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Medicaid and Long-Term Care Nathan Ziegler & Associates Lee Franks, Associate.

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Presentation on theme: "Medicaid and Long-Term Care Nathan Ziegler & Associates Lee Franks, Associate."— Presentation transcript:

1 Medicaid and Long-Term Care Nathan Ziegler & Associates Lee Franks, Associate

2 Introduction A little personal background: 1. B.Sc. Geological Eng., Colorado School of Mines, 1987 2. Exploration Geologist, Indonesia – gold, TX – sulfur, 1992 3. Accounting & Finance Student TTU, 1993 4. M.A. Energy & Min. Resources, UT, 1994 5. Underemployed, Earned Teaching Certificate, 1997 6. Secondary Science Teacher, 2005 7. J.D. Texas Tech School of Law, 2008 8. Attorney practicing elder law, Present

3 Who Should be Concerned About Medicaid? A Little Context Aging population Fewer children per couple Mobile society – distance separates generations Major medical advances, at least physical More people living into incapacity Serious growth in living facilities catering to seniors

4 Who Should be Concerned About Medicaid? Some Cost Figures Nursing home care in Texas exclusive of medicines and medical care, semi- private room - $3,990/mo Lubbock Area Costs: Small town - $2,700; Plainview - $3,800; Lubbock - $4,200 Private facilities – single room, lots of amenities, $5,000+

5 Who Qualifies for Medicaid Long-Term Care? (Warning: this general overview does some violence to precision) Single Person Under 65 & disabled or over 65 with Medical Necessity Income less than $2,022/mo Countable resources (assets) less than $2,000 Medicaid recipient (client) keeps $60/mo allowance if in N.H., $85 if CBA, rest of income to vendor (may be different for clients with VA benefits) Must Spend Down Excess Countable Resources

6 Who Qualifies for Medicaid Long-Term Care? Married Person (IS = Institutionalized Spouse, CS = Community Spouse) Under 65 & disabled or 65 with medical necessity IS income limited to $2,022 If CS income less than $2,739, can have enough of IS’s income to reach that figure Protected Resource Amount (PRA): CS keeps between $21,912 and $109,560 of CS’s share of combined countable resources (community- separate distinction irrelevant). IS keeps up to $2,000. Must Spend Down Excess Resources

7 So What Is Spend Down? NOT Spin Down - no planning default, i.e. assets sold or used up until Applicant eligible Spend Down – Converting countable resources into exempt resources (or occasionally into income) When are countable resources determined? 12:01 a.m. the first day of the month the application is filed This date also establishes the Look Back Date (later) Application Date Is Critical & in Applicant’s Control

8 What Are Exempt Resources? Things Applicant Can Spend Countable Resources On The homestead – up to $500,000 equity A car regardless of value (Medicaid Cadillac) Personal effects (no Picasso’s, no Ming vases, etc) Prepaid funeral contract – must be irrevocable Burial accounts – up to $1,500 each family member Cemetery plots – for Applicant & family (For now) transfers made under UTMA But be wary of Uncompensated Transfers

9 What Is an Uncompensated Transfer? Simple definition: Gift made to qualify for Medicaid Medicaid presumption: All gifts are for that purpose Look Back Period: Five years from Look Back Date Partial Uncompensated Transfer: Overpayment for goods or services Transfer for FMV: Not uncompensated, not a gift (May include irrevocably contracted future services)

10 Consequences of Uncompensated Transfers? Penalty period: one day of private pay for every $130.88 given away, or 1 month for every $3990 Example: $130,880 gift = 1000 day penalty (2 yr & 9 mo) Period runs from date Applicant otherwise qualifies Applicant entitled to Medical Assistance Only (MAO), but not nursing home care – must pay for the bed Status in Medicaid vernacular: “Mason Manor”

11 Consequences of Uncompensated Transfers? Dealing With Gifts Gifts can be returned in full, in part, on installment Penalty reduced by time served AND by return from donee at rate of 1 day/$130.88 This Give Back Strategy can be critical part of Medicaid and estate planning Gifts into irrevocable common law trusts prior to Medicaid need may offer asset protection opportunity

12 What is Medicaid Estate Recovery? The State Can Get Its Money Back The State may recover funds expended on a Medicaid client from deceased client’s probate estate If probate estate includes the home, the State may encumber the home Revocable living trusts (RLTs) not good, no homestead exemption on homes in RLTs

13 What About Long Term Care Insurance? Basics Long-term care could be necessary at any age  43% of claims for folks under 65 May cover skilled care or personal care (ADLs) Duration of care unpredictable  On average, 65+ will need 3 yrs of long-term care Needs may change over time Not just for nursing homes  Most recipients live at home or with relatives

14 Long Term Care Insurance Time to Buy – relatively young & healthy Benefit Triggers – usually 2 ADLs for 90 days, cognitive impairment, care by licensed health care pro Elimination period – period after trigger before pmts Benefit amount – depends on premium and whether home health care rider, check care costs your area Benefit period – more premium, more period Guaranteed renewable – subject to usual issues Premium Increase – Policies w/variable rates have rate increases, but only if everyone in class treated same Tax Qualification – If tax qualified, premiums may be part deductible (esp C-Corp), benefits not subject to income tax

15 Long Term Care Insurance Texas required options (may be waived in writing)  Inflation protection  Nonforefeiture benefit – some benefits received despite lapse or cancellation Additional options  Waiver of premium – no premium while on claim  Restoration of benefits – specified period after pmts end  Refund of premiums – only by rider, terms vary

16 Texas Partnership LTC Insurance Dollar-for-dollar resource protection – countable resource limit increased per dollar spent by insurer AND same resource amount MERP-protected Inflation protection – all Partnership policies Tax qualification – all Partnership policies State-to-state coverage – About 35 states have reciprocity agreement

17 Texas Partnership LTC Insurance Companies American General Assurity Berkshire Genworth John Hancock Lifesecure Massachusetts Mutual Physician’s Mutual Prudential Sterling Transamerica United Security

18 Long Term Care Insurance Good for whom? Resources in excess of $75,000, besides house and car Annual retirement income of at least $25,000 - $35,000 individual, and $35,000 - $50,000 couple Able to withstand modest premium increases over time C-Corps may expense premiums

19 Strategies to Maximize Preserved Assets Under Medicaid 1. Optimize the Spend Down process 2. Keep the Homestead out of probate 3. Utilize effective gifting strategies 4. Investigate Long Term Care Insurance

20 Philosophy of Nathan Ziegler & Associates “Traditional” estate planning effectively distributes assets upon death and avoids estate taxes, but “Traditional” estate planning is not as effective at planning for incapacity, e.g., POAs, personal care plans, and “Traditional” estate planning does not contemplate Spend Down or MERP should Medicaid become necessary

21 Philosophy of Nathan Ziegler & Associates We also think that: Clients facing the possible need for Medicaid find value in a firm that understands the application process and the complex and ever-changing eligibility rules Clients find value in a firm that offers the real possibility of extending their control over how and when their remaining assets will be used for their final care, if that indeed becomes necessary

22 Medicaid and Long-Term Care Thanks for your time

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