// BLOG
New Social Security Policy Change an Indication of More to Come?
March 15, 2010
A decision last month by the Social Security Administration (SSA) to add new medical conditions to its list of “Compassionate Allowance” conditions, including forms of Alzheimer’s Disease and dementia, may signal a change in how the government views and treats those illnesses from which a disproportionate number of long term care residents suffer. While this change will by no means solve the growing long term care problem in this country, it just might be the beginning of a shift in thinking – maybe.
Social Security and Supplemental Security Income disability benefits are paid to those who have been deemed disabled and no longer able to work. The application process, however, is a complex and drawn out one, often resulting in initial denial and then an appeal process that can take years. However, approval often opens the door to other government benefits, such as Medicaid.and Medcare. A decision of disability by Social Security is proof of disability for many other state and federal programs.
The “Compassionate Allowance” program is Social Security’s attempt to streamline the process and recognize certain conditions that clearly result in disability without extensive medical documentation so that applicants can get much needed benefits quickly. What is interesting is that Early Onset Alzheimer’s Disease (Alzheimer’s affecting those under age 65) and Mixed Dementia (persons suffering from dementia with more than one origin, eg. Alzheimer’s and vascular dementia) appear on the most recent list of 38 new conditions that the SSA deems to be so serious that it considers people with these diagnoses to “obviously meet disability standards”.
One of the problems with the long term care system is that government benefits available to pay for care discriminate based on disease. Alzheimer’s, Dementia and the like, that affect mental capabilities are so often treated differently than diseases and illnesses such as cancer, which are physical. Medicare, for example, provides no coverage for long term care which is typically needed by sufferers of Alzheimer’s and Dementia. So when a government agency decides to include these illnesses in its list of “fast track” diseases it is noteworthy. We’ll need much more than that to make a dent in the problem but you’ve got to start somewhere. And Social Security is as good a place as any.
Why Pay Someone to File an Application I can Complete Myself?
March 8, 2010
The call usually starts out this way. “I’ve given all of Dad’s money to the nursing home already and am ready to apply for Medicaid. His situation is really simple. I can handle it myself but I just have a few questions.” I’m always happy to try to help whenever I can but when I tell people that doing it yourself can often cause a loss of tens or even hundreds of thousands of dollars they act surprised. A recent case we handled in our office will illustrate.
Julie called us regarding her dad, who was in the hospital, ready to be transferred to a nursing home. She had picked out a nursing home, applied for Medicaid and thought she had a plan in place. Dad would move to the nursing home, private pay for a few months and then move over to Medicaid. Then she got a letter from Medicaid stating that Dad had made a number of asset transfers which would result in his being ineligible for benefits. The caseworker requested copies of checks and documents explaining deposits and withdrawals before he could tell Julie how long her dad’s penalty would be. Julie called us in desperation.
Now, I have to tell you, that some of the most challenging cases we get are those where we haven’t done the planning for families or even filed the Medicaid application but, rather, are called in to finish a process that has suddenly been derailed. And that, unfortunately, was what happened to Julie. The nursing home she lined up for Dad learned of the Medicaid problems and said she needed to get them straightened out before they could admit him. We took a look at the details and here is what we discovered.
Dad had transferred his home to his children 10 years earlier. That wasn’t the problem. However, Dad was still living there and paying much of the expenses of the home, but doing so by way of reimbursing Julie who was actually paying the taxes, insurance, etc. Additionally, Dad had been giving money to his children over the past several years, hardly unusual, but, transfers subject to a penalty, nonetheless. Finally, Julie had been using Dad’s bank account to deposit some of her own funds. She did this out of convenience but didn’t realize what a problem it would cause when Medicaid counted it as Dad’s.
The questionable transfers totaled almost $75,000, a 10 month Medicaid penalty if we couldn’t prove otherwise. So, we rolled up our sleeves and got to work. We learned that Julie’s brother Bill was disabled. Transfers to a disabled child are exempt from the transfer rules (something Julie didn’t know and which never came up at the Medicaid interview). That reduced the questionable transfers to $50,000.
We then painstakingly went through the nearly four years of account statements and had Julie provide us with as much information as possible to piece together the entire picture of money going in and money going out of Dad’s account. We separated what was actually Julie’s and proved it to Medicaid. Most of the payments that Dad made relating to the home he no longer owned we also were able to get Medicaid to treat as reasonable home expenses.
All this helped to reduce the $75,000 down to $20,000, resulting in a 3 month penalty. Dad entered the nursing home, the family private paid for 3 months and then Medicaid kicked in. The net savings to the family by knocking 7 months off the penalty was $70,000. Not knowing the Medicaid ins and outs, Julie would have never been able to do it on her own. Yes, she filled out the application. But, it was the rest of the complicated process she needed our help with.
The Difference Between Medicare and Medicaid
March 1, 2010
In speaking with people about Medicaid, they will often refer to it as Medicare. Perhaps it’s just a slip of the tongue since the two words sound so similar. But, I think, there is very often a fundamental misunderstanding about the two programs. Medicare is the federally funded and state administered health insurance program primarily designed for those individuals over age 65, disabled or blind. But, here is where the common mistake lies. Medicare does not cover long term care.
Not that this is different from any employer sponsored health insurance program. It isn’t. What most don’t realize until they need long term care is that health insurance policies, Medicare included, do not cover custodial nursing home care. Medicare does cover skilled nursing care but only if you’ve got an illness or injury from which you can recover. The common illnesses which cause long term care stays, such as Alzheimers and Parkinsons, have no known cures. Medicare won’t help you. Which surprises many who are confusing skilled nursing care and custodial care.
