LONG-TERM CARE PLANNING UNDER THE NEW MEDICAID RULES Presented by Donald D. Vanarelli, Esq. Certified Elder Law Attorney Registered Guardian R. 1:40 Approved Mediator

Long Term Care Planning is Critical 1.Older people get sick. Most illnesses are now manageable, resulting in chronic, or long-term, debilitating medical conditions. 2.When you get sick, you need care. 3.Long-Term Care is costly. In New Jersey, the cost is substantial. 4. Paying for care can deplete your savings and devastate your family.

If you cannot live independently, what care options are available ? 1.Stay at Home - Home Health Care 2.Move in with Family 3.Assisted Living Facility 4.CCRC 5.Nursing Home

Who Pays for Long-Term Care? 1.Private Pay49% 2.Medicaid44% 3.VA Benefits 4% 4.Medicare 2% 5.Private Insurance 1%

Rules for Medicare Payment of Nursing Home Care Immediate prior hospital stay of 3 days Admitted to NH within 30 days of hospital discharge Covers skilled nursing care or rehabilitation only, NOT custodial care Pays only when your condition is improving, NOT after you have stabilized

How Much Does Medicare Pay? Maximum Coverage days Day Medicare pays 100% of covered charges Day all covered charges except coinsurance amount. Year 2008 co-insurance payment = $128/day, or about $3,840/month Day 101-on - on your own

Statistics Show Close to 50% of the population over age 65 will spend time in a nursing home. Average Stay years Typical Cost in New Jersey - approx. $8,000.00/month, or $96,000.00/year Even if you are not admitted to a nursing home, older Americans usually receive care, even if it is provided in another setting - often at home.

NURSING HOME MEDICAID Joint Federal and State Program Provides medical assistance for financially eligible persons who are aged, blind or disabled

Administration Three (3) Levels of administration - Federal - CMS State - DMAHS County - CWB Both Federal and State authorities issue regulations, and interpretations vary from county to county.

Income All income is counted, including wages, SSA, pensions, annuities, interest, in-kind income, dividends, etc. There is an income cap on all Community Medicaid programs in New Jersey - $1,911/month.

Countable Resources Countable resources - all assets in the sole name of husband, in the sole name of wife or in joint names, either with the spouse or another person. Includes pension, IRA and retirement assets of the Community Spouse (if accessible).

Excludable Resources Home, but only if equity is less than $500,000. If equity exceeds $500,000, the excess must be used to pay care costs. Automobile Personal Effects and Household Goods Life Insurance - Face Value under $1, Medical Equipment Inaccessible Resources Irrevocable Burial Fund

Resource Limits 1. Medicaid Only - countable resources may not exceed $2,000 for an individual and $3,000 for a couple who both apply for Medicaid. 2. Medically Needy - countable resources may not exceed $4,000 for an individual and $6,000 for a couple who both apply for Medicaid. 3. Excess resources must be spent down.

Transfer of Resources Rules “Look-back period” - Period which Medicaid examines upon the submission of a Medicaid application to determine an applicant’s countable assets, and the disposition of an applicant’s assets.

Transfer of Resources Rules Look-back Period Under the New Medicaid Law- 5 years, or 60 months

Transfer of Resources Rules “Penalty period” - Period of Medicaid ineligibility imposed as a result of a transfer of assets for less than fair market value (i. e., a gift) made during the 60- month look-back period.

Transfer of Resources Rules The length of the penalty period is theoretically equal to the number of months that the transferred assets would have paid for care in a nursing home.

Transfer of Resources Rules Duration of Penalty Period - Determined by dividing the value of the transferred asset by the statewide average monthly cost of nursing home care as calculated by Medicaid = $6,

Transfer Penalty Start Date If a gift was made during the look-back period, the resulting penalty period starts on the day the applicant applies for Medicaid and would be eligible but for the penalty period resulting from the gift.

Example of Penalty Period Under New Medicaid Rules Estate Value=$100,000 Gift=$50,000 Date of Gift=3/1/06 Date of Admission to NH=12/1/06 Average Monthly Cost of NH care=$5,000 Date of Application for Medicaid=10/1/07 Start Date of Penalty Period=10/1/07 Penalty Period (10 months)=10/1/07-7/31/08 Date of Eligibility for Medicaid=8/1/08

Example II: No Round-Downs Gift=$9,000 Monthly NH Cost=$5,000 Transfer Penalty=9,000/5,000 = 1.8 months The new law prohibits rounding down the penalty period to a whole number (in this case, 1 month of ineligibility). Instead, partial months of ineligibility must be imposed. The new law also requires that all gifts made during the look-back period be aggregated.

