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Medicaid Redesign team Proposes Changes to Medicaid Eligibility in New York

November 10, 2011 by

Governor Cuomo recently accepted proposals from New York’s newly created Medicaid Redesign Team (“MRT”). While it is early in the process, and the proposals may not be implemented in their present form or at all, budgeting pressures at all levels of government make it likely that some changes in the Medicaid program will occur. Here are a few of the particularly troubling features of the MRT’s proposals:

Elimination of Spousal/Parental Refusal

Currently, a spouse may refuse to support their spouse who is an applicant for Community Medicaid or Medicaid Home Care. When this occurs, Medicaid is obligated to provide care or services to the applicant, assuming he is eligible (under $13,800 in resources), even if the spouse can afford to pay. The MRT is proposing that the resources and income of the spouse should be considered in determining whether the applicant is eligible for Medicaid. This means that spouses, and parents of disabled children, will be required to spend down virtually all of the household’s assets, and contribute a share of their income, before their ill spouse or disabled child will be eligible to receive care.

5-year “Look Back” for Community Medicaid and Home Care

Currently, the 5-year look back and transfer penalties apply only to applicants for Institutional Medicaid (for Nursing Home Care). Currently, applicants for Community Medicaid or Home Care are able to transfer their assets to family members, friends, or trusts, and thereby become eligible for Community Medicaid benefits. The MRT’s proposal would extend the 5-year look back to Community Medicaid and Home Care, which means that many potential applicants will find that they are ineligible for Medicaid, or subject to a lengthy penalty period before benefits can be obtained.

Estate Recovery

Currently, it is difficult for Medicaid to recover from the estates of medicaid recipients where the recipient has effectively transferred their assets during life to a family member or trust. The proposed law would allow medicaid the ability to seek recovery in these cases.

Impact of these proposals

If these proposals become law, many Medicaid applicants and their families will be severely affected. Some will find their financial situation and lifestyle significantly diminished, and others may find it difficult to pay for even basic living expenses. Many may to apply for food stamps, another program funded by the government.

What to do? Now, more than ever, people who need, or may need (even if they think they will never need it), long-term care should make it a top priority to consult an Elder Law attorney. Planning may need to be taken earlier than previously seemed necessary. As always, with proper planning, t will still be possible to improve your situation, even if these new measures find their way into law.

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Community Medicaid in New York State

November 10, 2011 by

How to Stay at home and protect your assets and income

In New York, the Community Based Medicaid program will pay for the cost of a home health aide. When applying, the local department of social services considered the applicant’s income and assets and whether the Medicaid applicant requires the assistance with the activities of daily living. The following is a breakdown of how DSS evaluates each for a New York Community Medicaid application.

Activities of Daily Living

An individual over the age of 65 is considered “disabled” and therefore entitled to Community Medicaid benefits if they need assistance with the activities of daily living, These include bathing, dressing, toileting and feeding. For most that are interested in Community Medicaid, this is not a difficult a difficult threshold to reach. Any applicant with the onset of dementia or Alzheimer’s or with physical disabilities that limit their ability to live on their own, is sufficiently “disabled” enough to receive Community Medicaid benefits.

Income

Income is calculated by adding the following: Social Security, Pensions, income from rental properties or other investments, and require minimum distributions from retirement accounts. Under Community Medicaid rules in New York, the Medicaid recipient is entitled to keep $787 per month of their income. The remainder of the recipients income is called a “spenddown”. The Medicaid recipient is required spend the remainder on the cost of the aide. Medicaid will pay the difference.

Most of those who can stay at home will have expenses far exceeding the $787 limit. Medicaid understands this and allows for an exception. The often used exception is called a “Pooled Income Trust”.

Clearly, for many recipients of Community Based Medicaid, loss of income would prevent them from remaining in their homes. Enter the Pooled Income Trust. A Pooled Income Trust is similar to a bank account, however it administered by a Non-profit Trust Company, such as NYSARC Trust Services or AHRC.

If Mr. Smith has a monthly income of $2,787 in Social Security and pension income, and he is receiving Medicaid benefits for home care in her Long Island home, he has $2,000 in “excess income” under the current Medicaid rules. As a result, Mr. Smith is required to send a check each month in the amount of $2,000 to his home care agency as a contribution to the cost of his care.

However, when Mr. Smith joins a qualified pooled income trust, his $2,000 check will be sent to the trust instead of his home care agency. The trust will then be able to pay any of Mr. Smith’s expenses, such as his utilities, his food, or his clothing, from his own funds or even the taxes on his Long Island home. Mr. Smith will continue to receive his Medicaid home care, as well.

The pooled income trust contains the funds of many disabled persons and is managed by a non-profit organization that maintains separate accounts for each individual. In order to participate in the trust, the disabled person (or his representative acting under durable power of attorney) signs an agreement with the trust. Under this agreement, upon the beneficiary’s death, if there are any remaining funds they are kept by the trust.

