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Is the Pressure Really Off?
April 9, 2012
Charlie had been transferred to a nursing home when his wife Doris called. Medicare was paying for his care but she had just learned coverage would stop in another week and the private pay cost of care was $11,000 per month. I could hear the panic in her voice when she said the $200,000 of assets plus her home was all she had.
I explained to Doris that the home is an exempt asset which she can keep as long as she continues to live there but the $200,000 is countable and must be spent down to $100,000. Some of that money must be spent towards nursing home care but I told her that we could also help her spend the rest in a way that most benefits her since the amount she is entitled to keep is not much for her to live on. She hired us to help her get through the spend down process and file the Medicaid application and we got to work. Several months later, we were just about ready to file the application and then Charlie passed away.
Doris had been through a lot in the past year since Charlie’s health had reached a crisis point. But even so, his passing was quite a shock after 50 years of marriage. I told her that, obviously, we don’t need to file for Medicaid, but that we should discuss the next steps after things settled down for her a bit. She appreciated that and I made a note to reach out to her in a month.
Actually, about 6 weeks later we connected. Her first statement to me, one I hear often, was “I guess we don’t need to do the planning anymore”. That’s a very natural response. The immediate crisis which caused her to reach out to us – facing a $132,000 a year long term care expense – was no longer a concern. The pressure was off, so to speak. What I told Doris, however, was the opposite.
She and Charlie had been totally unprepared and it had cost them. Doris was down to $100,000 in assets and a house worth $300,000. With Charlie’s passing she lost half of their income – one Social Security check and 50% of Charlie’s pension. Doris would have to make this money last for the rest of her life, including covering her own long term care needs. These were the negatives. But she had one positive. She is healthy. So time is on our side – but here is the key – provided we take advantage of it. Next week I’ll tell you what I told Doris.
An Abandoned Safe with $176,000 – Who’s the Rightful Owner?
April 1, 2012
Estate recovery is the process by which the State can seek reimbursement of Medicaid benefits it has paid during a person’s lifetime from assets of the probate estate after the Medicaid recipient dies. But, if one must spend down to less than $2000 what is left for the state to recover, you may wonder. There are actually quite a number of instances where there is money to recover. The following story from Massachusetts illustrates just one.
The story centers around a safe that was found on a vacant lot 3 and ½ years ago by firefighters during a routine inspection. We’re not talking about a small house safe but instead, a 2000 pound safe. Police were called in to help crack the safe and inside they found $178,000 in cash.
It turns out the safe had belonged to a former shoe store owner named Sally Daher who died 2001. The building where her store had been located – and is owned by her son – was being rented to a shoe repairman. Because that store owner had been burglarized, he felt the safe, which had been in the building for 40 years, was a liability so he hired a tow truck driver to remove it. The driver figured he could sell it to a local junkyard and make a profit but when the yard owner wouldn’t take the safe he dumped it in a vacant lot next to the driver’s home where it remained until the firefighters discovered it.
Several people stepped forward to claim ownership of the safe’s contents, including the State of Massachusetts. That might seem odd at first, until we learn that Daher had lived in a nursing home the last 5 years of her life and had received Medicaid benefits from the State. If it was determined that Sally Daher was still the rightful owner of the safe and its contents, then Daher’s estate now had assets worth $176,000 from which Massachusetts could seek reimbursement for benefits it paid out on her behalf, under estate recovery laws.
As with any legal dispute, this one wound its way through the court system. 3 and ½ years later a judge ruled that the safe belonged to Sally Daher and awarded the money to the State. Had Daher’s family discovered the money while she was still alive they would have had to spend it down first towards her care before applying for benefits. It is reasonable then to reimburse the State monies it might never have had to pay out in the first place.
In today’s economic climate everyone, the government included, is looking for extra dollars wherever they can find them, including abandoned safes in vacant lots.
What’s a Responsible Party? (Part 2)
March 26, 2012
Last week we were discussing Jenny’s problem. She spent down Dad’s assets. The nursing home filed the Medicaid application and Dad was approved, but with a 4 month penalty. The nursing home was pursuing payment for those 4 months from Jenny.
