MidSouth Coalition for Comfort Care and Bioethics Consumer
Mid-South Coalition for Comfort Care and Bioethics Consumer Education Programs Legal and Financial Considerations for Long Term Care Donna S. Harkness, CELA Professor of Clinical Law University of Memphis Elder Law Clinic March 17, 2018
Disclaimer • This presentation is for information ONLY. It does not constitute as a substitute for legal advice, consultation, or representation by an attorney.
What is Tenn. Care? • Tenn. Care is Tennessee’s name for Medicaid, which is a program to provide health care to certain eligible groups of indigent individuals. The program is 65% funded by the federal government, and 35% funded by the states.
Medicaid and Long Term Care • Institutionalized – Disabled – Need daily inpatient nursing care (PAE approved) – 30+ days continuous – No improper transfers – Assets below $2000 – Income below $2250 • Medically-Needy – Disabled – Need daily inpatient nursing care (PAE approved) – 30+ days continuous – No improper transfers – Assets below $2000 – No income limit
TENNCARE = TN MEDICAID • In Tennessee, the Medicaid program for Long Term Care is called CHOICES. • Includes both institutional (CHOICES 1) and home-based care options (CHOICES 2)
Effective May 1, 2005 • Institutionalized Medicaid – Disabled – Need daily inpatient nursing care (PAE approved) – 30+ days continuous – No improper transfers – Assets below $2000 – Countable income below the “Medicaid Income Cap” (3 x SSI maximum amount for individual)
FINANCIAL DETERMINATION • The Tenn. Care financial eligibility process for nursing home care, also known as “long term care services and supports” consists of three components: • Income Eligibility • Resource Eligibility • Disqualification due to Transfer of Assets for Less Than Fair Market Value
Income Eligibility • “Medicaid Income Cap” for 2018 is $2, 250 (3 x $750 = $2, 250) If an applicant’s monthly gross countable income is above $2, 250, Medicaid eligibility is DENIED…. …. UNLESS the Medicaid applicant uses a Qualified Income Trust to temporarily “shelter” the excess monthly income.
Gross Countable Income • Gross countable income includes: – Only the income of the person who will be applying for long term care; – Amount of Social Security BEFORE deductions for Medicare Parts B and D are taken out; – Amount of pension BEFORE deductions for union dues, Medicare Supplement, other health insurance, life insurance, etc. – Does NOT include VA Aid and Attendance benefits.
Gross Income Example • Suppose Jones and his wife, Ingrid, have the following income direct deposited to their joint bank account: • Joe’s Social Security = $1200 • Joe’s Pension = $1502 • Ingrid’s Social Security = $941 • What is Joe’s countable income?
CONSIDER THIS • An insurance premium of $302 is being deducted from Joe’s pension check for his Medicare Supplement; Ingrid’s Medicare Supp premium is $290, and is also being deducted from Joe’s pension check. They both have $134 being deducted for their Medicare Part B and $35 for their Medicare Part D. • NOW what is Joe’s countable income?
Gross Income • • • Joe’s Social Security $1200. 00 Pension 1502. 00 Medicare Part B -Joe 134. 00 Medicare Part D - Joe 35. 00 Medicare Supp - Joe 302. 00 Medicare Supp – Ingrid 290. 00 • Gross Income $3, 463. 00
Is Joe Eligible for Tenn. Care CHOICES?
NO, UNLESS…. • $3, 463. 00 is greater than $2250. 00, so Joe’s gross countable income exceeds the Medicaid Income Cap. • However, if Joe sets up a Qualified Income Trust, he can be eligible after all! • Joe’s income exceeds the cap by $1213. 00, so at least that much must be deposited into the QIT every month. • Under Tennessee’s rules, another $20. 00 is allowed to go into the trust to cover bank fees, even if the bank does not charge a fee. • So, when setting up the QIT, which is basically a bank account, the minimum deposit should be at least$1233. 00. • Finally, ONLY Joe’s income can be deposited into the QIT – the trust cannot contain any assets and cannot contain income belonging to anyone else.
So, How Does Joe Get a QIT? First of all, the QIT is a Qualified Income TRUST. A trust is a LEGAL document. So, Joe should probably consult a LAWYER to assist in drafting and executing the Qualified Income Trust.
QIT Grantor • The Grantor is the person who needs the trust to get Tenn. Care Medicaid • The Grantor needs Tenn. Care to cover either nursing home or home-andcommunity based care. • The Grantor’s income is the ONLY money that goes into the QIT bank account. No one else’s money can be put in that account.
