2010 Medicaid Update
CLTC
May 26, 2010
Harry S. Margolis, Esq.
Margolis & Bloom, LLP
Boston, Dedham, Framingham & Woburn
www.ElderLawAnswers.com
The Big Picture
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State budgets under incredible pressure
No comprehensive long-term care policy
Mix of Medicare, Medicaid and long-term care
insurance
Most nursing home care paid for by Medicaid
Basic Medicaid Rules
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Limited to $2,000 in “countable” assets
“Community” spouse limited to about $110,000
House not counted if spouse (or dependent child)
is living in it or equity value is under $500,000
($750,000 in some states)
But beware liens and estate recovery
Can't give away assets to get under the limits
Transfer Rules
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One month of ineligibility for every $8,120
transferred
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Different in each state
Transfer of $81,000 causes 10 months of
ineligibility ($81,000 / $8,120 = 10)
DRA changes
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Penalty period begins when “otherwise eligible” for
benefits – spent down to $2,000
Five-year lookback period
Transfers
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Mr. Gates transfers $81,000 to his son and
daughter on April 1, 2009
He enters a nursing home on April 1, 2010
He spends down his remaining assets on April 1,
2011
He will be eligible for MassHealth on February 1,
2012
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10 months after he runs out of money
34 months after the transfer
Transfer Exceptions
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To spouse
To disabled child
To trust for “sole benefit” of disabled individual
under age 65
House
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To “caretaker” child
To sibling with equity interest
Home Equity
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House worth $600,000
Options
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Sell and spend down
Borrow $100,000 on the house
Argue that the valuation is wrong
Do deal with nursing home – in effect a loan
Annuities for Community Spouses
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Mr. Gates moves to nursing home
Mrs. Gates remains at home
They have $310,000 in countable assets
Since Mrs. Gates can keep $110,000, they have
$200,000 in excess assets
Mrs. Gates can pay this towards her husband's
cost of care at $10,000 a month, or
Protecting the Community Spouse
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Purchase an immediate annuity
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Transforms excess resource to income stream
No limit on community spouse's income nor
requirement of contribution
Annuity must be “actuarially sound”, and
Include repayment provision
Purchase short-term annuities
Big Issues in Post-DRA World
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New versions of “half-a-loaf”
Penalty period start date
Promissory notes
Personal care contracts
The New “Half-a-Loaf”
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The old half-a-loaf
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John moves to nursing home with $200,000 in savings
He gives half to his children, causing one year of
ineligibility starting immediately
He uses the remaining $100,000 and his income to pay
for his care for that year
Doesn't work post-DRA because penalty period
won't begin until he uses up the remaining
$100,000
The New “Half-a-Loaf”
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Gift and gift back
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John gives entire $200,000 to children
They “cure” by paying for nursing home care,
shortening penalty period with each payment
Gift and promissory note
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John gives $100,000 and loans them $100,000 to
be paid back over the year, so John can pay the
nursing home
The New “Half-a-Loaf”
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Gift and annuity
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Same as promissory note, except payments coming
back come from annuity
Must be short term and “actuarially sound”
Different solutions in different states
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None works in Massachusetts
Penalty Period Start Date
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When “otherwise eligible” for benefits
Massachusetts approach: only when there's no
other source of payment for the nursing home
Penalty Period Start Date
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Marino v. Velez (U.S. Dist. Ct., Dist. N.J., No. 10911 (JAP), May 4, 2010).
