At first, it looked like George would make a complete recovery, but then he suffered a setback, a second stroke resulting in permanent paralysis.  It became clear that he would need long term care.  Claire didn’t want to place him in a nursing home, thinking she would be able to care for him at home.  Very quickly, however, the family realized that they would need home health aides.  Providing care is exhausting, physically and emotionally, and Claire, at 70, just couldn’t provide the round the clock care that was needed.

 For the first time, George’s family faced the reality of the long term care system and they were shocked.  George and Claire never did buy long term care insurance.  The health insurance plan that they had for years through the business, they soon learned, didn’t cover the type of custodial care George needed.  They were facing $100,000 a year in expenses and no insurance coverage for it.

 That’s when John called us, hoping we could help.  I went over the financial numbers.  George and Claire owned a house and about $800,000 in investments.  George also owned the business and the building which houses the business,  John estimated the combined value at over $1,000,000 but he wasn’t confident in those numbers since they had never before valued either.  Then John asked the $64,000 question.  Could they get any help, meaning government benefits?

 I explained how Medicaid works, that it’s a needs based program.  Claire, as the healthy spouse, could keep the house and just under $110,000 before Medicaid would cover George’s care.  “Does that include the business and the building?”, John asked.  “Dad always talked about a succession plan to transfer ownership to James and I, but he just never got around to doing it.”  Next week I’ll tell you what I told John.

Mom Has $1,000,000 – She’ll Never Run Out of Money (Part 2)

January 2, 2012

Last week we were discussing Paul’s mom, 88 years old and in need of nursing home care.  She has $1,000,000 in assets so first impressions suggest that she won’t ever need Medicaid.  But, upon further examination, we might want to reconsider that conclusion.  Here’s why.

Paul’s initial statement about never qualifying, or thinking he might need, Medicaid for his mother is a common one.   It assumes that there is one sole concern, long term care for Mom.  While that is certainly the primary concern, in this case it isn’t the only one.  As we learned, Paul’s brother, Bill, is unable to support himself.  Although he hasn’t been deemed disabled or been clearly diagnosed as far as Paul knows, Bill will likely need assistance the rest of his life.

Mom attempted to address his needs by leaving a portion of her estate to Paul to help provide for Bill’s needs (as I have written in previous posts,  not the optimum way to do this. A trust for Bill’s benefit is a much better way to go).  The more she spends for her care, however, the less there will be to support Bill.  That’s why Medicaid is important here.

I told Paul I could help but we’d have to act quickly.  We could set up a trust and transfer a portion of his mom’s assets to that trust.  But we need to keep enough assets in her account to cover 5 years of nursing home care.  Why? Because when we apply for Medicaid we’ll need to show, that from the date we apply going back 5 years, that she didn’t make any transfers for less than fair value, which, of course, she would have done.

I know what you may be thinking.  Why should the government pay for her care when she has the money to pay for it herself?  But is it really that simple?  Life rarely is.  Bill has no way to support himself.  He’ll end up destitute and Paul doesn’t have the means to support him.  Mom had always intended to provide for his care.  She just didn’t go about it the right way.  Luckily, Paul called us with enough time to fix things.  Mom will still pay plenty towards her care, probably close to $600,000 if she lives 5 years but there should be enough left for Paul to provide for his brother.

Paul’s scenario is not all that uncommon.  Families are often wrestling with more than one problem at a time.  Long term care is the most pressing one but there other competing interests.  It is, therefore, critical that you take a wider view of the landscape and over a longer time frame.  Which means that you might not have enough money as you think you have and it may be time to put a better plan in place.

Mom Has $1,000,000. She’ll Never Run Out of Money (Part 1)

December 26, 2011

Paul called concerning his 88 year old mother who needs nursing home care.  “She doesn’t have a power of attorney.  I think she needs one”, he said.  I concurred but our conversation didn’t stop there.  As we always do, I asked him about Mom’s finances.  “Her income consists of Social Security of $1000 per month and what she generates in income from investments”, Paul told me.  “But I’m not worried because she has $1,000,000 in assets.  I don’t think she’ll ever run out of money so Medicaid isn’t possible or necessary.”  “Maybe  – maybe not”, I replied.

 Why did I say that?  Doing some quick math, spending approximately $100,000 a year of her assets on nursing care, it will take 10 years before Paul’s mom spends it all.  A 10 year stay isn’t all that likely, is it?  After all, she would be 98 at that point.  Not likely, but it is certainly possible. But let’s say she doesn’t outlive her money.  What if, instead, she lives in a facility for 6 years or 8 years and spends $600,000 or $800,000?  

