Medicaid -Introduction to the Program

Medicaid is a joint federal/ state program providing medical assistance to people meeting certain income and resource limits. It is a health care program covering Prescription drugs, commun-ity based day care, respondent services, in - home care, hospital care & nursing-home care. Medicaid is primary source of funding for long-term custodial care in New York.

Eligibility-Basic Medicaid

Broadly speaking, to be eligible for Medicaid in the community an individual in 1998 may not have more than $3,500 in resources and $604 in monthly income. If the individual has excess monthly income, he or she is required to contribute that excess to cost of care. Certain burial funds/ prepaid funeral arrangements may be allowed in addition to resource level.

Eligibility for medicaid in nursing home

Same resources limits apply. However, all income for an unmarried individual must be paid onto program to help cover the cost of care, except for the cost of health insurance and a $50 personal needs allowance.

$ From - Well Spouse in a nursing home, law provides resource & income protections for spouse at home ("community spouse") is permitted to retain $74,820 or "spousal share," 1/2 of married couples assets up to maximum of $80,760.Not included in calculation of resources is value of home. Additionally, community spouse is allowed a monthly income of $2,019. If community spouse's monthly income is less then $2,019, he / she may draw upon income of nursing- home spouse. In certain circum-stances, community spouse's resource & income levels may be increased by a fair- hearing decision or Court order.

Transfer of Assets

Married individual who require Medicaid may transfer virtually all his or her assets to well spouse, but $ tfr. may be subject to recovery by Medicaid, later. If assets are transferred to persons other than spouse& certain specified individuals, a penalty period is incurred. During that penalty period individual is not eligible for Medicaid nursing home coverage. NOTE: No penalty period for transfer to spouse/ children of assets when applying for Medicaid home care.

Determining Penalty Period

With proper plans maximum period during which an individual may be counted ineligible for Medicaid nursing- home coverage is 36 months for outright transfer & sixty months for transfers to trusts. Penalty periods may be much shorter or, in some cases, avoided entirely!

Record Submission before Acceptance Under Program

When a Medicaid application for nursing-home coverage is made, Medicaid reviews all financial records of applicant & spouse for thirty-six months before month of application to determine whether there were any uncompensated transfers that would incur imposition of penalty period. All uncompensated transfers are added together and total is divided by a number representing the average cost of a nursing home in area where patient is to be institutionalized. Current figure in NYC is $6,521. The result of calculation is the number of months for which the applicant is ineligible for Medicaid coverage in the nursing home. For example, if Mr.Smith. transfers $130,410, to a trust or a nonexempt individual, he will incur a penalty period of 20 months during which time Medicaid will not cover his costs in a nursing home =$130,410/$6,521=20 months.

Transferring a Home

Although individuals home- a house or apartment- is an "exempt" resource for purposes of initial Medicaid eligibility, ultimat-ely it may be subject to a Medicaid demand for reimbursement.

Transfer of home to spouse & certain specified individuals will not trigger a penalty period. However, transfers to any other persons will trigger a penalty period.

Medicaid Trust

Medicaid income only trust is an excellent estate planing tool. This irrevocable trust is funded with assets of a person called a Grantor who retains a life interest funded by invested principal. Grantor has no right to receive any principal distributions. However, trustee whom Grantor appoints is allowed to make gifts of principal to others. In addition to liquid assets such as stocks, bonds & savings accounts, house, cooperative or condominium apartment may also be put into trust with provision that Grantor retain a "life estate," that is, Grantor may continue to live in residence for the remainder of his life.

Medicaid Application for Nursing - Home Coverage

In addition to requiring a thirty-six month retroactive review of applicant's financial history (sixty months when transfers are made to a trust), Medicaid requires extensive documentation to establish eligibility, incl. verification of identity, age, residency, citizenship, marital status, income& resources. Applicant must disclose all relevant financial records including bank statements, savings accounts, stocks and bonds, real estate, etc.. Also required is documentation and explanation for all transfers & transactions of $500 or more. Compliance with this requirement is more complex if substantial transfers were made by applicant. Role of elder-law professional is to participate in process, clarify consequences of these transfers & minimize any possible Medicaid penalty &/or delays.

Medicaid Home Care Application- Form 11q

When the applicant is applying for Medicaid home care assistance, application must be accompanied by finan. history for 1 month for individual applicant .In addition, applic. must include a physician's order designated as form M-Ilq in New York City. Some physicians do not fully understand that an M-IIq which inadequately explains patient's medical needs may account for Medicaid's decision to deny or provide service that is insufficient. The participation of elder-care professional or geriatric social worker who will review the M- 11 q with the physicians may be crucial to applic. success.

Supplemental Needs Trust for Disabled

Disabled persons world has changed. With recent federal & state legislation, "Supplemental Needs Trusts" have become widely used planning tools for persons with disabilities. Such trusts, generally referred to as "SNTs",are intended to enhance lives of disabled persons without jeopardizing eligibility for Medicaid and, &Supplemental Security Income.

Supplemental Needs Trusts

They can also address specific ongoing needs of beneficiary's. E.g.Trustee could be empowered to make payments directly to provider of services that government does not provide like travel, computers, tv, specialty equipped vehicle. If paid directy to benefiary would effect government benefits.

E.g. A disabled person can transfer his assets to a Supple-mental Needs Trust for another disabled person without disqualifying him for Medicaid coverage in nursing home.

E.g. A person who ordinarily would qualify for Medicaid inherits or wins a malpractice award can still qualify for Medicaid, by setting up a "Self Settled" Supplemental Needs Trust" established under recent Federal legislation. The Law says that the State has a right to recover from this trust the total medical assistance provided for her during her lifetime. Note: There are no limits on the amount of income or principal that may be expended on her during her lifetime.

Q & A on Client Inquiries

1. Medicaid Planning is Crime?
   No, a Federal Judge has forbidden enforcement of this law. Atty. General Janet Reno, informed Congress, she would not enforce the law as is unconstitutional under First Amendment.
2. My parent is " spending down" lifetime savings in nursing home, Is there any way to conserve assets?
   Yes, an individual who has assets in excess of Medicaid limits generally may protect 50% or more of those assets & still qualify for Medicaid nursing home coverage even if facing immediate placement in a home or is already in facility.
3. Transfer of home to a friend
   Under most circumstances it is not appropriate to transfer outright ownership of a house or apartment to another person. Such a transfer may incur substantial Medicaid penalty and costly tax results. A desirable alternative, especially if your friend is concerned about your creditors or future creditors, is to transfer home and any remaining assets)into a sheltering trust that, in most instances, will eliminate capital gains tax & liability from creditors, reduce medicaid penalty & avoid probate.
4. My child has financial difficulties and I am afraid any asset transfer to him will be taken by creditors.
   You can transfer your saving, stocks and bonds to a Medicaid Trust. Assets will be safe from Medicaid while you enjoy the income for you lifetime. In addition, you residence-a house, coop, or condo may also be put into trust, with provision that you retain right to live in residence for remain- der of your lifetime.
5. Parent never signed Durable Power of Attorney.
   No longer has sufficient capacity. Does that mean she will have to exhaust all of her assets before applying for Medicaid. You have no authority over parents assets. You may petition Court to become Guardian under Article 81. You must show necessity for specific powers you require.Once criteria met statute permits transfers to individuals & asset-protection trusts even when guardian is trust beneficiary.