BY

ROBERT J. LONGSTREET, ATTORNEY AT LAW

MEDICAID VS. MEDICAREMEDICAID VS. MEDICARE

MEDICAID IS A LARGE GOVERNMENT HEALTH INSURANCE PROGRAM

DIFFERENT FROM MEDICARE IN THAT MEDICAID ELIGIBILITY REQUIRES AGED OR DISABLED + STRICT FINANCIAL ELIGIBILITY REQUIREMENTS

COOPERATIVE FEDERAL & STATE PROGRAM

FEDERAL LAW PROVIDES BROAD PARAMETERS, STATE PROVIDES SPECIFIC RULES AND ADMINISTERS ELIGIBILITY

MEDICAID

• In Michigan, Medicaid implemented by county DHS (Department of Human Services) Offices.

• Many Medicaid Programs for various populations.

• Medicaid Long Term Care Programs: Nursing Home (NH) Medicaid MI Choice Waiver

• MEDICAID DOES PAY FOR LONG TERM NURSING HOME STAYS FOR SENIORS WHO QUALIFY

• BUT MEDICAID IS ‘MEANS TESTED’, MEANING THE STATE WILL LOOK AT ASSETS AND INCOME

(FOUR TESTS TO PASS… WE’LL DISCUSS IN A FEW MINUTES)

WHY DO WE CARE ABOUT MEDICAID ELIBILITY?

• 0ver 6,000 people turn 65 every day, and 40% of these people will spend time in a nursing home.

• The average cost in 2014 for 1 month in a nursing home in the State of Michigan?

$7,867.00

MEDICAID QUALIFICATION REQUIREMENTS

• Must be 65 years or older or disabled, blind or receiving SSI

• Must be a resident of the State of Michigan

• Income must be below the monthly private pay cost of the nursing home ($7,867)

• An applicant cannot own more than $2,000 of countable assets (individually or with spouse)

AND IF YOU QUALIFY…

• The nursing home patient is allowed to keep $60.00 per month for ‘personals’

• The remainder of the patient’s income goes to the nursing home

• MEDICAID will pay the remainder of the nursing home bill

THIS SOUNDSHORRIBLE!!!!

SOME GOOD NEWS

• NOT ALL ASSETS ARE “COUNTABLE”

• THESE ARE ASSETS A PERSON CAN OWN AND STILL RECEIVE MEDICAID BENEFITS

HOMESTEAD

ONE AUTOMOBILE

PERSONAL PROPERTY

PREPAID FUNERAL CONTRACTS

HOMESTEAD EXEMPTION

• HOMESTEAD INCLUDES HOME AND ANY CONTIGUOUS LAND• CAN BE SEPARATED BY ROAD OR RIVER, BUT NOT BY

ANOTHER’S LAND• NEED NOT BE IN MICHIGAN• FOR A SINGLE PERSON: LESS THAN $536,000 IN EQUITY VALUE• NO VALUE CAP IF OCCUPIED BY SPOUSE, DISABLED CHILD, OR

CHILD UNDER 21.

• OF ANY VALUE

ONE AUTOMOBILE

PERSONAL PROPERTY

CLOTHING

JEWELRY

HOME APPLIANCES

FURNITURE

PRE-PAID FUNERALCONTRACTS

MUST BE IRREVOCABLEFOR HUSBAND AND WIFE

CAN INCLUDE BURIAL PLOTSFOR ENTIRE FAMILY

EVERYTHING ELSE IS A “COUNTABLE ASSET”

• CHECKING ACCOUNTS

• SAVINGS ACCOUNTS

• CERTIFICATE OF DEPOSITS

• OTHER REAL ESTATE (BESIDES HOMESTEAD)

• STOCKS, BONDS, ETC.

VALUING COUNTABLE ASSETS

Joint Assets• Joint with Spouse = All counts• Joint with Non-Spouse

For Bank Accounts = All counts unless demonstrate contribution Real Estate, Stocks and Mutual Funds = valued in proportion to ownership

Valuing Countable Assets

• Retirement Funds and Annuities– If the owner can make a withdraw, the value is the

amount that can be withdrawn, reduced by any withdrawal penalty (but not reduced for taxes owing).