The QIT Trustee • The Trustee is the person who writes checks on the QIT account. • The Trustee must use the QIT money as described in the QIT trust document. • The Trustee must keep records for DHS to review.
QIT Trust Document • The Trust Document describes how the trust funds can be used. • DHS requires that a “schedule” be attached to indicate the amount and source of the money that goes into the trust. • A “Trustee” must be named to administer the Trust. • A “back up” Trustee should be named in the document as well.
QIT Trust Document (cont. ) • Only the grantor’s funds should be deposited into the QIT. • Money in the trust can ONLY be used for nursing home costs, health insurance costs, and other costs allowed by Tenn. Care. • Money left in the QIT bank account when the account is closed will go to the state to reimburse Tennessee taxpayers for the cost of the grantor’s care.
QIT Trust Document (cont. ) • A QIT is only for persons who need Tenn. Care to pay for long term care, either at home or in a nursing facility. • Establish the QIT only when all the other Medicaid eligibility factors are met. • Medicaid coverage can be retroactive to the first day of the month in which the QIT is funded. There is no retroactive coverage available before that date.
Allowable Disbursements • The Trustee must use QIT funds to pay one or more of the following: – Nursing home or home care costs (“Patient liability”) – Medicare and Medigap insurance premiums for the applicant – Spousal and dependent allowances – Other approved medical costs (“Item D” costs – eyeglasses, dentures, hearing aids, etc. ) – Up to $20 in monthly banking fees – Personal Needs Allowance ($50 per month in Tennessee)
Resource Determination • If single, assets limited to $2000 to be eligible. • Not all assets are considered, however, so classify into EXEMPT and COUNTABLE resources. • If married, spouse allowed a Community Spouse Resource Allowance
SPOUSAL IMPOVERISHMENT ISSUES • Now that Joe may have to enter the nursing home, that will mean that his income will go to pay for a portion of the nursing home bill, even if he qualifies for Tenn. Care. • His wife, Ingrid, will be left to manage the household on just her income, which in this case, to make things worse, is the lesser of the two.
SPOUSAL IMPOVERISHMENT ISSUES (cont. ) • To help address situations where community spouses were being left with insufficient means to self-support, Congress passed the Medicare Catastrophic Coverage Act of 1988, which contained Spousal Impoverishment provisions (2018 updated amounts): – Community Spouse Minimum Monthly Maintenance Allowance = $2030 – Community Spouse Maximum Monthly Maintenance Allowance = $3090 – Community Spouse Minimum Resource Standard = $24, 720 – Community Spouse Maximum Resource Standard = $123, 600
EXEMPT RESOURCES • Home – Applicant may exempt up to $572, 000 of equity in the primary residence if has “intent to return home” (or unlimited equity if spouse/minor/disabled/blind child or other dependent will continue to live the house). • Household goods and personal effects (furniture, appliances, computers, clothes, etc. ) May need to declare items of “unusual value (over $500) but if used regularly can assess value from a “yard sale” perspective ($5000 baby grand piano = $800). However, if expensive jewelry, paintings, coins, that are being held as “investment” property, will need to have appraised.
EXEMPT RESOURCES (cont. ) • Car – the unlimited equity value of one car may be excluded as exempt if used for transportation of the applicant or a member of the applicant’s household. Generally not questioned, BUT the regs actually call for the transport to be for employment, medical treatment, that the vehicle have been modified for a person with disabilities, or that a car is necessary for obtaining basic necessities. So if buy a Mercedes in order to turn a countable asset into exempt, but live in an assisted living where transportation is provided, DHS might question it, especially if someone outside the household is using the vehicle most of the time. • Term life insurance and burial insurance that is irrevocably assigned and designated for burial.
EXEMPT RESOURCES (cont. ) • Cash surrender value of whole life insurance is excluded if the face value of all policies owned does not exceed $1500. • Equity value of burial plots and burial contracts designated and set aside up to $1500 each for the applicant and spouse. • Designated burial trust or account up to $6000 • Income-generating real property essential to self-support up to $6000 in equity if property generates a rate of return equal to 6% of its equity value. • Property essential for self-employment – includes tools/equipment; stock or raw materials; real property; office equipment; inventory; machinery; etc.
EXEMPT RESOURCES (cont. ) • Traditional IRA/401 k Accounts – PRIOR to pay-out status, the amount accumulated in an IRA or 401 k account is a non-exempt asset. • By age 702, there is a mandatory pay-out requirement for traditional IRAs and 401 ks, and pay-out can begin as early as 592, if based on life expectancy. • Once the traditional IRA or 401 k is in pay-out status, the pay-out is considered INCOME to the applicant, BUT the remaining amount in the IRA/401 k is EXEMPT for resource purposes.
