How a Declining Stock Market Can Cause a Long Term Care Nightmare
March 30, 2009
As the current economic crisis deepens, it is becoming increasingly clear that we are heading into uncharted waters, in so many respects. Specifically, however, I am talking about the long term care arena, and a recent phone call I received highlights this so clearly.
John called concerning his father. Dad owns a home in which he lives. Home health aides come into the home to assist Dad but as his health deteriorates and he needs increased care John believes that Dad will very soon need to move to a nursing facility. Now, here is where it gets interesting.
Dad took a reverse mortgage for $300,000 and he took it in a lump sum. Johnâs plan was to invest the money in the market, get a decent rate of return that would help meet Dadâs expenses. Well, we know what has happened in the past year. The stock market has headed south. Dadâs investment headed south too. He lost roughly half of his investment. Thatâs bad enough. But here is the problem. John transferred the money to an account in his name. Not because he intended to keep it, but because it was just easier to manage the funds that way.
When he did that, however, he caused a Medicaid transfer penalty. In New Jersey that penalty is approximately 3 and  years. So what happens when Dad sells his home and uses the sale proceeds (less the amount he pays back to the bank) for his nursing home care? He will be ineligible for Medicaid unless John transfers back the money. Except that he doesnât have all of it.
I know. Youâre thinking, âWill Medicaid really deny Dadâs application if John can show that the loss in value occurred in the market, and that he didnât take the money?â I donât know. Maybe, maybe not. You see, we are living in unusual times. Many states are struggling with budget deficits. Medicaid is one of the biggest, if not the biggest, program for most states. If they donât have the money to fund these programs I can certainly see them applying the Medicaid rules as written and impose a penalty. If Dad is ineligible for 3 and  years he may never live to receive Medicaid, something the government no doubt may consider when trying to balance its budget.
And just another reason why you canât afford to be unprepared when it comes to long term care.
Assisted Living Care – I’m Out of Money So Now What?
March 23, 2009
Dad has been living in an assisted living facility for 3 years at a cost of $4500 per month. He likes it there, is safe and well cared for. There is one small problem. He is running out of money and the family is becoming desperate.
Fortunately, some states have Medicaid programs that cover assisted living care but the rules can vary significantly from nursing home Medicaid. In New Jersey, for example, if income exceeds the Medicaid cap ($2022 per month in 2009) the assisted living program wonât, under any circumstances, be an option. For those needing nursing home care, on the other hand, we have two Medicaid programs, one for those who do not exceed the income cap and a second for those who do.
The application process for Medicaid can take several months or longer. If, for example, Dad becomes eligible and applies for Medicaid beginning in February, it might take until April, or longer in some cases, for him to receive approval. In the case of nursing home Medicaid whenever Dad is approved payments will be made on his behalf retroactive to when he first applied (assuming of course that he was eligible in that month). Not so for assisted living Medicaid. Approval is not retroactive.
As an elder law attorney, our focus with clients is on the financial requirements of Medicaid. I always, however, remind clients that we canât forget about the medical requirement. The applicant must meet the test of medical necessity for nursing home level care as determined by a Medicaid nurse who visits the applicant. In New Jersey, this is true even in the case of assisted living. It bears repeating. The assisted living Medicaid applicant must be certified as needing nursing home level care. Fail that test and the asset and income levels are irrelevant.
So, if Dad canât get Medicaid, what then? If he canât pay the bill he generally wonât be able to stay in the assisted living facility unless the family pays for his care. Not a great result but one the family could have avoided. Before he entered the facility a plan should have been put in place to cover the possibility that he could run out of money. In some cases that may involve moving assets to a trust, determining what public benefits he can or cannot receive and when, (such as VA Aid and Attendance benefits) or negotiating a contractual modification with the facility before initial entry. It may mean choosing a different, less expensive, facility or living arrangement. It all depends on oneâs particular situation.
