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

Applying for Medicaid:The Four Eligibility Requirements

Amelia Crotwell, CELAElder Law of East Tennessee

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

www.elderlawetn.com

• Three groups for CHOICES long-term care• Group 1: skilled care in nursing facility• Group 2: long term care benefits received in ALF or at home

(under 65, must have physical disability)• Group 3: limited long term care support for “at-risk” individuals;

restricted to those eligible for SSI; does include ALF• Pre-admission Evaluation (PAE)• Pre-admission Screening and Resident Review (PASRR)

1. Medical Eligibility: The Needs Assessment

PAE and PASRR

• Pre-Admission Evaluation (PAE) • Points are awarded for deficits and needs – requires 9 pts• Typically requires deficits both physical and cognitive to achieve

eligibility• Qualified assessor evaluates and submits score with records• TennCare reviews and approves, modifies, or denies• If denied, next step is an appeal

• Pre-Admission Screening and Resident Review (PASRR)• Federal requirement to screen for serious mental illness or

intellectual disability to ensure proper placement and resources

Safety Determination

• Rule 1200-13-01-.02(125)• Decision by TennCare that the applicant cannot be safely

served in CHOICES Group 3 within the expenditure cap ($15,000), using natural supports and all other services available. A Safety Determination Request may be submitted to TennCare with the PAE application.

• Tricky stuff: disconnect between financial and medical eligibility leaves unclear pathways for citizens

• Different rules for single person vs. couple; Group 1 and Group 2

• Approach• Classify assets as of date of institutionalization if 30 consecutive

days• Assess client’s values and objectives– safety, happiness,

stretching dollars for client’s lifetime, leaving a legacy• Decide where and how care will be provided• Evaluate the Medicaid strategies to see what fits best with the

values, objectives, and care needs• Consider the PAE issue before choosing a strategy

2. Resource Eligibility:Exempt vs. Countable Assets

Asset Rules: Single Applicant• Manual 110.050; 20 CFR §416.1210, 1216, 1218, 1231 • Resource Allowance: $2,000• Common Exempt Assets:

• Home with equity value of up to $552,000 (2016) $560,000 (2017) with intent to return or if dependent family member lives there

• A car of any value if used for applicant’s transportation• Life insurance with no cash value• Life insurance with cash value if total face value of all policies is

less than $1,500• Irrevocable, itemized, and prepaid burial contracts• Burial plot (one per family member)• $1,500 of designated burial funds• $6,000 in an irrevocable burial trust

Asset Rules: Married Applicant• Community Spouse Resource Allowance (CSRA)

• Minimum: $23,844 (2016) $24,180 (2017)• Maximum: $119,220 (2016) $120,900 (2017)

• Snapshot Date: first date of institutionalization if 30 consecutive days of care

• Community Spouse Resource Maintenance Allowance (CSRMA)• Divide total countable resources of both spouses on Snapshot Date by two• See Manual 125.015 – remember the cap

• No equity limit for home occupied by community spouse• Retirement Accounts

• Community spouse - countable unless continuing to contribute or taking periodic (monthly) withdrawals

• Institutionalized spouse – countable unless taking periodic (monthly) withdrawals

• See 20 CFR § 1210 & 42 USC §1396p(c)

• For married couples, the community spouse’s income is not considered for eligibility of the institutionalized spouse

• But, community spouse may receive part of institutionalized spouse’s monthly income up to Minimum Monthly Maintenance Needs Allowance (MMMNA) - $2002.50 as of 2016

• If combined income is below MMMNA, assets over CSRMA may be shifted to community spouse to prevent impoverishment

• Income-First Rule: income must be shifted to community spouse before excess assets are shifted to community spouse

• Gross income and deductions for Medicare and Medigap costs

3. Income Eligibility

• Generally no deeming of other household members’ incomes for CHOICES programs (see Manual 115.040)

• Income is based on the date of its receipt• Gross amount from most sources counts as income (Exclusions:

sheltered workshop earnings and a few other minor disregards, see Manual 110.025)

• Automatic eligibility for applicant with monthly income less than 300% of SSI Income amount—$2,199.00 (2016); $2205 (2017)

• If monthly income exceeds cap, then applicant must use QIT/Miller Trust

• Personal Needs Allowance = $50.00/month or 3 x FBR for HCBS

Income Rules: Single Applicant

Income Rules: Married Applicant• Community spouse’s income is not countable and not required to

be paid over to assist with the cost of institutionalized spouse’s cost of LTC

• Standard Maintenance Amount (“CSIMA”) (aka MMMNA)• Minimum = $2002.50• Maximum = $2980.50 (2016) $3022.50 (2017)