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Mrs. Marino transferred $192,000 in February 2009
Her children returned $89,000, shortening the penalty
period
New Jersey says that penalty period would not begin
until $89,000 was spent down in April 2010
Federal District Court agrees
Personal Care Contracts
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Agreement with family member to be paid to
provide care
Lump sum vs. ongoing payment
Challenged as not arms length or adequately
monitored
Stronger if taxes, FICA, workers comp paid
Can't go back if no agreement in place
Promissory Notes
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Intra-family loans can be seen as unenforceable
Cases are fact specific, depending on timing and
terms of loan
Transfers: Intentions and Hardship
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No penalty is to be applied when
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Purpose of transfer is exclusively other than to qualify
for Medicaid benefits, or
Hardship would result
Very few successful claims
Successful cases are very fact specific
Transfer Exceptions
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Or not,
V.S. v. Division of Medical Assistance and Health
Services (N.J. Super. Ct. App. Div., No. A-473508T2, April 22, 2010).
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Son supports mother for years, including repairs to
house
Mother executes promissory notes
Ultimately transfers house to son
Medicaid agency imposes transfer
Tough Court
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Court agrees with state agency:
"the Director's findings of fact are supported by the
record . . . that the debt enumerated in the various
promissory notes did not match the funds
purportedly contributed and expended for V.S.'s
support and comfort . . . [and] that the various
renovations and upgrades could just as easily been
expended to ready the house for sale at an
advantageous price as to accommodate the home
for V.S.'s disability."
Promissory Note
Wesner v. Velez (D. N.J., No. 10-308 (JAP), April 19,
2010).
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Applicant seeks injunction in support of authenticity of
promissory note
Court refuses, stating that the circumstances of the
note combined with the acknowledgement that the note
was part of a Medicaid planning technique place the
bona fides of the note in question.
Penalty Period Begins on
Application
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Matter of Baker v. Mahon (N.Y. App. Div. 2d. Dept., No.
2009-03242, April 13, 2010).
Mother in nursing home transferred $292,680 to son
Son paid $153,122 to nursing home
Then applied for Medicaid for mother
Medicaid agency determines that that's when 15-month penalty
period begins because mother was not “otherwise eligible” until she
applied for benefits
Court upholds state decision
But Not in New Jersey
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Frugard v. Velez (U.S. Dist. Ct., D. N.J., No. 085119 (GEB), April 8, 2010)
New Jersey residents transferred assets while in the
community and were eligible for community based
waiver services, but did not apply
Federal Court disagrees:
“Defendants' position is plainly an incorrect reading of the statute.
Defendants ignore the language 'and would otherwise be' in the
statute and incorrectly replace it with the word 'is,' to require the
applicant to actually be receiving community-based waiver services
before the penalty period can begin. This is an improper and
incorrect reading of the plain language of the statute.”
Spousal Annuity Protected
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J.P. v. Missouri State Family Support Div. (Mo. Ct.
App., No. WD 70994, April 20, 2010).
State rules that income from spouse's annuity is
available to the nursing home resident
Court disagrees, finding that that under federal
Medicaid law the community spouse's income is not
deemed available to the institutionalized spouse and
the requirement under the DRA that the state be
named a primary beneficiary means only that the
annuity could not pay out to another heir in the
event of the community spouse's death
Georgia Court Permits NonAssigned Annuity
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Harbin v. Meadows (Ga. Sup. Ct., No. 2009-CV0643-LA, Dec. 1, 2009)
94-year-old woman pays $83,500 for actuariallysound annuity
Georgia Medicaid agency demands that it be
named the remainder beneficiary
Woman refuses and Georgia court agrees with
her interpretation of the DRA
If finds that federal law requires it to be
actuarially sound for its purchase not to be a
transfer of assets; nothing else is required
Lump Sum Life Care Contract
Disallowed
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E.S. v. Division of Medical Assistance and Health
Services (N.J. Super. Ct., App. Div., No. A-256408T2, March 26, 2010)
Life care contract between nursing home resident
and daughter
Lump sum for the future provision of personal care
services
Court determines mom did not receive fair market
value because contract is non-assignable and nonenforceable
Margolis & Bloom, LLP
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Offices in Boston, Dedham, Framingham &
Woburn
 617-267-9700
 hsm@margolis.com
 www.margolis.com
 www.elderlawanswers.com