Medicaid and Long-Term Care
Nathan Ziegler & Associates
Lee Franks, Associate
Introduction
A little personal background:
1.
B.Sc. Geological Eng., Colorado School of Mines, 1987
2. Exploration Geologist, Indonesia – gold, TX – sulfur, 1992
3.
Accounting & Finance Student TTU, 1993
4. M.A. Energy & Min. Resources, UT, 1994
5. Underemployed, Earned Teaching Certificate, 1997
6. Secondary Science Teacher, 2005
7. J.D. Texas Tech School of Law, 2008
8. Attorney practicing elder law, Present
Who Should be Concerned About Medicaid?
A Little Context
 Aging population
 Fewer children per couple
 Mobile society – distance separates generations
 Major medical advances, at least physical
 More people living into incapacity
 Serious growth in living facilities catering to seniors
Who Should be Concerned About Medicaid?
Some Cost Figures
 Nursing home care in Texas exclusive
of medicines and medical care, semiprivate room - $3,990/mo
 Lubbock Area Costs: Small town -
$2,700; Plainview - $3,800; Lubbock $4,200
 Private facilities – single room, lots of
amenities, $5,000+
Who Qualifies for Medicaid Long-Term Care?
(Warning: this general overview does some violence to
precision)
Single Person
 Under 65 & disabled or over 65 with Medical
Necessity
 Income less than $2,022/mo
 Countable resources (assets) less than $2,000
 Medicaid recipient (client) keeps $60/mo
allowance if in N.H., $85 if CBA, rest of income
to vendor (may be different for clients with VA
benefits)
Must Spend Down Excess Countable Resources
Who Qualifies for Medicaid Long-Term Care?
Married Person
(IS = Institutionalized Spouse, CS = Community Spouse)
 Under 65 & disabled or 65 with medical
necessity
 IS income limited to $2,022
 If CS income less than $2,739, can have
enough of IS’s income to reach that figure
 Protected Resource Amount (PRA): CS keeps
between $21,912 and $109,560 of CS’s share of
combined countable resources (communityseparate distinction irrelevant). IS keeps up
to $2,000.
Must Spend Down Excess Resources
So What Is Spend Down?
 NOT Spin Down - no planning default, i.e. assets sold
or used up until Applicant eligible
 Spend Down – Converting countable resources into
exempt resources (or occasionally into income)
 When are countable resources determined? 12:01 a.m.
the first day of the month the application is filed
 This date also establishes the Look Back Date (later)
Application Date Is Critical & in Applicant’s Control
What Are Exempt Resources?
Things Applicant Can Spend Countable
Resources On
 The homestead – up to $500,000 equity
 A car regardless of value (Medicaid
Cadillac)
 Personal effects (no Picasso’s, no Ming
vases, etc)
 Prepaid funeral contract – must be
irrevocable
 Burial accounts – up to $1,500 each family
member
 Cemetery plots – for Applicant & family
 (For now) transfers made under UTMA
But be wary of Uncompensated Transfers
What Is an Uncompensated Transfer?
 Simple definition: Gift made to qualify for
Medicaid
 Medicaid presumption: All gifts are for that
purpose
 Look Back Period: Five years from Look Back
Date
 Partial Uncompensated Transfer:
Overpayment for goods or services
 Transfer for FMV: Not uncompensated, not a
gift (May include irrevocably contracted future
services)
Consequences of Uncompensated Transfers?
 Penalty period: one day of private pay for every $130.88
given away, or 1 month for every $3990
 Example: $130,880 gift = 1000 day penalty (2 yr & 9 mo)
 Period runs from date Applicant otherwise qualifies
 Applicant entitled to Medical Assistance Only (MAO),
but not nursing home care – must pay for the bed
 Status in Medicaid vernacular: “Mason Manor”
Consequences of Uncompensated Transfers?
Dealing With Gifts
 Gifts can be returned in full, in part, on installment
 Penalty reduced by time served AND by return from
donee at rate of 1 day/$130.88
 This Give Back Strategy can be critical part of
Medicaid and estate planning
Gifts into irrevocable common law trusts prior
to Medicaid need may offer asset protection opportunity
What is Medicaid Estate Recovery?
The State Can Get Its Money Back
 The State may recover funds expended on a Medicaid
client from deceased client’s probate estate
 If probate estate includes the home, the State may
encumber the home
 Revocable living trusts (RLTs) not good, no homestead
exemption on homes in RLTs
What About Long Term Care Insurance?
Basics
 Long-term care could be necessary at any age
 43% of claims for folks under 65
 May cover skilled care or personal care (ADLs)
 Duration of care unpredictable
 On average, 65+ will need 3 yrs of long-term care
 Needs may change over time
 Not just for nursing homes
 Most recipients live at home or with relatives
Long Term Care Insurance
 Time to Buy – relatively young & healthy
 Benefit Triggers – usually 2 ADLs for 90 days, cognitive
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impairment, care by licensed health care pro
Elimination period – period after trigger before pmts
Benefit amount – depends on premium and whether home
health care rider, check care costs your area
Benefit period – more premium, more period
Guaranteed renewable – subject to usual issues
Premium Increase – Policies w/variable rates have rate increases,
but only if everyone in class treated same
Tax Qualification – If tax qualified, premiums may be part
deductible (esp C-Corp), benefits not subject to income tax
Long Term Care Insurance
 Texas required options (may be waived in writing)
 Inflation protection
 Nonforefeiture benefit – some benefits received despite
lapse or cancellation
 Additional options
 Waiver of premium – no premium while on claim
 Restoration of benefits – specified period after pmts end
 Refund of premiums – only by rider, terms vary
Texas Partnership LTC Insurance
 Dollar-for-dollar resource protection – countable
resource limit increased per dollar spent by insurer
AND same resource amount MERP-protected
 Inflation protection – all Partnership policies
 Tax qualification – all Partnership policies
 State-to-state coverage – About 35 states have
reciprocity agreement
Texas Partnership LTC Insurance Companies
www.tdi.state.tx.us/consumer/hicap/partnershipcomp.html
 American General
 Massachusetts Mutual
 Assurity
 Physician’s Mutual
 Berkshire
 Prudential
 Genworth
 Sterling
 John Hancock
 Transamerica
 Lifesecure
 United Security
Long Term Care Insurance
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Good for whom?
Resources in excess of $75,000, besides house and car
Annual retirement income of at least $25,000 - $35,000
individual, and $35,000 - $50,000 couple
Able to withstand modest premium increases over
time
C-Corps may expense premiums
Strategies to Maximize Preserved Assets
Under Medicaid
1. Optimize the Spend Down process
2. Keep the Homestead out of probate
3. Utilize effective gifting strategies
4. Investigate Long Term Care Insurance
Philosophy of Nathan Ziegler & Associates
 “Traditional” estate planning effectively distributes
assets upon death and avoids estate taxes, but
 “Traditional” estate planning is not as effective at
planning for incapacity, e.g., POAs, personal care
plans, and
 “Traditional” estate planning does not contemplate
Spend Down or MERP should Medicaid become
necessary
Philosophy of Nathan Ziegler & Associates
We also think that:
 Clients facing the possible need for
Medicaid find value in a firm that
understands the application process and
the complex and ever-changing eligibility
rules
 Clients find value in a firm that offers the
real possibility of extending their control
over how and when their remaining assets
will be used for their final care, if that
indeed becomes necessary
Medicaid and Long-Term Care
Thanks for your time