 I told Paul that whatever is left will be passed on to her heirs in her will.  The exact amount will depend on how long she lives and how much she uses for her care.  I then asked if she had a will.  That’s when he told me that Mom has 3 children, but Paul’s brother Bill has “issues”.  “He hasn’t been deemed disabled or even diagnosed with anything”, Paul told me, “but Bill never married, has never held a job for very long and is just ‘off’.”

 Paul told me that Mom’s will leaves 2/3 of her estate to him to look after his brother.   I then asked about Bill’s situation, his financial needs.  Not surprisingly, he has nothing to his name.  As we were talking, Paul had an “aha” moment.  He realized that there just might not be all that much left for Bill and that the financial burden would fall to him.   Suddenly, Medicaid seemed to be more relevant.  Paul grew concerned and asked, “Is there anything you can do to help me?”  “Actually, there just might be”, I told him.

Next week I’ll share with you what I told Paul.

Harry’s Law – Hollywood and Elder Law Collide (Part 2)

November 21, 2011

So, last week we were talking about Gloria and Abe, the subject of an elder law plot line on the NBC drama, Harry’s Law.  Gloria wants to divorce Abe because she can’t afford the long term care that Abe needs without selling their house and leaving her destitute.  A discussion amongst the lawyers in the firm ensues about the ethics of a plan to qualify for Medicaid, but as is so often the case with television and movies, it’s not that simple and the writers haven’t gotten the law right.

We learn that the assets Gloria is trying to protect include a house and a car.  The writers do get something right.  Medicaid will likely scrutinize a divorce settlement that leaves all the assets to the healthy spouse.  But, if it is true that those are the only assets, any elder law attorney knows that Gloria can keep them under Medicaid spousal protection laws.  A divorce is unnecessary.

Let’s change the facts a bit.  Even if the couple have some money in the bank, Gloria can keep some or possible all of it, or at least spend it in a way that is more beneficial to her.  For example, if they have an additional $25,000 in assets she can keep almost $21,000 of it under Community Spouse Resource Allowance Rules.  The rest can be applied, for example, to a prepaid irrevocable funeral for Abe.

There are other possibilities, although the writers didn’t tell us enough about the couple to be able to say for sure.  Is Abe a war time veteran?  If so, then Gloria may be able to qualify for nearly $2000 a month of tax free income to help pay for his care under the VA’s Aid and Attendance program.

And what about the discussion about the ethics of a divorce?  We learn that Gloria has been unhappy in her marriage for years.   Medicaid isn’t her sole motivation so would she really be committing fraud?  Is it true that, as one of the attorneys in the firm says, her failure to plan is bankrupting the country?  We don’t know enough about how Gloria and Abe got to this point – how much money they had over their marriage and how they spent it – to be able to answer that question.  Maybe this is all they ever had in their lifetime.  Their house is their nest egg so what exactly did they do wrong? 

It is unfair and inaccurate to put the entire blame on the backs of individual Americans.  The problem of long term care is much more complicated than that.  The cost keeps climbing exponentially and we are living longer than ever before.  How were Gloria and Abe – or any of us for that matter – supposed to plan for that?

It’s 9:50 and Harry and her attorneys have only a few minutes to wrap up Gloria’s problem into a nice neat solution.  After all, they’ve got to get through the credits and at least 3 commercials before the next show in NBC’s lineup at 10p.  In typical TV fashion, Harry’s partner Tommy says he will pay for Abe’s care, even 24 hour care.  At an average cost of $120,000 per year that’s mighty generous of Tommy.  I doubt he realizes what he has just offered.

That’s clearly not a realistic solution, but the show’s writers can get off the hook that way.  They can write it anyway they want and in TV land you’ve got to have a nice neat ending.  It’s just that, in the real world, you can’t script it that easily.  It takes much forethought and planning. 

If I was writing the ending I would have sent Gloria to an elder law attorney to help guide her through what will surely be the most challenging time in hers and Abe’s life.  There are solutions.  She just has to get the right advice.  Who knows?  Maybe that can lead to a spin off series for NBC about an elder law firm.