Jenny hired us to work things out with the facility. It was not clear that she was responsible to pay the bill from her own assets since the agreement was filled out improperly. We could go to court and let a judge decide that. Maybe we win, maybe the nursing home wins. Either way, a lot of money is spent and time wasted. Both sides end up losing.
A negotiated resolution was the better option. Jenny talked to her brother about repaying the loan. He claimed he had, over the years, repaid much of it but, of course, that didn’t help us now. Unfortunately Jenny missed her opportunity to present her case to Medicaid. They made their decision and she was stuck with the penalty.
Legally, Jenny would have had a tough time compelling her brother to repay it since there was no written agreement (there rarely is amongst family) and, again, that would have cost time and money to file a lawsuit. She also didn’t enjoy the thought of suing her brother. Her brother, on the other hand, didn’t want Jenny to be held responsible to pay out of her own pocket since she did not benefit from Dad’s loan. Luckily, he agreed to give more money back.
So, we went back to the nursing facility and negotiated a settlement in an amount that would compensate the facility for what they would have received from Medicaid if the State had covered the cost of care during the 4 month penalty. Jenny was happy she didn’t have to pay the $40,000 and the nursing facility received what they would have gotten from Medicaid. Quite frankly, they were lucky. Things worked out even though everyone involved made a colossal blunder.
The result could have been much better for both sides. If Jenny had hired us to file the Medicaid application we would have gone through Dad’s financial records before we applied for Medicaid and found the loan. Jenny’s brother would have had an opportunity to provide us with proof of what he paid back. In that case, we would have been dealing with a number less than $40,000 and thus a smaller potential penalty.
And, now I will tell you the biggest mistake the nursing facility made – filing the Medicaid application with a penalty. It is often better to return the money and spend it down before filing. Why? Because, the penalty is calculated on the State’s assertion that one month of nursing home care costs $7282, not on the actual cost to Jenny of $10,000 a month.
So, let’s say that Jenny’s brother still owed Dad $20,000. If he had returned the money before we filed, Jenny would have been able to pay another month of nursing care at $10,000, hired us to file the Medicaid application, set up a prepaid irrevocable burial and spend down the balance of the funds on clothes, etc. to less than $2000 before we applied.
The nursing facility would have received an extra month’s payment of $10,000 and there would have been no Medicaid penalty. So instead of negotiating a settlement with the facility to pay them what they would have received from Medicaid for the 4 month penalty, they would have received private pay for 1 of those months and Medicaid coverage for the other 3. More money for them and less aggravation for Jenny.
Once again, an example of why the Medicaid rules are so complicated and why you need the guidance of a professional who knows the rules.
What Exactly is a Responsible Party?
March 17, 2012
Jenny took over handling her dad’s finances shortly before he entered the nursing facility. As a dutiful daughter and agent under his Power of Attorney she saw to it that he was well cared for. She visited him at the facility and paid the facility’s bill promptly until it was time to file for Medicaid. The nursing facility filed the application for her dad andJenny was relieved when she finally got the letter of approval from Medicaid 6 months later. So why was the nursing facility insisting that she now owed them $40,000?
Jenny explained to me that Medicaid didn’t approve Dad until 4 months after the date he ran out of money. The $40,000 was the facility’s private pay rate for those months that Medicaid wouldn’t cover – the Medicaid penalty. “And, why”, I asked, “did Medicaid assess a 4 month penalty?” Jenny told me that Dad had helped out her brother with a $40,000 “loan” 4 and ½ years ago. She didn’t know that, however, until the Medicaid caseworker found the transfers in the records that she provided as part of the application process. Once the State assessed the Medicaid penalty there wasn’t anything she could do about it.
The transfers that caused the penalty weren’t Jenny’s fault but they weren’t the facility’s fault either. The nursing home was just looking to get paid for the 4 months of care that they had already provided. They turned to the one family member they had been dealing with, Jenny, insisting that she was responsible to pay the bill, pointing to the admission agreement she signed on Dad’s behalf when he entered their facility.
