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Medicaid
Old 11-25-2013, 04:20 PM   #1
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Medicaid

I'd like to reopen a discussion on Medicaid, as there have been some different and conflicting points made, that really need some clarification. Different statements are made on some senior sites, and even senior legal websites.

Naturally everyone here would like to be 100% sure that retirement will be safe, and in many cases that nest egg assets would be passed on to the family. Life doesn't always work that way and while we try to protect ourselves, it's good to consider alternatives. At the present time, our national safety programs include Medicaid. Knowing how it works can help in retirement planning.

Let's start with an assumption that we may need medicaid, to pay for nursing home or medical expenses in the event long term care is needed... and further that we want to protect a partner from becoming destitute, in order to pay for nursing home expenses.

Under current rules, there are certain items that can be kept, while other assets must be given over to the state, to pay for the nursing home care.

That is the area that needs (for me) clarification, as I have read different interpretations that get confusing.
State rules differ.
First of all, the assets that can be taken by the state are subject to a 5 year lookback rule, so that if you see a nursing home or heavy doctor's bills coming, you can't unload that million dollar bank account.
Other items to be considered for protection are:
-An automobile
-The home... healthy spouse to keep
-Personal belongings required to maintain the home, other income producing property such as rental property or business income producing property with certain limits.
- Personal life Insurance cash value(not term)
-Cash- depends on state law
-Funeral expenses

Now this is where the questions come in...
-Cash.. 2K for resident - ?? for partner??
-Maximum value of the retained home? $500K ...more?Dependent on state?
-Auto value $4.5K.more?
-Income producing property... 6% minimum ROI ?
-Lookback for house sale? ie. 5 years? or can it be bought in less time?
-Time period between selling one home and buying another?
-After death, can remaining partner keep the house?
-After death, can the state put a lien on the property?
-Circumstances where the state may place a lein on the house before death?

I believe, (not sure though)... that the partner living outside the nursing home can keep personal SS, pensions and or annuities, and one half of co-owned cash assets, but there is stall a question about retaining the full value of the home.

For long term planning, keeping the home (as opposed to downsizing) or renting, could have a major impact on decisions, and the time to make the plans may have to be 5 years before they are needed.
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Old 11-25-2013, 04:52 PM   #2
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Quote:
Originally Posted by imoldernu View Post
I'd like to reopen a discussion on Medicaid, as there have been some different and conflicting points made, that really need some clarification. Different statements are made on some senior sites, and even senior legal websites.

Naturally everyone here would like to be 100% sure that retirement will be safe, and in many cases that nest egg assets would be passed on to the family. Life doesn't always work that way and while we try to protect ourselves, it's good to consider alternatives. At the present time, our national safety programs include Medicaid. Knowing how it works can help in retirement planning.

Let's start with an assumption that we may need medicaid, to pay for nursing home or medical expenses in the event long term care is needed... and further that we want to protect a partner from becoming destitute, in order to pay for nursing home expenses.

Under current rules, there are certain items that can be kept, while other assets must be given over to the state, to pay for the nursing home care.

That is the area that needs (for me) clarification, as I have read different interpretations that get confusing.
State rules differ.
First of all, the assets that can be taken by the state are subject to a 5 year lookback rule, so that if you see a nursing home or heavy doctor's bills coming, you can't unload that million dollar bank account.
Other items to be considered for protection are:
-An automobile
-The home... healthy spouse to keep
-Personal belongings required to maintain the home, other income producing property such as rental property or business income producing property with certain limits.
- Personal life Insurance cash value(not term)
-Cash- depends on state law
-Funeral expenses

Now this is where the questions come in...
-Cash.. 2K for resident - ?? for partner??
-Maximum value of the retained home? $500K ...more?Dependent on state?
-Auto value $4.5K.more?
-Income producing property... 6% minimum ROI ?
-Lookback for house sale? ie. 5 years? or can it be bought in less time?
-Time period between selling one home and buying another?
-After death, can remaining partner keep the house?
-After death, can the state put a lien on the property?
-Circumstances where the state may place a lein on the house before death?