– Annuity in pay status or pension that pay monthly benefit (with no right of withdrawal) in treated as income.

EXTRA EXEMPTIONFOR “COMMUNITY” SPOUSEOF REMAINING ASSETS, SPOUSE IS

ENTITLED TO KEEP:

½ THE COUNTABLE ASSETS

UP TO A MAXIMUM OF $117,240

**UNLESS A HIGHER AMOUNT IS ESTABLISHED BY THE COURT**

EXAMPLE: Mr. Brown is entering a long term care facility. Mr. and Mrs. Brown own the following assets:

• HOME ($180,000)

• ONE CAR

• PERSONAL PROPERTY

• PRE-PAID FUNERAL

• $100,000 cd (Mr. Brown)

• $20,000 savings (Mrs. Brown)

• $35,000 CDs (joint)

• $7,000 checking (joint)

IF MR. BROWN APPLIED FOR MEDICAID:

• MR. BROWN COULD KEEP $2,000• MRS. BROWN (THE COMMUNITY SPOUSE)

COULD KEEP:

THE HOUSETHE CAR

THE PREPAID FUNERALPERSONAL PROPERTY

$80,000 IN CASH

WHAT ABOUT INCOME?

• MR. BROWN GETS TO KEEP $60.00 PER MONTH

• IF MR. BROWN WERE SINGLE, THE REMAINDER OF HIS INCOME WOULD GO TO THE NURSING HOME BILL

• MRS. BROWN GETS TO KEEP ALL OF HER INCOME

• PLUS, ENOUGH OF MR. BROWN’S INCOME TO PAY HER MONTHLY BILLS (APPOX. $1,500 - $2,500 PER MONTH)

WHAT ABOUT THE REMAINING $80,000 THE BROWNS OWN?

WHAT ABOUT THE REMAINING $80,000 THE BROWNS OWN?

• THEY COULD SPEND IT ON THE THEY COULD SPEND IT ON THE NURSING HOME (APPROX. 1 YEAR)NURSING HOME (APPROX. 1 YEAR)

• OR THEY MIGHT BE TEMPTED TO OR THEY MIGHT BE TEMPTED TO GIFT THE MONEY TO RELATIVES…..GIFT THE MONEY TO RELATIVES…..

MEDICAID PENALIZES GIFTS

• ON MEDICAID APPLICATION, ASKED IF MEDICAID APPLICANT HAS GIVEN AWAY ASSETS IN LAST 60 MONTHS

• FOR TRANSFERS BEFORE FEBRUARY 8, 2006, ONLY ASKED ABOUT LAST 36 MONTHS

• IF YES, APPLICANT PENALIZED FOR AMOUNT OF TIME GIFTED MONEY COULD HAVE PAID FOR NURSING HOME STAY

• GIFT AMOUNT / $7,867 = Penalty Time

IF MR. BROWN GIFTS REMAINING $80,000 TO CHILD

• AND MR. BROWN APPLIES FOR MEDICAID WITHIN 60 MONTHS OF GIFT

• $80,000 / $7,867 = 10.2 MONTH PENALTY

• RESULT: MR. BROWN WILL NEED TO GET THE MONEY BACK TO PAY FOR NURSING HOME STAY!

SO WHAT IS LEFT FOR CLIENTS SO WHAT IS LEFT FOR CLIENTS TO DO?TO DO?

FOR A SINGLE CLIENTCONVERSION: Transfer countable assets to an

exempt asset.EX: Purchase a pre-paid funeral.

TRANSFER TO DISABLED CHILD: A transfer to a *disabled individual* is not a “divestment.” **interestingly, MI does not distinguish between child and individual**

FOR A SINGLE CLIENT

• “HALF-A-LOAF” METHOD

• GIFT APPROXIMATELY 60% OF ASSETS

• REMAINING 40% USED TO COVER THE PENALTY PERIOD

• EX: MR. X HAS $100,000 IN COUNTABLE ASSETS. WE HELP HIM GIFT $60,000 AND USE $40,000 TO COVER THE 8.5 MONTH PENALTY PERIOD.