EXEMPT RESOURCES (cont. ) • ANNUITIES – are EXEMPT only if: – The annuity is irrevocable – The annuity is non-assignable – The annuity is actuarially sound – The annuity provides payments in approximately equal amounts, with no deferred or balloon payments – Periodic payments are provided to the annuitant, and – The state must be named as the remainder beneficiary
TRANSFER OF ASSETS PENALTY • If assets have been given away or transferred for less than fair market value at any point during the 60 month period immediately preceding the application, this transfer will result in the denial of the application and imposition of a penalty period during which the applicant will remain ineligible.
MEDICAID PLANNING • “Medicaid Planning” is counseling provided to a potential Tenn. Care applicant in advance of and in preparation for, the individual’s application for Tenn. Care benefits to help pay for long term supports and services, either in a nursing home or in a home and community based setting.
CONVERT TO NON-COUNTABLE STRATEGY • Personal effects & household goods – personal property found in or near the home and used on a regular basis; household appliances, furniture, electronic equipment, etc. • Home improvement – remodeling, repaving driveway, adding a wheelchair ramp, etc. • Purchase a new home • Purchase life estate from an adult child – amount paid must be fair market value based on life expectancy • Irrevocable prepaid funeral contract – services must be itemized, price must constitute fair market value • Purchase new car • Purchase annuity for community spouse
SPEND-DOWN STRATEGY • Pay off debts – mortgages, liens, credit card bills, car loan • Pay for needed services – medical costs, legal fees, repairs • Prepay real estate taxes/utilities, condo fees, etc.
SO HOW DOES THIS WORK? • Say Joe and Ingrid have the following: • Home worth $150, 000; owe $50, 000 (owned as TBE) • Joe’s 2005 Buick = $3000 • Ingrid’s 2014 Enclave = $25, 000 • Joe’s stocks = $15, 000 • Joint Checking Account = $5000 • Joint Savings Account = $80, 000
SNAPSHOT RESOURCES • Exempt resources: one car, the house • Countable resources: one car, stocks, bank accounts • Notice that it DOESN’T matter who owns, unlike the income • Total Countable Resources= $103, 000 • Divide by 2 = $51, 500
COMMUNITY SPOUSE CALCULATION • $51, 500 is within the parameters for Ingrid • What about Joe? He can only have $2000 to be immediately eligible for Tenn. Care to pay for his nursing care. • $51, 500 - $2000 = $49, 500 excess to be spent down.
SOLUTIONS • Can just pay for his own care at the nursing home at private pay rate (about $6000 a month) until the excess is gone. • OR • Use Spend Down options to become IMMEDIATELY eligible
Spend Down Options • Sell Joe’s car for $3000 • Liquidate Joe’s stocks = $15, 000 • Withdraw $31, 500 from joint savings account for a total of $49, 500 • Use those funds to pay off mortgage on home, which is EXEMPT resourcs
Post-Eligibility Calculations • There are two financial calculations that are done by Tenn. Care after eligibility is established: – Spousal Monthly Maintenance Needs Allowance – an allotment that may be granted to the community spouse out of the institutional spouse’s income – Patient Liability – amount of money paid by institutionalized spouse to nursing home/HCBS provider to pay for cost of care
Medicaid Budget • DHS will count the money in the QIT account after the application for Tenn. Care is approved/ • The money in the QIT account will be used to pay the grantor’s patient liability and/or allowable costs, and only those costs.
Ingrid’s Minimum Monthly Maintenance Needs Allowance • Ingrid only receives $941 net per month in Social Security after her Medicare Part B and Part D premiums are deducted. When she and Joe were living together, his $3463 gross income enabled them to live comfortably. But now, if all his income will basically be going to the nursing home, Ingrid will be impoverished. • Luckily, there is the MMMNA. Ingrid is entitled to receive a minimum of $2030 per month. Since she only gets $941, she is currently $1089 short. • Under the Medicaid statute and regulations, this shortfall can be taken from Joe’s income and allotted to Ingrid every month, rather than being paid to the nursing home.