I believe, (not sure though)... that the partner living outside the nursing home can keep personal SS, pensions and or annuities, and one half of co-owned cash assets, but there is stall a question about retaining the full value of the home.

For long term planning, keeping the home (as opposed to downsizing) or renting, could have a major impact on decisions, and the time to make the plans may have to be 5 years before they are needed.
I believe it should be pre-paid funeral expenses. Since otherwise there is no way of segregating the funds.
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Old 11-25-2013, 05:11 PM   #3
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Originally Posted by imoldernu View Post
State rules differ.
First of all, the assets that can be taken by the state are subject to a 5 year lookback rule, so that if you see a nursing home or heavy doctor's bills coming, you can't unload that million dollar bank account.
One fascinating exception to this turned up in the case of a friend who was looking after his aged mother. It turned out that although normal nursing home care would have required the 5 year lookback, if they used half-time home care (12 hours/day), then the lookback was only 2.5 years. It wasn't easy at all, but they were able to make this work to their advantage. I don't know if other states have similar provisions, but it's at least possible in some.
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Old 11-25-2013, 05:19 PM   #4
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Originally Posted by imoldernu View Post

That is the area that needs (for me) clarification, as I have read different interpretations that get confusing.
State rules differ.
First of all, the assets that can be taken by the state are subject to a 5 year lookback rule, so that if you see a nursing home or heavy doctor's bills coming, you can't unload that million dollar bank account.
Other items to be considered for protection are:
-An automobile
-The home... healthy spouse to keep
-Personal belongings required to maintain the home, other income producing property such as rental property or business income producing property with certain limits.
- Personal life Insurance cash value(not term)
-Cash- depends on state law
-Funeral expenses

Now this is where the questions come in...
-Cash.. 2K for resident - ?? for partner??
-Maximum value of the retained home? $500K ...more?Dependent on state?
-Auto value $4.5K.more?
-Income producing property... 6% minimum ROI ?
-Lookback for house sale? ie. 5 years? or can it be bought in less time?
-Time period between selling one home and buying another?
-After death, can remaining partner keep the house?
-After death, can the state put a lien on the property?
-Circumstances where the state may place a lein on the house before death?

I believe, (not sure though)... that the partner living outside the nursing home can keep personal SS, pensions and or annuities, and one half of co-owned cash assets, but there is stall a question about retaining the full value of the home.

For long term planning, keeping the home (as opposed to downsizing) or renting, could have a major impact on decisions, and the time to make the plans may have to be 5 years before they are needed.
On a lot of these questions, if you do research online there is quite a lot of information. That said, I think it is difficult to rely on it. It can be difficult for the average person to navigate the information. For example, some websites are just wrong. Some are out of date and were right at one time but the law has changed. In some cases, they may be right for a particular state or a particular situation but not for others.

Even when the information is correct, bear in mind that this is an area where the law can change and it can really have a great impact.

Given the complexities involved, I really think that for most people the way to find out the real answers that apply to their situation is to a consult an elder law attorney in their state. While internet research can give people a list of things to ask about, I would be reluctant myself to rely on it. I don't really think it is a substitute for getting individual legal advice.
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Old 11-26-2013, 07:18 AM   #5
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Staff at a good nursing home are often quite expert in this area. If you can find someone to consult.
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Old 11-26-2013, 08:13 AM   #6
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Legal advice... definitely.
My point in bringing the issue up, again... was more to point out that decisons about buying, downsizing or renting, are important to crafting a full retirement plan... and that it is not something to be left for a "later date". The "lookback" puts a time frame on the plan.

If the value of the home is important to long term planning, understanding the basic rules will be important. In our case, the home is a major part of our fallback position. Together with social security, the dollar value of our home would provide for an extra 5 to 7 years of living in a continued care facility.

I look at the home as the safety valve... If DW or I were to require nursing home care for a number of years, @ $80K+/year... that amount would come from our liquid assets (savings)... before medicaid kicked in to pay. As the home and Social Security are exempt, it would provide for the other spouse.

Knowing what assets or income can be protected is not important, unless something happens. Another way to look at this, could be to think of it as Long Term Care Insurance.

