Is Your Home an Exempt Asset Under Medicaid Rules . . .
May 7, 2012
or must it be sold and the proceeds spent down first?
Click on http://www.youtube.com/HauptmanLaw to see my answer.
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.
Why the Nursing Home Shouldn’t File Your Medicaid Application (Part 1)
February 26, 2012
Barry called me concerning his dad who is in a nursing facility. He had spent down Dad’s remaining funds. He paid the nursing home and set up a prepaid irrevocable burial trust as permitted by Medicaid. The facility said they would file the Medicaid application so Barry gave them all of Dad’s records going back 5 years as required by the 5 year Medicaid look back. So why was he calling me?
Barry related to me that before his mom died 4 years ago his parents gifted $22,000 to their 2 children. He said his Dad had now been assessed a Medicaid penalty of 5 months, meaning he was not eligible for benefits for that time period. That didn’t sound right to me. A transfer that size would result in a 3 month penalty. But, I know that in telling their story, many callers aren’t accurate with the facts. It’s not intentional. It’s just that they don’t understand the significance of the details and how slight changes can drastically alter the outcome. So I asked for Barry to fax me Medicaid’s decision.
My first thought was that if the State calculated the penalty incorrectly, that can be appealed – if there is still time. I couldn’t imagine they would have gotten the math wrong. You take one number divide it by another to get the penalty. But stranger things have happened. Then Barry called back with a more surprising answer.
The nursing home never filed the application! They found the transfers, told Barry there is a penalty and that he must put the money back. It was now 2 weeks ago since he had that conversation with the facility and 2 months since Dad had spent down his assets to below $2000. Barry’s inaction and the facility’s handling of his Dad’s application were costing both of them money. The meter, so to speak, was running.
Next week I’ll explain to you why and what they ought to do.
Can I Give a Gift of $10,000 Per Person Without Jeopardizing Medicaid Eligibility?
February 20, 2012
A common question I get probably as much as anything about Medicaid. The answer may surprise you.
Click on http://www.youtube.com/HauptmanLaw to see my answer.
Why You Shouldn’t Walk into the Medicaid Office Alone
February 13, 2012
Last year I wrote about the dangers of filing a Medicaid application yourself, without any idea of how the Medicaid rules work. But, in the past month we have had a rash of calls from folks who did just that and ended up with Medicaid penalties – months of Medicaid ineligibility and no way to pay for care.
It’s a disturbing trend but it can’t be ignored. The state is taking longer to decide Medicaid applications and is scrutinizing them more than ever. Why? Because it just doesn’t have the money to pay for care. If it can find transfers and impose penalties – waiting periods -that means it doesn’t have to pay for care during those months.
So often, when I explain how the Medicaid penalty works the response I get is, “no problem, Mom didn’t gift any money” or “Mom never really had much money so it won’t be an issue”. But, there is a certain innocence in that answer, a lack of understanding of the Medicaid regulations and of the economic recession that is affecting our government as well as average Americans.
For example, several times in the past month we have received calls from people who have been questioned by Medicaid about transfers that have been made by the applicant 3 and 4 years ago. It typically starts with a letter from the Medicaid caseworker asking for documentation concerning a particular transaction on “such and such date” or a request for copies of all checks over $1000”.
So, here’s the problem. Before you filed the Medicaid application did you ever review those checks, or is now the first time? What happens if the checks are payable to family members – or to any individuals for that matter – but not to businesses? Well, Medicaid will ask you what those checks were written for. Your explanation must be backed up by documentation. So if Mom wrote you a check to reimburse you for something, but you don’t remember what, or you can’t produce the paperwork to support that, it is subject to a Medicaid penalty.