• Excess Shelter Allowance • $597.38 (2016) $600.75 (2017)• Community spouse’s monthly mortgage or rental payment + any

homeowner’s association dues + homeowner’s insurance + utility allowance of $308

• Lookback Period• 5 years from date of application• For any transaction that was not for adequate consideration re: fair

market value• Can request financial records for last 5 years• Gifting – potentially harsh consequences, regardless of the reason

for the gift (e.g. tithing, gifts unrelated to Medicaid eligibility)

4. Transfer Eligibility

Asset Transfers and Penalties

• General rule: transfer of an asset for less than fair market value results in a penalty period

• Penalty period• Length of time Medicaid coverage is denied due to disqualifying

transfer• Calculation

• Value of transfer ÷ penalty divisor ($5,472) = months of ineligibility • Penalty begins on date of application or date of gift, whichever is

later

Penalty Period Rules – 1200-13-20-.08• Divide the uncompensated value of the transferred asset by the

average daily NH private pay rate (Penalty Period Divisor of $5,472) or $179.90/day

• No rounding down and no disregard of fractional period of ineligibility • Once a penalty period begins, it cannot be stopped, but may be cured

through returning of funds; partial cures recognized• Applicant does not need to maintain continuous eligibility• Only for nursing facilities/CHOICES Group 1 – penalty does not run

for Group 2 applicants; however, Manual indicates otherwise, so be cautious

• No maximum penalty length; multiple transfers = consecutive penalties

Penalties and Partial Months of Ineligibility• Penalty can run for person on CHOICES Group 2 if enrolled before the

transfer• For new applicants, Medicaid requires notice of the penalty – hammer down

your dates• For individuals already enrolled, a 10-day adverse action notice is required• Other categories of Medicaid may continue during a penalty period, such as

Medicare Savings Programs (Yay!)• Gift of $10,000/5,472=1.827 month penalty; 1.827×30.41days/mo=55.57

days of penalty• Practice tip: avoid confusion by making a gift of $10,944 rather than $10,000

MMMNA for Community Spouse

• Steps to arriving at the proper MMMNA• Calculate the gross income of both spouses• Obtain Medicare and Supplemental or Advantage Plan costs per

spouse• Start with CS; gross income – Medicare and supplemental costs=

net income; if gross income is over $2002.50, no allowance to CS• 2016 MMMNA $2002.50 – net income of CS=shortfall• Gross income of IS – Medicare and supplemental costs – PNA –

shortfall = Patient Liability

Example: Sid and NancyNancy Sid

Gross 880.9 1359.9Medicare B -104.9AARP Supp. -220Part D -49PNA -50MMMNA 2002.5CSIMA 1121.6 -1121.6Patient Liability -185.6

Negative Patient Liability?

• Save more resources• Remember the income first rule and shifting of assets to the

CS when income is low• Calculation is arguably the resources needed to generate

income shortfall per year but TC says, we’ll let you keep shortfall per month × life expectancy in months instead

Annuity Transfer Rules

• Sources of Law• Federal 42 USC §1396p(c) • State 1200-13-20-.06 ABD Financial Determinations• Policy manual 110.030 and 110.050

• General rule: purchase of an annuity is a transfer of assets, but there are exceptions

Exceptions to Transfer Rule for Annuities• Annuities purchased in the past that meet certain IRS rules

under IRC 408(b) regarding Individual Retirement Annuities and deemed IRAs under qualified employer plans under IRC 408(q)

• Purchased annuity meets these requirements:• Irrevocable and non-assignable• Actuarially sound (see SSA life table)• Equal payments during the term• No deferral or balloon• State as beneficiary after CS, minor child, blind or disabled adult child

Case Law and Decisions on Annuities

• Geston v. Olson, No 12-2224, 8th Cir. (ND), amicus brief provides summary of arguments TennCare will make regarding use of spousal annuities

• States have the flexibility to count annuities under federal law• States have limited resources• Couples with means use annuities to shelter assets = abuse• SSI rules would allow counting annuities

• Geston v. Anderson, 729 F.3d 1077 (8th Cir., 2013) Court affirmed trial court’s decision that a DRA compliant community spouse annuity is not a countable resource