The mistake that Dad and his family made is in not looking far enough down the road and failing to sit down with someone knowledgeable about the various issues and pitfalls, such as an elder law attorney. The lesson to be learned is that you canât wait until the money runs out to then answer the question "What do I do now?"
The Unpredictability of Alzheimers’ Disease
March 16, 2009
So often, when working with families who are struggling to care for a loved one with dementia, the most frustrating part is the uncertainty of the condition from day to day. The recent case in Minnesota of Verne Gagne highlights that very clearly.
Verne Gagne was a prominent professional wrestler in his day with the American Wrestling Association, in the 1960âs and 70âs. He eventually lost his big stars, such as Hulk Hogan and Jesse Ventura, to the World Wrestling Federation. He is now 82, and suffers from Alzheimerâs disease, residing in a nursing home. That is where he had an altercation with a 97 year old resident and put a wrestling move on the resident, slamming his body to the ground. The other man broke his hip and died several weeks later. The police are investigating the incident but there is a consensus of opinion that Mr. Gagne should not be charged with a crime because he didnât know what he was doing. A tragic story but with similarities that are all too familiar to families who have loved ones with Alzheimerâs. It is the uncertain, sometimes violent and erratic, behavior that can be most frustrating and frightening.
Although no one can be sure what caused Verne Gagne to act in the way he did, we know that Alzheimerâs patients very often lose their short term memory but are able to conjure memories of events and people 40 or 50 years ago or more. Gagneâs skill as a wrestler made him more dangerous than the average resident. Firstly, he was more physically fit than the average resident. Secondly, while he was losing his short term memory, he was prone to recalling events from his past, such as his days wrestling. Perhaps it is that memory, programmed into his brain, that caused him to perform a wrestling move on his co-resident.
It is the unpredictability that often turns a familyâs world upside down,. Dad can be living comfortably in a facility one day and the next he can become extremely agitated and aggressive, causing the facility to ask the family to move him because they canât accommodate his needs, or because of concern for the safety of other residents.
It is just another reason why families cannot wait and react to a loved oneâs long term care needs. When possible, preventative measures need to be taken. So often, we see families plan as if Mom or Dadâs current condition, while tragic and upsetting, will remain static, unchanging. That is usually far from the case and misjudging the situation can be worse than anyone imagined.
Who knows what could have been done to prevent Verne Gagne from acting out, although, there was at least one previous altercation between the two residents. The lesson to be learned on a broader level, however, is to recognize the unpredictability of Alzheimerâs, and dementia in general. Take action before, not after, it becomes necessary. I am sure everyone involved in Verne Gagneâs case is reexamining what they could have done differently.
Married … Well Not Really – A Long Term Care Quagmire
March 9, 2009
Jane calls us to relate the same problem that many Americans today are coping with, trying to care for aging parents. She calls because Dadâs health is rapidly deteriorating and she fears he will need nursing home care. I ask about Momâs health. Jane replies that she is healthy. And here is the twist, where the story becomes more complicated.
Jane tells me that Mom and Dad have been separated for years, never divorced, just living separate lives under separate roofs, with separate assets. âDad was never easy to live withâ, she tells me, âbut Mom wasnât the type to file for divorce. It wasnât acceptable.â âSoâ, she asks me, âwe can spend down Dadâs assets and then qualify him for Medicaid, right?â
âWellâ, I tell her, âit is a bit more complicated than thatâ. Under Medicaid rules, because they are still married, all their assets are combined for purposes of calculating how much to spend down. Medicaid rules do provide that if the applicant is separated from a spouse for at least one month then he will be treated as a single person and only his assets will count towards the asset spend down. However, there is no definition of what constitutes a separation and you can be sure that the State will scrutinize it very closely. Mom may still have to spend some of her assets for Dadâs care even though they have been living single lives for years. âIs there anything we can do,â Jane asks, as I hear the desperation in her voice.