Exceptions to Transfer of Resources Rules Home - transfer of the home to the following persons is exempt: Spouse Child under age 21, or blind or disabled child Sibling with existing equity interest who resided in home for one year or more immediately preceding institutionalization “Caretaker” child

Exceptions to Transfer of Resources Rules Assets other than the home - Certain transfers of assets other than the home are also exempt: Transfer to the Community Spouse Transfer to a trust for the sole benefit of the Community Spouse Transfer to a minor, blind or disabled child

Exceptions to Transfer of Resources Rules Transfer to a trust for the sole benefit of a minor, blind or disabled child Transfer the assets of a disabled Medicaid applicant to a trust for the sole benefit of the disabled applicant as long as that applicant is under age 65 when the trust is funded Transfer to a trust established by a non-profit association Assets transferred for a purpose other than to qualify for Medicaid

Spousal Anti-Impoverishment Provisions Medicaid rules designed to avoid impoverishing the Community Spouse: 1. Income of the Community Spouse is not deemed available to the Institutionalized Spouse to pay for the cost of care.

Spousal Anti-Impoverishment Provisions 2. MMMNA - Community Spouse is entitled to a Minimum Monthly Maintenance Needs Allowance (MMMNA). The MMMNA is $1, through July 1, The income of the community spouse is subtracted from the MMMNA. The MMMNA may come from the income of the Institutionalized Spouse.

Spousal Anti-Impoverishment Provisions 3. Excess shelter allowance - Community Spouse is entitled to an excess shelter allowance to the extent that the shelter expenses exceed $ per month. Shelter expenses include rent or mortgage, taxes, insurance and utilities.

Spousal Anti-Impoverishment Provisions 4. CSRA - Community Spouse is entitled to a Community Spouse Resource Allowance (CSRA) equal to one-half of the countable assets, subject to limitations. The minimum which the Community Spouse may retain is $20,880 and the maximum is $104,400.

Spend-Down Contrary to popular belief, the amount in excess of the CSRA need not be spent on the Institutionalized Spouse. Rather, the “spend-down” can be spent for the benefit of the Community Spouse, or otherwise preserved for the heirs. This is the heart of Long Term Care Planning.

Planning Strategies Under the New Medicaid Law WARNING: ALL STRATEGIES ARE NEW and UNTESTED

New Medicaid Planning Strategies: Buy Exempt Assets Use assets to purchase exempt assets: Buy a house (but equity must be less than $500,000); make home repairs and improvements; purchase household furnishings; buy a cemetery plot or funeral trust..

New Medicaid Planning Strategies: Pay Debts Pay debts: Prepay your mortgage; prepay RE taxes and homeowner’s insurance; pay all outstanding debts, including credit card debt and debts owed to children.

New Medicaid Planning Strategies: Large Gifts Transfer Assets & Pay for 5 Year’s of Care - Retain 5 years of private pay - Consider Inflation Factor Transfer all Assets - Child Gets Medical Deduction

New Medicaid Planning Strategies: Smaller Gifts Smaller Gifts made during the Look-Back Period cannot be made, except as described below (maybe): Transfer Assets Apply for Medicaid/Denial Return 1/2 of Assets Use Returned Assets to Pay for Care Reapply for Medicaid

New Medicaid Planning Strategies: Cash/Home Assume the Medicaid applicant own a home and cash assets: Transfer Home - Consider Capital Gains Tax Use Cash to Pay for Care

New Medicaid Planning Strategies: Reverse Mortgage Borrow down to $500,000 Use Cash to Pay for Care Transfer Home to Children

New Medicaid Planning Strategies: Annuities Annuities - exempt from the transfer of assets penalties under the new Medicaid rules if the annuity is: Owned by Retirement Account OR Irrevocable Non-Assignable Actuarially Sound Equal Payments/No Balloon State Primary Beneficiary

New Medicaid Planning Strategies: Life Care Agreement Care provided in Child’s Home or Parent’s Home Coordinate - child coordinates care like a geriatric care manager Hands-On Care Taxable Income Withholdings Document Value of Services

New Medicaid Strategies: Notes, Loans & Mortgages New Medicaid Strategies: Notes, Loans & Mortgages No Transfer If the Loan Is: - Actuarially Sound - Equal Payments/No Balloon - Market Rate of Interest - No Cancellation on Death

New Medicaid Strategies: Purchase Life Estate Capital Gains for Home Owner 1 Year Residency required under the New Medicaid law to be valid.

New Medicaid Planning Strategies: Divorce Must be Arms Length Equitable Distribution QDRO

New Medicaid Planning Strategies: Buy LTC Insurance 5 Year Policy Inflation Factor Transfer Assets - Policy Pays for Care Applicant may be able to shield assets if New Jersey joins the Long Term Care Partnership

New Medicaid Strategies: Transfer Home to Exempt Person Transfer Home to Exempt Person: Spouse, Child under age 21, Blind or Disabled Child, Sibling with equity interest, or Caretaker Child.

New Medicaid Planning Strategies: Trusts Specialized Trusts - for spouse, disabled applicant under age 65, income trust, disabled child.

ESSENTIAL ESTATE PLANNING 1. New Will for Community Spouse. 2. Power of Attorney, or guardianship. 3. Advance Medical Directive. 4. Change beneficiary designations. 5. Change ownership of assets to CS. 6. Long term care insurance for CS.

Community Medicaid 1. Community Care Program for the Elderly and Disabled (CCPED) 2. Pharmaceutical Assistance to the Aged and Disabled (PAAD)/Senior Gold 3. Respite Care 4. Assisted Living (AL)

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