Mindy corrected me.  “Dad only has $500 in the bank.  His income doesn’t count towards the $2000 asset limit”, she said.  That’s true but the assets aren’t Karl’s problem.  He has too much income.  You see, if his income exceeds the Medicaid reimbursement rate, that rate which Medicaid pays the nursing home for its’ Medicaid residents, then he won’t qualify.  (Actually, Medicaid requires the resident to give his income to the nursing facility and then it will pay the difference up to the reimbursement rate.)   And the long term care insurance, which will pay out for another 3 years, counts towards income.

 “But, the nursing home we looked at said their private pay rate is $10,000 per month”, Mindy told me.  “He only has $7500.  What are we going to do?”  I asked her if Karl was a veteran.  He was, of World War II.  If you are a regular reader of this blog you know that there is a wonderful program available to wartime veterans and their surviving spouses which can provide additional income in the form of a pension.

 I told Mindy that Karl could obtain a pension of $1700 per month.  That would bring his income up to $9200 per month, close to the $10,000 she was quoted.  We could either negotiate with that facility or find another one that would accept her dad’s income on a private pay basis.  That would get her through 3 years, until the insurance policy is tapped out.  And what then?  Karl’s income would most likely be below the Medicaid reimbursement rate at that point and we could then qualify him for Medicaid.

 I could hear the relief in Mindy’s voice.  “This is all so complicated.  I am so lucky I found you.  I could never have figured this all out myself. ”  I understood completely.  It’s so difficult to navigate through the long term care system without a knowledgeable guide.  To see if VA benefits can help you check out our 30 second VA Quiz at http://elderlawtodaypodcast.com/areas-of-practice-2/veterans-benefits/

I have spoken and written often about a wonderful benefit available to many of our elder law clients, specifically wartime veterans and their widowed spouses.  It is a non-service connected pension, commonly referred to as the Aid and Attendance benefit.  It provides a monthly pension to seniors needing increased long term care and is a real life saver for people receiving care at home, in an assisted living facility or a nursing home setting.  The 3.6% COLA applies to this program as well.

 In real dollar terms that means, for example, that in the case of a married couple, the maximum pension of $1949 per month increases to $2019 per month.  For the widowed spouse of a veteran it jumps from $1056 to $1094 and for a single veteran from $1644 to $1701.  And keep in mind that this pension is income tax free.

 Take our VA Quiz to see if you just may qualify.  Email us at contact@hauptmanlaw.com and we’ll send you the 4 easy questions you can answer in seconds, that could get you as much as $24,000 a year of additional income.

 I explained to Melissa what I call the Medicaid “time bomb”.  She was totally unprepared for it.  The advisor who helped her with the VA application never told her about it and she said she never really thought about what she would do if either of her parents needed nursing home care.  I told her not to worry.  We’d have to transfer back assets to her parents and spend down some of that money before we apply for Medicaid.

 That’s when she told me about the annuities she purchased.  The stream of income they provided was a great help to pay for the assisted living care but now that Dad needed $10,000 of care each month the VA pension plus the annuity wasn’t nearly enough to meet the monthly nut.  I told Melissa that she would need to cash in the annuity, transfer it back and then spend down at least part of it.   “One small problem”, she said.  They have surrender charges if she liquidates them now.  The penalty is about 7% of the total value.

 “But the advisor never prepared me for this”, Melissa exclaimed.  That’s because he didn’t understand how Medicaid works – really doesn’t work – in conjunction with the VA benefits.  Melissa started to regret her decision to pursue the VA benefit.  I quickly corrected her.  It wasn’t a mistake.  It’s just that getting the VA pension was only a small part of what her parents needed.  They should have also, at that time, prepared for the next stop in their elder care journey – before they reached it.  Locking up their money with early withdrawal penalties severely restricted their flexibility, something they absolutely need when their health is declining.

 It wasn’t wrong to restructure their assets to get the VA pension.  It can help them stretch their money out and hopefully have enough to provide for both Mom and Dad’s care needs.  The problem is that they were completely unaware of how it affected their Medicaid eligibility.  The advisor couldn’t provide Melissa with any help at all.  His response was to contact an elder law attorney.

 Great advice, only he should have given it to her 2 years ago.

 The VA program is a needs based one, meaning that there is an income limit and an asset limit, similar to Medicaid, but also with some significant differences.  The asset limit is about $80,000 for a married couple. $40,000 for a single applicant.  Melissa’s parents had $200,000.  The advisor explained that transferring the excess assets out of their names would work because the VA doesn’t have a look back or a penalty period like Medicaid.  Mom and Dad could qualify for VA benefits the very next month.