Divorce is still an option, although it could be considerably more difficult if Dad doesnât have the mental capacity to understand the legal process and consent to a divorce settlement. There is also the matter of the State, again, scrutinizing the divorce, especially if Mom has accumulated and wants to keep more than 50% of the combined assets. You see, the State assumes the divorce was obtained for the purpose of qualifying for Medicaid. If Mom keeps more than half of the assets Dad would probably be turned down for benefits. There may also be other strategies that we have discussed for married couples that could be employed to preserve assets for Mom but, although they are married under the law, they are not really âtogetherâ. So preserving Dadâs assets for Mom and vice versa is not the goal.
As Jane puts it, âMom and Dad have lived separate lives for many years. Mom has struggled to accumulate her own assets and become self sufficient. How can I tell her that she may lose some of her hard earned money?â. I didnât have an answer for Jane. I do, however, have one for others who may one day be in that situation. If any of Janeâs story sounds familiar to you, donât wait till long term care is staring you in the face. Plan ahead and solve the problem before it reaches crisis proportions or youâll be faced with the dilemma that Jane and her family face.
Elder Law Today Podcast Show #15 – You Have Spent Down all Your Money and Still Can Not Get Medicaid How Could This Happen?
March 5, 2009
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You’ve spent down the remaining assets on Momâs care and have no more money left. You apply for Medicaid but are told, “Sorry, Mom is not eligible for another 8 months.” How could this happen? What can you do to avoid this horrific outcome?
In Show 15 of his monthly Elder Law Today Podcast, practicing elder law attorney, Yale Hauptman, explains why spending down assets may not be as simple as you think. Medicaid rules are complex and it is easy to get tripped up. Well meaning citizens can unwittingly cause themselves to lose these essential benefits by creating transfers that are subject to a Medicaid transfer penalty.
Learn the danger of paying home health aides cash and why that could result in long penalty periods. Discover why gifts made 4+ years before Medicaid is applied for can come back to haunt you. More importantly, learn how you can avoid these Medicaid traps and how to correct the mistakes youâve already made. If you wait till you apply it’s too late.
This episode is for anyone who cannot afford the cost of long term care indefinitely and may need to apply for government benefits at some time in the future.
Important information that you’ll want to listen to carefully.
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The Home – To Transfer or Not to Transfer – Part 2
March 2, 2009
As we discussed last week, Joe wants to transfer his home to Jim, who lives there with his wife and children. But letâs change the facts a bit. Joe is not healthy but has the early stages of dementia and needs some in home assistance. It is possible that within 5 years he will need nursing home care, so we are concerned about the 5 year Medicaid lookback. What options do Joe and Jim have?
One possibility is for Jim to buy the home at a price that he can afford but that may be below fair market value. If, for example, he purchases the home for $200,000 and it is worth $450,000, then $250,000 is considered a gift subject to the Medicaid transfer penalty. Jim can spend down the $200,000 for his care but if he runs out of money then Jim may need to cover the cost of care until the 5 year time frame expires.
Now that Joe lives in Jimâs home, they could enter into an agreement for Joe to pay rent. If Jim or his wife is providing care that Joe otherwise would need to hire an aide to do, then Joe could pay Jim to do it. This is what is called a personal services contract. Food, utilities, and other goods and services that Jim may be providing, can and should be paid for by Joe. Perhaps the home needs to be modified to allow Joe to live there. Jim could spend money to make those improvements when they become necessary, borrowing against the home.
Some or all of these strategies may be ways for Jim to, in essence, pay Joe for some of the remaining uncompensated value of Joeâs home, over time, in a way that may be more affordable for Jim. However, each of these financial arrangements must be in writing. Thatâs because Medicaid presumes that any transfers of money or services is a gift, subject to a transfer penalty, unless it is in writing and at fair value.
But, a word of caution. The Medicaid rules are complicated. What will work in one state may not work in another. What may suitable for one family may be entirely the wrong solution for another. If you try to do it yourself and get it wrong, you may find yourself with a lengthy period of Medicaid ineligibility and no money to pay for care. You need a knowledgeable and trusted elder law advisor to guide you through the maze of laws and regulations that leave hidden traps for the unwary.