Those who wish to participate in a pooled income trust will have to establish that they are disabled, but findings of disability by the Social Security Administration or by Medicaid are valid for this purpose.

Assets

For Medicaid purposes in New York, assets include any real property owned by the applicant or savings in the form of money markets, CD’s, stocks, bonds, cash values in insurance policies, and other non-retirement investments. When applying for Community Medicaid in New York, the applicant’s total assets must be under $13,800. Clearly, most individuals in New York City, Queens, Brooklyn, and Long Island, are worth more than $13,800.

Many have heard of a five-year look-back period on asset transfers when applying for Medicaid. It is true that a five-year look back period exists – but only for Institutional Medicaid application where the applicant is residing in a nursing home. When applying for Community Based Medicaid applications in New York, there is no five-year look back. Therefore, an applicant can transfer their assets in month and apply for benefits the following month. The best way to transfer assets can only be determined on a case by case scenario. While in some cases it may be appropriate to transfer assets to other family members, including adult children, in other cases it would more advisable to transfer the assets to an Irrevocable Trust.

Most people are not aware of the eligibility requirements for Community Based Medicaid in New York. This is unfortunate because many individuals who could be eligible are spending down their savings on the cost of a home health aide. Whether an individual requires an aide for the first time (perhaps they are leaving a rehab facility) or have had an aide with them and are paying privately, many can eligible for Community Medicaid benefits with the proper planning.

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How to Pay for Nursing Home Care on Long Island

November 10, 2011 by

The cost of a Nursing Home in Long Island is generally $12,000 – $15,000 per month. This cost can deplete savings very quickly. As a result, proper planning is extremely important.

There are three ways to pay for a Nursing Home. First, one can use their savings. Clearly not a great plan – especially if your spouse must rely on that money to live. Second, one can purchase Long Term Care Insurance. Unfortunately, not many people can afford the premiums and the policies do not always cover the entire cost of care.

The third way to pay for Nursing Home Care on Long Island is Medicaid. Medicaid is a federal program which is administered by the States. In 2006, the Deficit Reduction Act of 2005 (DRA) was passed, making it more difficult – NOT IMPOSSIBLE – to qualify for Medicaid benefits. There are two ways in which the DRA made qualifying for Medicaid more difficult.

First, it extended a look back period on assets transfers from 3 years to five years. This means that when applying for Institutional Medicaid to pay for the Nursing Home, the local Department of Social Services will review your bank statements for the previous five years. If you have transferred any assets to a non spouse, they will impose a penalty period, during which the resident of the Nursing Home is responsible for payment. At the conclusion of the penalty period, Medicaid will “pick up” the cost of care.

The second way that the DRA affected eligibility is that he penalty period now begins when who enter the nursing home and apply for medicaid. Under the old law, the penalty period began when the asset was transferred. Therefore, under the old law, even if you made a large transfer within the 3 year look back, there is a possibility that the penalty period is over when you enter the nursing home. Under the DRA, the penalty period does not begin until one applies for Medicaid. Therefore, if there was a transfer of assets within the 5 years, there will always be a penalty period.

This does not mean that you cannot apply for Medicaid when you enter a Nursing Home. To the contrary it means that YOU MUST APPLY IMMEDIATELY because you want the penalty period to begin as soon as possible. Additionally there is a planning strategy that can cut the penalty period almost in half.

The above only applies to those who do not have spouses. If a Medicaid Applicant has a spouse, they can transfer their assets to the spouse and that transfer is not considered in the look back period – hence there would be no penalty period. The spouse simply signs a form called a “Spousal Refusal” and Medicaid will not impoverish the well spouse. There are certain limits to this, however. if the Community spouse has over $100,000 in assets, Medicaid can seek a contribution from them. Fortunately, the contribution is often minimal.

Proper planning can alleviate many concerns and protect assets against the high cost of care at Nursing Homes on Long Island. However, even if planning has not occurred, it it possible to protect some assets should you require Nursing Home Care. It is advisable to seek the advice of an Elder Law Attorney in Long Island as soon as your spouse or family member enters a nursing home. Getting a jump on the application process can save you a month or two of nursing home costs.

With questions about how to apply for Nursing Home Medicaid benefits, please call this office for a free consultation at 516-605-0625.

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The Irrevocable Income Only Trust

November 10, 2011 by

A Case Study in protecting your assets against the cost of long term care

Mr. and Mrs. Watson are in their mid-seventies. Mr. Watson recently fell and injured his hip. He is home from re-hab and is doing better, but may require assistance in the coming years. Additionally, Mrs. Watson has just been diagnosed with the onset on Alzheimers. They own their house (valued at $550,000) on Long Island and have a nice nest egg of about $400,000 in investments and savings. They also receive a combined $3,700 per month in income from social security, Mr. Watson’s pension and income from their investments. They can comfortably live off of their income and do not need to touch the principal of their savings. Their children are concerned with how they can protect their assets while receiving the care they will require in the future.