“Harry’s Law” – Hollywood and Elder Law Collide

November 14, 2011

Over the years, not surprisingly, there have been many televisions series that focus on the legal profession.  The stories are interesting, entertaining and often emotional.  LA Law was a popular show back when I was in law school.  Currently, Kathy Bates stars in Harry’s Law, which focuses on Harriet “Harry”: Korn and the other lawyers in her private law firm.  Last week, one of the plot lines focused on an aspect of elder law.  While it may make for “must see TV”, the episode leaves much to be desired when it comes to accuracy.

 An elderly married couple, Gloria and Abe, meet with one of the lawyers in the firm.  Gloria explains that Abe has Alzheimer’s and that he needs full time care which they can’t afford without selling the house.  She wants a divorce from Abe, allowing her to keep their assets and permitting him to qualify for Medicaid.

 Much of the discussion amongst the lawyers in the firm focuses on the ethical issues.  Would Gloria be committing fraud?  Would Medicaid challenge the divorce settlement?  Should the country help Gloria and Abe (and others) who failed to plan for long term care? 

Later in the episode we learn that Medicaid isn’t Gloria’s sole motivation for seeking divorce.  She has been unhappy for much of their 40 year marriage.  The stress of Abe’s illness has just aggravated the situation.

 It all makes for great drama, but as so often happens with television and movies, in an effort to make the story “more sexy” and in the interests of time (after all, the show is only an hour and there is more than one plot line in each show) the truth sometimes falls by the wayside.  Next week I’ll share with you where the writers went wrong and why you don’t want to get your elder law advice from television.

A Medicaid Millionaire

October 3, 2011

Much has been written about how much long term care is costing this country and specifically how much tax payer dollars are spent on government benefit programs, with those numbers continuing to rise.  All true.  But, government waste, ineptitude and an inability to eliminate fraud certainly play a role.  An article in the local newspaper last week caught my eye.  It described the largest settlement of a home healthcare fraud case ever but what was most interesting was the person who was the catalyst for the investigation.

 Richard West, a Medicaid recipient afflicted with muscular dystrophy, who needs nursing assistance and uses a ventilator, learned that certain of his vital services were being cut back because he had “maxed out” his benefits.  Although severely disabled, he still has mental capacity – and determination.  He checked his medical records and discovered that the home health care company that provided him with nursing care was overbilling Medicaid.  He tried reporting what he found to several government hotlines, but got nowhere so he hired an attorney.

 The healthcare company, Maxim Healthcare, has several hundred offices around the country.  The case involved 4 federal agencies and the Medicaid fraud units of at least 3 states.  The investigation reached through almost every state in the country.  For at least 6 years, Maxim billed Medicaid for services it never provided, using what is known as “no show” billing.  Nurses were paid for jobs they never had.  After being nabbed, Maxim agreed to return improper payments it received and pay criminal fines, totaling $150 million.  For his part in bringing the fraud to light, Richard West received $15.4 million.
 
 West described his frustration in reporting what he found, first to his county social worker, then to the state Medicaid office and then to a Medicaid fraud hotline number and waiting for action.  As anyone who has ever dealt with government bureaucracy knows, you can wait a long time.  West then took matters into his own hands.  Unfortunately, most Medicaid recipients are too sick, physically and mentally, to take on the fight that West did.

 West was literally fighting for his life.  Take away the vital services that Medicaid provides and he feared that he would die.  Now he has too much money to qualify for Medicaid.  Not exactly the “Medicaid Millionaire” who proponents of Medicaid reform claim are collecting benefits that shouldn’t be.  But it just goes to show you that you can’t rely on the government to take care of you.  It took a wheelchair bound 63 year old man on a ventilator to get the government to pay attention to someone stealing hundreds of millions of dollars right from under its nose.

Beware of Greeks Bearing Gifts

September 26, 2011

Perhaps it’s a phrase you’ve heard before but aren’t aware of the history behind it. (More on that in a minute.)  A recent New Jersey court case brought the statement to mind and left me shaking my head because it just reinforces why clients so need my services.  Allow me to explain.

 The case involved I.M., a 79 year old grandmother who is the primary caregiver for her 21 year old mentally disabled grandson, J.M.  (The court used initials to protect the family’s privacy.)  Their sole source of income consisted of I.M.’s Social Security and J.M.’s disability benefits.  They also both were Medicaid recipients.

 One day the State of New Jersey’s Department of Developmental Disabilities sent I.M. a grant of $2000 to be used for J.M.’s benefit.  She spent $500 and put the rest in the bank for later use, in a savings account payable on death to J.M.  She later changed the account to show that I.M. held it as representative for J.M.