Without advocating for the legality... here is a site that offers some of the basic considerations... a starting point.
http://www.nolo.com/legal-encycloped...ed-living.html
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Old 11-26-2013, 08:22 AM   #7
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While I agree that it is important that one consult with specialist legal counsel and not DIY since it is a complex area that changes frequently, I think it is also important to become educated on the rules so you can optimize your time with counsel.
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Old 11-26-2013, 08:41 AM   #8
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While I agree that it is important that one consult with specialist legal counsel and not DIY since it is a complex area that changes frequently, I think it is also important to become educated on the rules so you can optimize your time with counsel.
+1
Oh yes!... While I posted this note on another thread, it fits in here, too.
A $200 visit to a geriatric lawyer... a "just in time" decision... avoided a simple mistake that would have cost a family member many hundreds of thousands of dollars. Involved spousal intent to remain in home... a close call that could have been avoided by understanding the basics.
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Old 11-26-2013, 08:46 AM   #9
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Legal advice... definitely.
My point in bringing the issue up, again... was more to point out that decisons about buying, downsizing or renting, are important to crafting a full retirement plan... and that it is not something to be left for a "later date". The "lookback" puts a time frame on the plan.
By the same token, it is important to think about these things pre ER if you want to leave an estate. Long term care insurance and/or a larger portfolio than required to simply last 30 years are key factors.
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You can shelter 1/2 of your assests...
Old 11-26-2013, 11:42 AM   #10
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You can shelter 1/2 of your assests...

My 90 year old father was heading to a nursing home because of many, many complications from surgery. Although he thankfully passed away before he had to enter one, it would have killed him to enter a nursing home, I talked to elder care attorneys. The jist of it was you could legally create a shelter to shield half the assets. The following is from a legal website:

THE 'REVERSE RULE OF HALVES' (ST-9-24-07)

If you've been reading these articles regularly, you know that the Deficit Reduction Act of 2005, which changed the the Medicaid law, made it much more difficult to do planning. Writing about the DRA in October, 2006, I noted that we might be able to use a form of our prior planning tool, the "rule of halves." The new plan would be called the "reverse rule of halves." Several recent fair hearing decisions by the state social services commissioner have now confirmed that the "reverse rule of halves" is a viable planning tool, which is really good news for middle-class individuals faced with a nursing home stay.

Under the old "rule of halves" an individual entering a nursing home could transfer half of their assets out of their name, resulting in a period of ineligibility for Medicaid whose length was determined by the amount of the assets transferred. He would then use the half of the assets remaining in his name to pay the nursing home during that period of ineligibility. This relatively simple idea was reassuring; it gave an individual entering a nursing home peace of mind of knowing that, although he was going to spend a considerable amount of money, he would be able to protect half of his assets - even at the last minute.

The "reverse rule of halves" is more complicated. Under this plan an individual entering a nursing home must transfer all of their assets (over an above the Medicaid resource allowance, which in 2007 is $4,200.00) to his heirs, and then apply for Medicaid - knowing that the application will be denied because they have transferred assets. He will be ineligible for Medicaid for a period of time equal to the total assets transferred divided by the average monthly cost of a nursing home. On Long Island in 2007 that's $10,123 per month. That heirs to whom he transferred the assets must then execute a promissory note to him, agreeing to pay back, in monthly installments an amount equal to half of the total assets transferred, plus interest at a "reasonable" rate (which the Department of Social Services says is 5 percent.) The nursing home will be paid the institutionalized person's monthly income plus the monthly payments on the promissory note, until the period of ineligibility ends. If, for example, a person with $200,000 in assets requires nursing home care, under the "reverse rule of halves," he will have to spend half of his assets on nursing home care before becoming eligible for Medicaid - just as under the old "rule of halves." But he would transfer the entire $200,000 to his heir, who would sign a promissory note to him pledging to repay $100,000, plus interest at 5 percent. He would be ineligible for Medicaid for approximately 10 months: $100,000 (or half of the assets transferred) divided by the average $10,123 per month for nursing home care. If he had $1,000 per month in income, that $1,000 (less a small personal allowance) would be paid to the nursing home, and the balance of the nursing homes charges would be paid by the heir's monthly payment under the promissory note Those payments would continue until the period of ineligibility expires. Then Medicaid will be approved.