• Geston Facts: husband entered NH in 2010; wife at home; resource assessment in 2011 total countable of $586k

• Paid privately for several years, purchased a more expensive home, purchased a $400k SPIA with a 13-year payout for wife

• North Dakota denied application• Holding: resources converted to uncountable income after

institutionalization but before filing application do not affect eligibility

Case Law and Decisions on Annuities

• Hughes v. McCarthy, 734 F.3d 473 (6th Cir., 2013)• Ohio case • Purchase of $175,000 annuity for community spouse to pay

$1,728/month for 9 years for husband; IS was primary beneficiary followed by state

• Department denied application; argued purchase of annuity exceeded CSRA and state agency should be first beneficiary

• Issue- is purchase of annuity an improper transfer of assets under 42 USC 1396r-5(f)(1) even though 1396p(c)(2)(B)(i) allows a transfer for the sole benefit of the spouse?

Case Law and Decisions on Annuities

Case Law and Decisions on Annuities

• Holding: the two code sections address different time periods; transfers before application is filed between spouses or for the sole benefit of a spouse are unlimited

• 1396r-5(f)(1) addresses transfer of assets to the community spouse up to the CSRA amount after eligibility; may be limited … unsure

• 1396p(c) addresses transfers of assets before the Medicaid application is filed and offer exceptions to those rules for the sole benefit of spouse; not limited

Timing

• Ambiguity about transfers to community spouse after eligibility attained or in excess of Community Spouse Resource Assessment

• Practice tip– purchase your CS Immediate Annuity before application

Transfer Situations Not Affecting Eligibility• Applicant received fair market value for transfer.• Transfer was made exclusively for a purpose other than

Medicaid qualification.• Assets which were transferred have been returned.• Denial of eligibility would result in undue hardship.

• TennCare can recover costs of nursing home care, HCBS waivers, and hospital and prescription drugs for people enrolled in nursing home or HCBS waiver programs – not those enrolled only in Medicare Savings Plans

• Assets owned with right of survivorship are not subject to estate recovery (life estate remainder deeds)

• Probate property is susceptible to estate recovery claims• Expanded to include assets held in revocable living trust

immediately before death (In re Estate of Stidham, TCA E2011-02507-COA-R3CV, Aug. 23, 2012)

Estate Recovery Rules

• TennCare has right of recovery against property inherited via intestacy – property brought into probate to settle claim (In re Estate of Trigg, 368 S.W.3d 483 (Tenn. 2012))

• TennCare can’t recover from a person who did not receive benefits (e.g. when spouse of TennCare beneficiary dies) (In re Estate of Smith, TCA M2005-01410-COA-R3-CV, May 24, 2006)

• Current estate recovery does not extend to life estate/remainder deed property

Estate Recovery Rules

Federal Estate Recovery Exemption

• Surviving spouse (recovery postponed until spouse’s death)• Surviving child under 21, blind, or permanently disabled• Cause “undue hardship”• Assets not included in “probate estate” as defined by state

Tennessee Estate Recovery Exemptions• Surviving spouse (recovery postponed until spouse’s death)• Surviving child under age 18, blind, or permanently disabled

before 18• Surviving child blind or permanently disabled after age 18 but

would cause “undue hardship”• Assets not included in “probate estate” as defined by state• Decedent below age 55• Decedent was not receiving benefits at time of death• Decedent was not informed of estate recovery• TennCare did not properly file claim

Filing Claims for Estate Recovery

• In re Estate of Tanner, 295 S.W.3d 610 (Tenn. 2009), the court implied that TennCare is subject to the one year statute of limitations for decedents dying after 1/1/2007

• In re Estate of Gregory, (TCA E2011-01369-COA-R3-CV, June 29, 2012), one year statute of limitations applies to TennCare only if it receives actual notice.

• No Medicaid expansion in Tennessee to date• 19% of residents receive no subsidy and no Medicaid

• Households without children • Not disabled• Income under 100% FPL

Affordable Care Act

PACE• Program for All-Inclusive Care for the Elderly• Hamilton County only• Health and social services program for “frail elderly”

residents• Goal: allow residents to stay in their homes and

communities rather than nursing facilities• Services in the home, at PACE center, and hospital if

needed• Muti-disciplinary team of professionals with focus on

prevention

PACE Eligibility

• Age 55 and older• Living in Hamilton County• TennCare certifies to be nursing home level of care eligible• Assessed as being appropriate for PACE services• Focus on preserving dignity and avoiding NH