FOR MARRIED CLIENT

• TAKE ADVANTAGE OF FULL COMMUNITY SPOUSE ALLOWANCE (1/2 OF COUNTABLE ASSETS)

• WE THEN DRAFT AN “IRREVOCABLE ANNUITY TRUST” TO HOLD REMAINING ASSETS FOR SPOUSE

• TRUST PAYS OUT REMAINING FUNDS TO SPOUSE BASED ON LIFE EXPECTANCY

AS A AS A REVIEW… REVIEW…

REMEMBER REMEMBER MR. AND MRS. MR. AND MRS.

BROWN?BROWN?

EXAMPLE: Mr. Brown is entering a long term care facility. Mr. and Mrs. Brown own the following assets:

• HOME ($180,000)

• ONE CAR

• PERSONAL PROPERTY

• PRE-PAID FUNERAL

• $100,000 cd (Mr. Brown)

• $20,000 savings (Mrs. Brown)

• $35,000 CDs (Jointly)

• $7,000 checking (Jointly)

Mr. Brown is Medicaid Eligible

MR. BROWN

• GETS TO KEEP $2,000

• $60 PER MONTH OF HIS INCOME FOR MISCELLANEOUS

MRS. BROWN

• HOUSE, CAR, PRE-PAID FUNERAL AND PERSONAL PROPERTY

• COMMUNITY SPOUSE ALLOWANCE (1/2 COUNTABLE ASSETS) $80,000***

• REMAINING $80,000 IN IRREVOCABLE TRUST PAID TO HER ANNUITY STYLE

• ALL OF HER INCOME, PLUS ENOUGH OF MR. BROWN’S INCOME TO PAY MONTHLY BILLS

POST PLANNING IS KEY POST PLANNING IS KEY FOR MRS. BROWN…FOR MRS. BROWN…

HER ESTATE PLAN HER ESTATE PLAN NEEDS TO SUPPORT MR. NEEDS TO SUPPORT MR. BROWNBROWN’’S CONTINUED S CONTINUED

MEDICAID ELIGIBILITYMEDICAID ELIGIBILITY

•Community Spouse TrustCommunity Spouse Trust

•Testamentary TrustTestamentary Trust

Estate Recovery

• Only applies to:– Persons on Medicaid in Nursing Homes or

receiving care through long term care programs including:

• MI Choice Waiver Services• Home Help• Home Health• PACE

– Over the age of 55

Estate Recovery

• Normally talking about the house, as that is typically the only asset of significant value owned by a Medicaid beneficiary

Estate Recovery

• Every state is different.• 2007 Michigan law provides favorable

exceptions:– Only applies to “probate assets”– Exclude 50% of average value of home in the

county.– Spouse or disabled child residing in home

delays implementation.– Caregiver relative residing in home delays

implementation.

What We Do

• Avoid probate by using ladybird deeds and other non-probate arrangements.

• Transfer homes to disabled or caregiver children where possible.

• Where no estate, provide minimal information and return questionnaire with death certificate and cover letter.

• Where there is an estate, complete questionnaire with nominal information (sign it? not required).

• Disallow the claim when filed.

Two Powerhouse MethodsYou Can Do NOW

• Power of Attorney with Extraordinary Powers– Authority to make gifts– Authority to create trusts

• Community Spouse Estate Planning– Nursing home spouse should not be beneficiary– Create testamentary trust to care for NH spouse

IF YOU HAVE A NURSING HOME ISSUE….

ROBERT J. LONGSTREET

GEE & LONGSTREET, LLP

269-945-3495

607 N. BROADWAY

HASTINGSrlongstreet@geelongstreetlaw.com

www.longstreetlegalservices.com

LongstreetElderLaw.com(269) 945-3495