 Then the advisor explained the income rules, what I call the “critical calculation”.  The VA takes gross income and subtracts recurring unreimbursed medical expenses to arrive at income for VA purposes (IVAP).  This number is then subtracted from the maximum pension rate for the category applied for to determine the pension received.  If unreimbursed medical expenses exceed gross income then the applicant gets the maximum pension.  In Melissa’s parents’ case, that would be $1949 per month.  The advisor next explained that unreimbursed medical expenses include the cost of home aides.

 Melissa told me she gave the advisor the income numbers.  Mom and Dad had combined income from Social Security and pension of $4000 per month.   Living at home the cost of the aides was $2000 per month but Dad needed more care than what he was getting.  She just couldn’t convince her parents to hire more because of their concern that they couldn’t afford it.  Melissa wanted to move her parents into the assisted living facility but that expense was even greater, at $8500 per month.

 The advisor then explained that the money they transfer out of their names could buy an annuity.  This would be a stream of income for Melissa’s parents that would helpe them pay for the assisted living facility.  Combined with the VA benefit they could make ends meet.  It all sounded great and Melissa and her parents went ahead with the plan.  Mom and Dad moved into the facility and applied for and received VA benefits.  Everything worked according to plan – that is until Melissa called us.  That’s because of what we call the Medicaid time bomb.  We’ll talk more about that next week.

 Julia lived in that facility for almost 7 years actively participating in events and socializing with other residents.  It was at that point, however, that Amy’s family moved Julia to a nursing home.  They were worried that if she did not have the private funds to pay for her care in a nursing home of their choosing, but applied for Medicaid just before entering a facility, they could not be sure that she would be placed in a suitable nursing home.  So they moved her before she ran out of funds.  She is now 91 and has not handled the move well.  Her health is rapidly deteriorating.  She no longer socializes with other residents and rarely speaks, even to family members who visit.

Amy’s family was unaware of the VA’s Aid and Attendance program, which Julia could have qualified for back in 2003 upon her move to the assisted living facility.  She has lost out on nearly $90,000 in benefits over that 7 year period.  That money could have kept Julia in the place where she had thrived, for possibly 2 more years, before a move had to be made. 

Who knows?  Maybe her dementia would not have progressed as far if she stayed in the environment in which she had grown accustomed.  It’s also possible that she may pass away within those 2 years without ever having to move.  Unfortunately, Amy didn’t know enough about the situation (her family lives out of state), or soon enough, to be able to direct them to an elder law attorney who could have helped them qualify for these benefits.  But she wanted me to tell her family’s story because it illustrates how we can help guide families through the elder care journey if we get to them early enough.  By tapping into any and all possible sources of payment we can often keep your loved ones in the safest and best environment for them, and reduce the likelihood that you are forced to make a decision purely because you are out of money.

 Specifically, we are talking about a specific VA program (of which there are many) called Aid and Attendance.  This is a non-service connected pension available to wartime veterans and their spouses who are deemed disabled and in need of aid and attendance.  The disability stems not from a service related injury but typically from declining health caused by the aging process.  Veterans and their surviving spouses can qualify for as much as $1949 per month of income to help pay the costs of that care.

 But, as most applicants are elderly, and the application process can take months, some die while their claims are “pending”.  VA regulations provide that certain “qualified” persons can continue on with the application.  Those persons include the veteran’s spouse and the veteran’s children.  However, not all spouses or all children are “qualified”.

 The spouse must have been married to the veteran at the time of the veteran’s death and lived with the veteran continuously from the date of marriage to the date of death and has not remarried.  The child must be under age 18 or one who became permanently incapable of self-support before reaching 18 or who is not yet 23 and pursuing a course of instruction at an approved educational institution.  In each case that qualified member can be substituted for the veteran and complete the VA claim.

 And what if you don’t fall into any of the above situations? Then the claims dies with the veteran.  However, any person who paid for the veteran/claimant’s last illness and burial expenses may file for accrued benefits to be reimbursed for those out of pocket costs.  If, for example, the veteran was single and a child was paying for care at home or at an assisted living facility or nursing home, as long as the expenses can be linked to the last illness the child can seek reimbursement from the VA.  For many families  that can mean recouping as much as $10,000 in VA benefits on an application that may have been pending for 6 months before the parent died.

 That statement is incorrect and leads to many veterans foregoing as much as $1949 of tax free income each month that can help pay for assisted living care.  But it is easy to understand why so many make this mistake.  It’s because the Medicaid waiver programs that pay for this type of care have an income cap of $2022 per month.  So naturally, the concern is that the additional VA income will push me over that income cap.

