briefs and request oral argument

Appeal of Initial Order (cont.)

Option 3: File Both a Petition for Reconsideration and a Petition for Review

If you choose to file both a Petition for Reconsideration and a Petition for Appeal, the Petition for Reconsideration is disposed of first and a new fifteen day period begins to run

Appeal of Final Order

A Final Order can be appealed by filing a Petition for Review in a Chancery Court of Tennessee having jurisdiction within sixty (60) days after the Final Order is entered.

Laws to Reference in Appeals• Federal:

• State is required to verify applicant’s assets.• Applicant has to give permission for State to complete asset

verification.• State must promptly consider asset information to determine if it

affects eligibility.• Agency must provide the individual a reasonable period to furnish

any additional information required.• State:

• Before application can be denied for lack of documentation or conflicting information, Agency must notify applicant of the type of documentary proof required to meet the eligibility requirements.

TennCare Policy – Rule vs. Policy

• Rule: binding on both TennCare and the applicant• Policy: binding only on TennCare, NOT the applicant

• Verification - According to the HCFA Manual, TennCare must allow up to 10 days for individuals to provide verification of resources.

• TennCare may wrongly denying applications based on its internal policies rather than codified rules.

Keys to Winning

• Know the law and check the policy. If policy is favorable, rely on it.

• Develop your facts.• Point out the lack of authority and lack of personal knowledge of

the qualified witness. Point out all the things they haven’t done. • Always point out that the State’s case is based on conjecture.• Be aware that the State relies on lack of evidence, particularly

and sometimes unconstitutionally relying on lack of verifications without going through the initial step at the application process of denying the application on the basis of verifications.

Keys to Winning (cont.)• Lean on prior Chancery Decisions.• Enforce your procedural due process rights. Agencies are high-

volume and tend to blitzkrieg appellants at hearings. Do not be bullied.

• Present law and memorandum before hearing and if necessary after hearing.

• Appeal again and again. ALJs and Commissioners make mistakes.

• Make a record for Judicial Review, pointing out procedural due process, evidentiary due process, and substantive due process claims.

Sources for TN Attorneys

• 42 U.S.C. § 1396• 42 C.F.R. § 435.1200 and 20 C.F.R. §416.1200 et seq.• TennCare LTC Program Rules:

http://share.tn.gov/sos/rules/1200/1200-13/1200-13-01.20160121.pdf

• TennCare policy manual: http://tn.gov/assets/entities/tenncare/attachments/HCFAEligibilityPolicyConsolidated.pdf