 Well, maybe, if you are a frequent reader of my blog, you can guess what happened.  That account, combined with another account I.M. owned, pushed her over the $2000 limit for Medicaid eligibility, or so said the government.  The State demanded the money back on the threat that they would take away her Medicaid benefits.  I.M. refused and the case went to court.

 On appeal I.M. was victorious.  The court said that the money wasn’t hers simply because she had physical access to it.  She was merely acting in a fiduciary capacity, on J.M.’s behalf, as his representative.  Of course the State gave her the money with that understanding in the first place, but that didn’t seem to stop it from taking action against her for accepting it. 

And that’s what reminded me of the oft repeated phrase “Beware of Greeks bearing gifts”.  The saying is a reference to the story of how the ancient Greeks defeated the Trojans in a long war that lasted 10 years.  Cities at that time were surrounded by walls to protect against invading armies.  The Greeks couldn’t penetrate the walls of the City of Troy so they devised a clever plan.  They pretended to “give up” by offering the Trojans a peace offering of sorts, a wooden horse.  They left the gift outside the city gates and sailed away.  The Trojans saw this and brought the gift inside and proceeded to celebrate their “victory”.  In actuality, the gift was a trick to gain access to the city.  Hidden inside the horse were 30 Greek soldiers.  At night, while the city inhabitants slept, they opened the gates for the Greek army which had surreptitiously returned.  Victory was theirs.

 I am sure that I.M. would agree with my thoughts.  Accept the government grant to help her son but beware, because the same government will try to take away her Medicaid benefits.  It sure sounds sneaky and just reinforces to me why  I do what I do as an elder law attorney, on behalf of my clients.

Are You Making Gifts You Aren’t Even Aware of? (Part 2)

September 18, 2011

We were discussing Eddie’s problem last week.  His Dad needs nursing home care and, at a cost of $11,000 per month, Eddie was concerned that there would not be anything left for Mom if he didn’t look to qualify for Medicaid quickly.  However, the family was totally in the dark about how Medicaid works.  So, when I explained to him that there could be a Medicaid penalty period, Eddie panicked.  “Can you help me”, he pleaded.  Here’s what I told him.

 The first things we needed were the last 5 years of statements for every asset that Eddie’s parents owned.  We then looked through each one to determine what amounts of money had been transferred from their accounts that Medicaid could consider “transfers for the less than fair value”, that is, transfers for which they did not receive something of equal value back in product or service.  The monies Mom and Dad sent to Ecuador to support family members counted as transfers but we wanted to know what else there might be. 

 Eddie admitted he had no idea since his parents didn’t keep good records and they never discussed it with their 3 children.  Our paralegal painstakingly went through what seemed like a mountain of documents.  She found a total of $40,000 of cash withdrawals over a period of 5 years.  “Not all of that money was sent to Ecuador,” Eddie explained.  “My parents paid for things in cash.  They didn’t believe in credit cards.”    I told him if we could prove what some of that money was used for, by documentation (ie. receipts), we could knock that $40,000 down.

 Our goal was to get that number as small as possible because that is what Medicaid divides by another number to tell us how long the Medicaid penalty would be, how long Mom would have to pay privately for Dad’s care before Medicaid would kick in.  As it turned out, some of the cash was used to pay repairs on the home.  I had Eddie contact the contractor to get an invoice.  That was $10,000 right there.  We also determined that $7500 had been sent to Ecuador 4 years and 10 months ago.  I told Eddie that as long as we apply for Medicaid more than 5 years from the date of those transfers they would fall outside the lookback and we didn’t need to disclose that to Medicaid.

 That left $22,500 unaccounted for consisting of numerous withdrawals of varying amounts from many different accounts over the 5 year period.  I told Eddie that we should file for Medicaid and let’s see what they come up with.  I was confident their number wouldn’t be bigger than ours because I was very conservative in terms of what could be considered a transfer for less than fair value.  But I also know that much of this is subjective and Medicaid may “let certain transactions go”.  That depends on the caseworker, his/her caseload, the timing of the application and my ability to walk the caseworker through our application and the documents we provided.

 At worst, the penalty would be 3 months, meaning Eddie’s parents would have to pay an additional $33,000 at the nursing home’s private pay rate of $11,000 per month. But Mom still has a house worth $300,000 so, I explained, we could work out an arrangement to pay the nursing home from the proceeds of the house if she sells it or have her take a reverse mortgage or have one of the children loan her the money.