 Except that not all income is treated as income for Medicaid purposes.  The VA Aid and Attendance benefit falls into that category.  It does not constitute “countable income”.  In fact, there is a Medicaid Communication issued by the New Jersey state agency that administers Medicaid, clearly stating that the benefit will not be counted for financial eligibility purposes.  I should also note that Medicaid won’t deny an application if someone does not apply for VA benefits.  That can also be a point of confusion  since Medicaid does require applicants to apply for other benefits that they may be eligible for, such as disability. 

 Another point of confusion is that while the VA benefit is not counted for eligibility purposes, it is included with all other income when determining the amount of contribution towards the cost of care.  This is the cost sharing aspect to Medicaid assisted living benefits.  How much you pay for your own care and how much Medicaid pays depends on your income.  However, once VA receives notification of Medicaid benefits received it will reduce its pension to $90 per month.

 As you can see, it’s tough navigating through the long term care system alone.  It can cost you literally thousand of dollars a year if you don’t get the right information.

 There are a number of different VA programs, many which are not publicized.  This results in many veterans and their families losing out on benefits for which they are eligible.  The Aid and Attendance program is one such program.  Eligible wartime veterans can receive as much as $1954 per month of tax free income. 

 There are income and asset limits to qualify.  Single applicants can have no more than about $40,000 in assets and married applicants under about $80,000 (primary residence is exempt).  The income limits are too complicated to explain in a short post such as this, but before you jump to the conclusion that you do not qualify it is best to consult with a knowledgeable elder law attorney because so often restructuring your assets can result in immediate qualification.  For more information I suggest you sign up for my free e-course on VA benefits www.learnvabenefits.com/hauptman.

 So, on this Memorial Day, as you salute a veteran you can also do so much more by alerting your veteran loved one that help may be available.

The VA doesn’t do a good job of publicizing its benefits and services so getting accurate information is never easy.  There is a program of services under what the VA calls the Geriatric and Extended Care Program.  These include programs that provide care in a veteran’s home or in a community setting such as adult day care, specialized services for rehabilitation following, amputation, stroke, traumatic brain injury and spinal cord injury, physical therapy and home hospice care.  Keep in mind that the range of services can vary greatly depending on where you live and which health care network the VA has charged with providing those services.

Uncovering and understanding the eligibility requirements is the harder part.   Unlike the Aid and Attendance program which is available to veterans and their spouses, the Extended Care Program is only available to veterans who received a discharge under honorable conditions.  It is, however, not limited to veterans who served during wartime (again, unlike Aid and Attendance).  There is no length of service requirement for vets who enlisted before 1980.

There is a co-pay requirement applicable to the nonservice connected veteran, that is, a veteran who’s injury or illness is not linked to his military service (which is the case with most of our elderly clients).  In order to be eligible the veteran’s income must not exceed  the maximum annual pension rate for the Aid and Attendance program.  The co-pay generally ranges from $5 to $97 per day, depending on the particular service received.

What I concluded from my research so far is that  the Extended Care Program is another option, another piece of the long term care puzzle.  And with proper guidance our clients may be able to tap into a valuable source which will help lessen the risk that they will run out of money and options when they reach the next step in the long term care journey.

As is often the case with government benefits, the rules can be confusing.  Similar to the Medicaid program applicants must meet certain income and asset limits.  The pension amount is determined by a specific formula.  Unreimbursed medical expenses are subtracted from gross income.  That number is then subtracted from the maximum pension amount to determine the applicant’s pension amount.  It is important to understand that the cost of the assisted living facility and home health aides is usually counted as an unreimbursed medical expense.  In many cases, it becomes easy to qualify for the maximum pension amount.

There is also an asset limit, approximately $40,000 for a single individual, $80,000 for married couples.  Unlike the Medicaid program, however, there is no lookback period or penalty for transferring assets.  This means that one can transfer assets to get below the asset limits and immediately qualify for Aid and Attendance.

However, things are not that simple.  (They rarely are when it comes to the long term care system and government benefits).   Transferring assets can result in additional benefits from the VA but those same transfers will result in ineligibility for Medicaid.  Now, that’s not to say that one should forget about Aid and Attendance.  It does, however, require a carefully drafted plan so that should the applicant need the next level of care down the road (ie. nursing home care) the applicant will be able to qualify. 

Consulting with a knowledgeable elder law attorney who will help a family plan for the next level of care, not just the care that is needed now, is advisable.