Ingrid’s Excess Shelter Allowance • Suppose in addition that the mortgage/taxes/insurance on Joe & Ingrid’s home comes to $1200 per month, and their utility bill averages $275. That is less than the standard utility allowance for Tennessee, which is $308, so they may claim the standard instead. The regulations also allow for an additional allotment to cover the community spouse’s housing expenses that exceed the standard housing allowance of $609. » Mortgage, etc. » SUA $1200 + 308 $1508 - 609 $ 899 Excess Shelter Allowance
Ingrid’s Total Monthly Maintenance Allowance • MMMNA $2030 • ESA + 899 $2929* - 941 $1988 TOTAL *Notice that this figure is LESS than the MAXIMUM Monthly Maintenance Needs Allowance of $3090
Joe’s QIT Budget • Based on the figures in the foregoing slides, DHS provides a Medicaid Budget Sheet for Joe’s QIT: – Joe’s gross income – Medicare Part B* – Medicare Part D* – Medigap* – Spousal allowance – QIT bank fees – Patient Liability *Joe’s premium only $3463 134 35 302 1988 20 $984
QIT and the HCBS Enrollee (CHOICES 2) • Gross Income $3463 – – – PNA 2250 Med Part B 134 Med Part D 35 Medigap 302 Spousal Allow 1988 QIT bank fees 20 Patient Liability $0
Monthly Banking Activity • Each month, deposit at least the minimum deposit amount • More than minimum deposit can move through QIT, but never less • Pay out all but $20 per month • Joe’s QIT – $3463 Gross Income – 2250 Income Cap – $1215 Excess + 20 Banking Fee $1235 Minimum Deposit
How Does it End? • Trust Account is Closed – When the Grantor passes away – or – When the Grantor leaves the Medicaid program – Balance of funds is sent to the Third Party Liability Unit of the Tenn. Care Bureau • Contact as of Jan. 2017 – Third Party Liability Unit 310 Great Circle Road 4 th Floor West Nashville, TN 37243 Toll free 866 -389 -8444 FAX: (615) 413 -1941
How Does it End – Part 2 Estate Recovery • Remember how the home was an exempt asset when determining initial eligibility for Tenn. Care CHOICES? That is true and remains true while the recipient is living, and even after the recipient’s death if there is a surviving spouse or other eligible dependents still living in the home. But otherwise, once the recipient dies, the state is entitled, and in fact under federal law, MUST engage in Estate Recovery.
Estate Recovery (cont. ) • Estate recovery is simply the process whereby the state is reimbursed from the Tenn. Care recipient’s estate for the cost of the medical care received by the recipient. • Generally, estate recovery is not allowed for benefits that were correctly paid. Congress, however, made an exception for long term care benefits correctly paid to recipients who were over age 55 at the time the payments were made.
Estate Recovery (cont. ) • Properly speaking, like any other creditor, the state should file a claim against the estate of the recipient, seeking reimbursement for the Tenn. Care benefits paid. In addition, under Tennessee law, creditors must file claims within 1 year of the date of decedent’s death, or else the claim will be barred. However, certain claims, e. g. , for taxes, are NOT barred by failure to file a claim, and the Tennessee Supreme Court, in a case called Estate of Tanner, ruled that Tenn. Care Choices estate recovery claims are also not barred by the 1 year statute of limitations.
Estate Recovery • As a practical matter, Tenn. Care now does not need to file claims, because the statute also places an affirmative duty on the executor or personal representative of the estate to seek a RELEASE from Tenn. Care before the estate can be closed, whether or not Tenn. Care has received a notice of the debt, and whether or not Tenn. Care has filed a claim.
Estate Recovery (cont. ) • Can estate recovery be avoided by placing all your assets in a revocable living trust? NO – In general, revocable living trusts do NOT prevent creditors from recovering claims against the estate, and Tenn. Care claims are no exception.
Estate Recovery (cont. ) • Can Tenn. Care use estate recovery to attach survivorship property owned by the recipient? Not at present, because Tennessee has not adopted “expanded estate recovery”. Normally this requires state legislation, but the Tennessee Supreme Court has indicated in Estate of Trigg (2011) that the day could come when the Court itself might act to expand estate recovery beyond normal probate assets.
Be A Believer in Healthy Aging • Ten Tips for Healthy Aging – – – – – Live an active life Eat healthy Maintain your brain Cultivate relationships Get enough sleep Reduce stress Practice prevention Take charge of your health Make community connections Complete your advanced directives – in other words Plan Ahead
PLAN AHEAD! • Just as you would plan for disability, incapacity, insurance needs, retirement, housing, and the disposal of your estate, don’t put off planning for how you will pay for long term care if needed, and how to make the best use of your income and assets should your need to apply for public assistance.
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