 It all made sense to Eddie and that’s what we did.  Medicaid in fact, found $14,000 in uncompensated transfers, resulting in a 2 month penalty.  Eddie was pleased.  Mom would have to pay the nursing home $22,000 but Medicaid then covered the rest.  We ended up saving her at least $40,000, the amount of money she would have had to pay if the penalty had been as much as 6 months or more.  Why?  Because, if Eddie had filed the application himself he would have been totally unprepared to provide the documentation Medicaid needed and to plead his case.  Being at the mercy of the State who knows how high that penalty would have been?

Are You Making Gifts You aren’t Even Aware of? (Part 1)

September 12, 2011

So often, when I explain to someone how the Medicaid lookback and transfer penalty work, the response I get back is, “Don’t worry.  My parents haven’t made any gifts.  We don’t have anything to worry about.”  But, the term “gift” is such a subjective one.  It can mean different things to different people.  However, the only definition that matters is the one Medicaid uses.  Let me explain.

 Not too long ago, we handled a Medicaid application for a family.  Some clients we have worked with for a period of years, guiding them through the various stages of long term care, which culminates in a Medicaid application.  In other cases, we are called upon just before Medicaid is needed.  Eddie’s call about his dad fit the second scenario.  We knew nothing about his parents’ finances and Dad was in a nursing home.  Eddie was panicked about applying for Medicaid as soon as possible to protect as much as possible for Mom.

 I gave Eddie our Medicaid checklist of documents we would need to file the application, including 5 years of financial records for every account Mom and Dad owned.  I explained that we need to closely scrutinize money going into and out of those accounts, looking for transfers for less than fair value.  We want to determine, before we file the application, if there will be any transfers which will cause a Medicaid penalty.  Sometimes we can correct them before we apply or at least gather as much paperwork as we can to present to Medicaid if and when it becomes an issue to limit the penalty.

 Eddie told me not to worry.  Mom and Dad didn’t make any gifts, he told me.  The bank account statements I started to receive, however, painted a different picture.  As soon as we started to review them, we noticed cash withdrawals of, in some cases, $2000 per month.  Eddie told me, “Oh, my folks help out my aunt and her family in Ecuador.  But, that’s not a problem for Medicaid, right?”

 “Actually,” I said, “it is.  That’s a transfer subject to a Medicaid penalty.”  Eddie had a hard time grasping that.  “It’s not a gift,” he said.  “My aunt helped my family when my parents first came to this country when I was a young boy.  My parents are really repaying a debt.”  Unfortunately, Medicaid doesn’t look at it that way.  Under their rules it’s subject to a penalty, a period during which Dad is not eligible for Medicaid, even though he meets all the other Medicaid qualifications.

 Eddie was distraught until I told him what we needed to do but we had to work fast.  Next week I’ll tell you what I told him

How We Pulled Charlie from a Black Hole of Long Term Care

August 15, 2011

A few months back I wrote about a situation that is not all that uncommon, a nursing home resident with long term care insurance benefits but no other assets.  If the insurance payment goes directly to the resident it counts as income, resulting in too much income to qualify for Medicaid.  Changing the payment to go to the nursing home could solve the problem but what if that isn’t possible.

 We had a recent situation in which our client, Charlie had long term care insurance and Social Security and pension income that, combined, exceeds the Medicaid reimbursement rate, the amount which Medicaid pays the nursing home.  Charlie’s income plus insurance benefits totaled $7500, while the Medicaid reimbursement rate for the particular nursing home is $6000 per month.  The home charges $10,000 per month to its private pay patients so Charlie was in a bind.  He had too much income to get Medicaid but not enough to pay privately.  It would seem that Charlie had fallen through the cracks.

 We spoke with Charlie’s family about a possible solution.  Charlie was a World War II veteran, having been honorably discharged.   The nursing home bill counts as an unreimbursed medical expense, which easily reduced his income to zero for VA qualification purposes.  He, therefore, was eligible for a VA Aid and Attendance pension of nearly $1650 per month, the maximum amount allowed for his category.  That would bring his income up to $9150. 

We then approached the nursing facility to see if they would take Charlie as a resident.  It seemed to be a win/win.  The facility, while not getting quite the amount they usually charge private pay, still would receive more than the Medicaid reimbursement rate and Charlie’s family would have the peace of mind of knowing that Charlie would have a place to stay.  They could rest assured that he would fall into what I call a black hole of long term care.

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