Now, I’m always careful to advise family members who serve as power of attorney that you must understand what you are signing. Most agreements refer to the “resident”, the person receiving the care and the “responsible party”, that person who the facility will look to under their contract to make payments for the services they will provide. The contract usually is an agreement printed by the facility with blank spaces to be filled in and signed in the appropriate places. I’ve reviewed many of these agreements over the years and they are rarely filled out correctly. In Jenny’s case, she signed as a responsible party on the signature page but no one filled her name in the space provided on the first page identifying that person. It was left blank. We’ll get back to that.
But, the $64,0000 question really is “what exactly is the responsible party responsible for?”, meaning, is Jenny responsible to pay the bill from Dad’s assets only or must she use her own assets? The answer is, “it depends on what the agreement says”.
Unfortunately for Jenny, the contract clearly identified the resident and the responsible party as being “jointly and severally liable for all charges. That means the facility can hold either one responsible. She didn’t recall anyone pointing that out to her before she signed the agreement but, quite frankly, she couldn’t really remember that meeting at all. Jenny had a real problem. Next week, I’ll tell you how we helped Jenny.
Why the Nursing Home Shouldn’t File Your Application (Part 2)
March 11, 2012
A few weeks ago we were discussing Barry’s problem. He had spent down Dad’s assets towards his nursing home care and the facility said they would file the Medicaid application. He gave them the financial records and other documents they requested. They said they would handle the rest. So what went wrong and why was the facility demanding payment from him of $20,000 and counting?
The Medicaid rules are complicated and if you don’t understand them and work with them on a regular basis you can make a mistake that can cost literally tens of thousands of dollars or more. That’s what happened here. It’s not clear whether Barry told the facility about the $22,000 or they discovered it when reviewing the financial statements. It doesn’t really matter. It’s what they did – or didn’t do – at that point which caused the problem to mushroom.
Upon discovering the gifts, the nursing home didn’t file the Medicaid application but instead told Barry that there was a 5 month Medicaid penalty. They were wrong for two reasons. First of all, the penalty on a gift that size is 3 months, really 3.02 months to be precise. The second and bigger mistake, however, was not understanding that the penalty hadn’t yet started.
Under current Medicaid rules the penalty does not start until the applicant has spent down his assets, meets all the other eligibility requirements, needs nursing home level care and files the Medicaid application. In other words, Barry’s dad needs Medicaid to process his application and determine that, but for the transfer of $22,000 he would be eligible. Until that happens the penalty doesn’t start.
By deciding not to file the application, the nursing facility made the problem worse. If they file the application now, 3 months after they said they would, the State will approve him from that date forward, but for a 3 month penalty. In other words, Medicaid will kick in after the 3 month penalty period. But by waiting to file, they lost an additional 3 months for which Medicaid will not cover.
So who will pay for that? Good question. The facility will probably look to Barry but he has an argument that the facility took on the task of filing the Medicaid application and their mistake in not filing in a timely manner is the cause of the additional 3 months for which there is no coverage so they should assume that responsibility.
And what about the original 3 month penalty? Barry told me he and his brother don’t have the money any longer. Who knew 4 years ago that the gift was going to be such a problem? I sympathized with him but told him it’s not the nursing home’s fault either. If they provided the care to his dad and Medicaid won’t cover the cost because he gifted that money it needs to come back, plain and simple. Between he and his brother they’ll need to find a way. That’s the easy part.
The bigger problem is resolving the issue with the nursing home as to who will pick up the tab for the 3 months that were lost by not filing the Medicaid application. As I often say, you wouldn’t think of going through an IRS tax audit without being represented by an attorney and/or your accountant. It’s the same with a Medicaid application. Having an attorney handle the application will save you and the nursing facility tens of thousands of dollars and a whole lot of aggravation and stress. In Barry’s dad’s case the cost of that mistake turns out to be $30,000.