Technically, a second Medicaid application should be filed to obtain approval. However, in both Nassau and Suffolk counties the local social services departments have indicated that they will proceed based on the first application and the second application will not be necessary. More good news.

The promissory note must meet certain criteria. The repayment must be actuarially sound, meaning the monthly payments must be sufficient that the loan can be repaid during the institutionalized person's life expectancy. Also, the payments must be made in equal amounts with no deferral and no balloon payment. The promissory note also must prohibit the cancellation of the balance on the death of the lender. Lastly, the note must be non-negotiable, otherwise it might be determined that the note itself has a value, which could make the applicant ineligible.

Since the DRA was passed, there has been a cloud of gloom and uncertainty hanging over elder law planning. With these recent decisions, we as attorneys are now able to speak to our client with a little more certainty of the effectiveness of planning. Hopefully the trend will continue.

Reprinted with permission of the Suffolk Times 2007
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Old 11-26-2013, 03:05 PM   #11
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Yeah... speaks to why it takes a lawyer to sort through this.
In any case, it looks to me as if this part of the law has more to do with the total estate assets. This later analysis (2011) appears to supercede the above mentioned law, and points out that the laws vary by state.
http://www.mobar.org/uploadedFiles/H...%20Handout.pdf
It appears to me that the "residence" is a separate issue, but I haven't sorted through that yet... (a bit to complex for this aging gray matter ) In any case, whether parents or spouse... it could be important.
My original post had more to do with a spousal safety net, rather than preserving the estate.
Of course, the best thing to do, is to have enough money to pay, in the first place.
.................................................. .....................
Back to the "lookback rule"... Here's one law site that addresses this. http://www.finkrosner.com/articles/m...sic-rules.html
Quote:
A person can apply for Medicaid to pay for nursing home care or care in the home when the countable, available resources have been reduced to $2,000 plus an allowance for the community spouse which is called the CSRA or Community Spouse Resource Allowance. The reader needs to understand the fundamental concept that a transfer of any interest in property for less than fair market consideration, if made within the five years prior to applying for Medicaid, will trigger a disqualification period known as a transfer penalty unless the property was the primary residence and it was transferred to one of a limited category of transferees. The result of this disqualification is that Medicaid will not pay for the care regardless of poverty or medical necessity.
The next part of that article covers spousal exemption as well as prorated penalties for tranactions made within the 5 year lookback.
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Old 11-26-2013, 03:25 PM   #12
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There are now close to 30 states that have filial laws, at least one state has used this to sue the child of an indigent parent. Plan, and stay up to date on elder issues.

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Old 11-26-2013, 04:35 PM   #13
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My 90 year old father was heading to a nursing home because of many, many complications from surgery. Although he thankfully passed away before he had to enter one, it would have killed him to enter a nursing home, I talked to elder care attorneys. The jist of it was you could legally create a shelter to shield half the assets. The following is from a legal website:

THE 'REVERSE RULE OF HALVES' (ST-9-24-07)
We are going through this wringer right now with FIL, with guidance from the elder law attorney. FIL is in MD, some minor differences from what you describe but very similar in operation. That's why it is so important to talk with an attorney familiar with that particular state's laws.

Although one may initially gasp at the attorney's fees, in the long run they're well worth it for what they know. The power of attorney alone was worth what we paid for the will, POA, and health care directive. Even something as seemingly simple as a change of address requires either a POA, the parent's signature (which they may not be physically able to do) or multiple doctor's certifications and a court ruling. Obviously the POA smooths things out a lot.
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Old 11-26-2013, 04:42 PM   #14
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Some rules can vary quite a bit by state. As we were looking into this issue in PA for my MIL, we discovered that, while there were hefty restrictions on assets that the 'community based' spouse can keep, they didn't actually look at income (the income of the 'community-based' spouse, that is).

One elder law attorney told us that annuitization *if done right* can shelter assets as well. We didn't pursue the details, so I can't provide them here. I just want to stress that state laws very quite a bit.
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