Do you remember what you did 4 years ago? Do you have paper records to back up what you say you did with your money if someone asked? Oh, and keep in mind that you aren’t being asked about your own finances but rather someone else’s. If you haven’t been managing Mom’s accounts you don’t know what you’ll find. Now add a deadline to the mix. The letter you received from Medicaid says you’ve got 10 days to provide the documentation or the application could be dismissed. But Mom didn’t keep her old statements so you’ll have to contact the bank to get replacements. Good luck getting that in 10 days.
In this type of environment it becomes very easy to see how well intentioned families end up with disastrous consequences. Mom has no money left and Medicaid won’t pick up the cost of care when they thought it would, leaving a gap of months (the more uncompensated or unexplained transfers the longer the gap). The nursing home needs to pay its bills and is looking to the family to pay the $10,000 or $20,000 (or more) balance. The finger pointing starts as does the talk of lawsuits.
That’s why it bears repeating. You can’t walk into the Medicaid office, innocently hand them all your documents and say “please give me Medicaid”. You’ve got to be prepared. You’ve got to know what’s in those documents and how you are going to respond to the inevitable questions. It’s like an IRS tax audit. You’d be crazy to walk into the auditor’s office without a professional. Same thing with Medicaid. The stakes are just too high.
Is Paying Cash a Problem When Filing a Medicaid Application?
February 6, 2012
This week I am pleased to introduce a new feature to my blog called “Elder Law in a Minute”. This is a short video in which people have an opportunity to ask some of their most pressing elder law questions, ones that may be on your mind too. We’ll mix these videos in with my usual written posts to add a little variety.
The first question “Is paying cash a problem when it comes time to file for Medicaid?” I’d love to hear feedback from our subscribers if you enjoy this new addition.
Click on http://www.youtube.com/HauptmanLaw Elder Law Minute Season 1 Episode 1 to see my answer.
A Family Owned Business Long Term Care Nightmare (Part 2)
January 30, 2012
Last week we were talking about George’s tragic stroke and need for nursing home care. He still owns the manufacturing business he built and the warehouse which houses it. His son, John, asked me whether those assets are protected from being spent down towards care before Medicaid qualification. Like so many other questions about Medicaid , the answer is complicated. But, I told John that there were steps that they absolutely need to take now.
Let’s first review the Medicaid basics. As the healthy spouse, George’s wife, Claire, can keep the home and just under $110,000 in assets. The rest of their $800,000 in liquid investments must be spent down or converted to non-countable assets. The building and business are also countable – well maybe. Medicaid rules allow for inaccessible assets to be treated as “excludible”, in essence not countable towards the $110,000 limit.
It may be possible to treat them as inaccessible, if they can’t be sold easily. Remember that this is a family business and the real estate is an industrial building that houses the business. Neither is easy to sell on the open market. John then reminded me that he and his brother, James, run the business and want to keep it. “It was always Dad’s plan to give it to us,” he told me.
Unfortunately, his failure to put that succession plan in place makes it much more complicated to do now. “If he gives you the business and building now,” I told John, “it is a transfer subject to a Medicaid penalty and he must provide for his nursing home care for the next 5 years before he can qualify for Medicaid. That would be roughly $500,000, leaving your mom with $300,000 and the house.”
There was a long pause and then John said “that’s not a whole lot for Mom to live on and she could live another 10 or 15 years or more. Are there other options? I then explained that he and James could buy both assets themselves. “But we don’t have $1,000,000 to buy both,” John exclaimed. Well, then, they could buy the business and we could treat the building as inaccessible. Claire could also possibly buy a bigger home, with some of the countable assets, which would still be exempt. This would mean they could preserve more than the $110,000 for Claire.
It all was very confusing to John, which I certainly can understand. And not the best time for his family to have to make such important decisions, in what we call “crisis mode”. I told John that we could definitely help him but there is a lot to do and no time to waste. John scheduled an appointment for his family to meet with me. Before he hung up the phone he said that the fact his dad had never completed a succession plan or purchased long term care insurance was always in the back of his mind but he now realizes, for the first time, how devastating those oversights turned out to be for his whole family. I couldn’t agree more.