In general, if you are enrolled in traditional Medicare, and you’ve had a hospital stay of at least 3 days, and then are admitted to a skilled nursing facility, Medicare may pay for a while. If you qualify, Medicare may pay the full cost of the nursing home stay for the first 20 days and can continue to pay for the next 80 days, but with a deductible of about $130 per day. Some Medicare supplement insurance policies will even pay the cost of that deductible so that in the best-case scenario, Medicare may pay up to 100 days for each “spell of illness.”
In order to qualify for this 100 days of coverage, however, the nursing home resident must be receiving daily “skilled care” and generally must continue to “improve.” (Note: Once the Medicare beneficiary has not received a Medicare covered level of care for 60 consecutive days, the beneficiary may again be eligible for the 100 days of skilled nursing coverage for the next spell of illness).
While it’s never possible to predict at the outset how long Medicare will cover the rehabilitation, from our experience, it usually falls far short of the 100 day maximum. It makes sense, since the recuperative abilities of an 80 year old are certainly not what they are for a 40 year old. But, even if Medicare does cover the 100 day period, what then? What happens after the 100 days of coverage have been used?
At that point, in either case, you’re left with paying the bills with your own assets or long term care insurance, or qualifying for Medicaid which does cover long term care but is a needs based program. That means you’ve got to meet certain income and asset limits, but if you were thinking Medicare was going to cover you, then you’ll be completely unprepared when it comes to long term care. And if you’ve been a frequent reader of this blog you know what happens when you’re totally unprepared for the prospect of long term care.
Are Your Advisors All on the Same Page?
February 22, 2010
As I am fond of saying, navigating through the long term care system usually requires a team of advisors. While the elder law attorney is, no doubt, a pivotal person, the accountant, financial advisor and insurance specialist are equally important. And when one piece isn’t properly in place it can be catastrophic. Betty’s story is illustrative. Betty and Tom decided to sell their home in which they raised their four children. They invested the majority of the proceeds in annuities and decided to rent and live off the income from their investments and Social Security. Tom, however, had exhibited some signs of dementia.
After the sale of their home, Tom’s condition deteriorated rapidly. He became restless and, at times, physical with Betty, who weighed 100 pounds less than Tom. She could no longer keep him at home. Betty came to us for help, thinking she could get Tom on Medicaid. She didn’t realize that the $300,000 she invested in annuities was now a countable asset and would have to be spent down to $109,560 before Tom could get Medicaid. Betty was distraught. “I am only 65. How can I live on $100,000”, she asked me. I told her not to worry. She could cash in the annuities, buy another home with that money and keep it, as an exempt asset. After Tom qualifies for Medicaid she could then resell the home if she wanted, to reinvest for income again.
Then we examined the annuities. That’s when I discovered the surrender charges of 7% that Betty would have to pay. While they did have a provision that waived the charges if the owner needed to cash them for long term care expenses, the problem was that Betty, and not Tom, was the owner. Betty told me that Tom had definitely been diagnosed with dementia at the time that these decisions were made but couldn’t recall any conversations about long term care or how to provide for it. Big mistake.
We were able to help Betty get Tom into a quality nursing home. She privately paid for 7 months, cashed in the annuities, paid a surrender charge, and bought a home. We helped Betty preserve the majority of their savings, money she will need to provide for her own care down the road. But, there are lessons to be learned here.
The result could have been much better had Betty come to us before she sold her home and before she bought the annuities. We might have suggested she wait until Tom entered the nursing home, to sell her home. We also would have cautioned Betty about purchasing investments that could easily be liquidated if a large expense (ie. nursing home care) became necessary. Buying the annuities wasn’t the problem. It was the fact that she couldn’t sell them without paying a penalty. No one thought to ask what would happen if Tom needed care sooner rather than later. And that’s why having a team of advisors working together is so important. All tax, financial and legal aspects of any decision should be analyzed carefully and that’s more than any one advisor is capable of doing.
How Jane’s Simple Estate Matter Turned into a Complicated Mess
February 15, 2010
There are many misconceptions about estate administration and probate. So often when someone asks me about it, they’ll typically tell me that their family member’s estate matter is not that complicated, that they can handle it themselves. The following is a cautionary tale for the do-it-yourselfer. Mary died without a will. She never married and had no children. She did have 3 sisters, Jane, Ann and Betsy. Betsy had died before Mary, leaving two children, Jim and John. Jane was appointed administrator of Mary’s estate and thought she could handle things herself. However, she made 2 big mistakes.
Under intestacy laws, Mary’s sisters were entitled to split her estate 3 ways. That’s where Jane made her first mistake. A family friend told her she should split the estate 2 ways, not 3, because since Betsy had died, she wasn’t entitled to receive anything. Except that, under New Jersey’s intestacy laws, Betsy’s share should have passed to Jim and John.
Then Jane made her second mistake. New Jersey has an inheritance tax payable based on the relationship of the heir to the decedent (the person who died). Siblings are Class C beneficiaries. Nephews are Class D beneficiaries. Each class has a different tax rate. So when Jane filed the inheritance tax return indicating that she and Ann were the heirs she didn’t pay enough tax.
When Jim and John realized they were entitled to receive a share of Mary’s estate they contacted an attorney who then contacted Jane. Jane had already distributed the estate assets and had already filed the tax return and paid the tax by the 8 month deadline. So, now she has a problem. Jane has to retrieve funds from Ann to then pay Jim and Joe their proper share. She also must file an amended tax return with the State and pay the proper amount of tax as well as a penalty for late payment at 10% per year.
The irony of the story is that the estate was a simple one with a few bank accounts to be administered and an uncomplicated tax return. But by trying to do it herself, Mary made mistakes that an experienced estate attorney would have recognized right away. So now it will be more complicated to fix things. A lesson learned the hard way.