Their situation is common to many seniors on Long Island. The solution – The Irrevocable Income Only Trust (IIOT). In simplest terms, a Trust is private agreement used to achieve various estate planning goals. There are many kinds of Trusts – the most common being Revocable and Irrevocable. The Irrevocable Trust, as it’s name implies, cannot be altered, modified, amended or revoked. Then why do it?

Simple – if your situation is similar to the Watson’s, the Irrevocable Trust is most often the best way to protect assets against the cost of long term care (cost of home health aide or nursing home).

Here’s how the IIOT would work for the Watson’s. Mr. and Mrs. Watson would create the Trust (they are called the Settlor’s) and appoint one of their two children as Trustees. The Trust would have a name, just as any company has a name. It may be called the “Watson Family 2010 Irrevocable Trust”. Then they would transfer the deed to their house to the Trust. Although they technically do not own the house, the Watson’s would still receive all tax breaks associated with property ownership, such as a property tax deduction or veteran’s deduction. The Trust terms would also stipulate that the Watson’s can live in the house for the remainder of their lives.

The Watsons are considering selling their house in 1 year to buy a condo. The good news is that the Trustee can sell the house for them and buy the condo with the proceeds. The remaining proceeds as well as any of their other investments can also be owned by the trust. The principal remains in the Trust and the income generated (dividends from stock, interest from CD’s, etc..) will continue to go to the Watsons. This is important because they need currently rely on that income. By creating the Irrevocable Trust and transferring assets to the Trust, the assets are protected from Medicaid because the Trust is Irrevocable. By giving control of the assets to one of your children, you are protecting the assets.

If you require the assistance of a home health aide in New York, the assets are protected immediately. This means that, assuming you have protected all of your assets, you would qualify for Medicaid benefits. To be eligible for Institutional Medicaid (Nursing home), you have to do this planning 5 years before applying for Medicaid (The Deficit Reduction Act of 2006 (DRA) imposed a five year look back period on asset transfers).

Typically, I would not advise my clients to transfer all of their assets to the Trust. That would be a big step for most. Fortunately, you can continue to transfer assets down the road.

Protecting assets against the cost of care is important. Most of my clients are like the Watson’s. They want to ensure that their assets are protected and would rather their children inherit than the money go to a nursing home. Though important, this planning must also be done with the counsel of trusted advisors.

With questions about how the Irrevocable Trust can be used to protect your assets, please call this office for a free consultation at 516-605-0625, or contact us online.

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Pooled Income Trusts

November 10, 2011 by Leave a Comment

How to protect your excess income when receiving community Medicaid

A Pooled Income Trust is an option for a disabled individual who has excess income while receiving Community Medicaid Benefits.

Here is how it works:

Recipients of Community Medicaid – those who receive the assistance of a home health aide – are allowed to keep $787 per month of their income. Any additional income, called a “Spendown”, is supposed to be spent down on the individuals care. Therefore, if a Medicaid recipient has income of $1,500 per month, they would be allowed to keep $787 and the remainder would go to the home health aide – with Medicaid paying for any additional costs of the care.

However, for many recipients of Community Based Medicaid, loss of income would prevent them from remaining in their homes. Enter the Pooled Income Trust. A Pooled Income Trust is similar to a bank account, however it administered by a Non-profit Trust Company, such as NYSARC Trust Services or AHRC.

If Mr. Smith has a monthly income of $2,787 in Social Security and pension income, and he is receiving Medicaid benefits for home care in his Long Island home, he has $2,000 in “excess income” under the current Medicaid rules. As a result, Mr. Smith is required to send a check each month in the amount of $2,000 to his home care agency as a contribution to the cost of his care.

However, when Mr. Smith joins a qualified pooled income trust, his $2,000 check will be sent to the trust instead of his home care agency. The trust will then be able to pay any of Mr. Smith’s expenses, such as his utilities, his food, or his clothing, from his own funds or even the taxes on his Long Island home. Mr. Smith will continue to receive his Medicaid home care, as well.

The pooled income trust contains the funds of many disabled persons and is managed by a non-profit organization that maintains separate accounts for each individual. In order to participate in the trust, the disabled person (or his representative acting under durable power of attorney) signs an agreement with the trust. Under this agreement, upon the beneficiary’s death, if there are any remaining funds they are kept by the trust.

Those who wish to participate in a pooled income trust will have to establish that they are disabled, but findings of disability by the Social Security Administration or by Medicaid are valid for this purpose.

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