NEW MEDICAID RULES Presented by Donald D. Vanarelli, Esq. Certified Elder Law Attorney Registered Guardian Accredited Professional Mediator

Overview of Government Sources for Payment of Long Term Care Costs

Long Term Care Long Term Care refers to the kind of care a person needs when he or she is unable to care for himself or herself due to illness, frailty or cognitive impairment. Long Term Care is sometimes referred to as “Custodial Care”.

Custodial Care Custodial Care (sometimes called Personal Care) is the level of care provided to residents of ALFs and NHs. Custodial Care is assistance provided with activities of daily living (ADLs). ADLs include bathing, eating, dressing, toileting, continence and transferring. Compare: Custodial Care vs. Skilled Nursing Care

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

The Need for Long Term Care 1 of 2 women and 1 of 3 men who reach the age of 65 will use a nursing home at some point during their lives. 40% of nursing home residents are between 18 and 64 years of age. Average stay in NH years 7 in 10 individuals will need home health care.

The Cost of Long Term Care Average cost of 24 hour Home Health Aides provided by an agency - $4,500 per month, or $54,000 per year. Range of costs charged by Assisted Living facilities - $4,500 - $6,500 per month, or $54,000 - $78,000 per year. Typical cost of Nursing Home care in New Jersey - $8,000 per month, or $96,000 per year.

Who Pays For Long Term Care? 1. Private Pay49% 2. Medicaid44% 3. VA Benefits4% 4. Medicare2% 5. Private Long Term Care Insurance1%

Compare Medicare and Medicaid Medicare is an insurance program. Medicaid is a welfare program. Medicare is for elderly and disabled people regardless of their income or resources. Medicaid is for elderly and disabled people with low income and resources.

Long Term Care Costs Covered by Medicare 1.Home Health Care 2.Nursing Home Care

Medicare - Home Health Care Aides Covers up to 100 home visits per “spell of illness”. Preconditions to payment: prior hospital stay of at least 3 days and home health care initiated within 14 days of discharge. Beneficiary must be homebound and need skilled nursing care, physical or speech therapy, NOT custodial care.

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.

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

Overview of the Nursing Home Medicaid Program in New Jersey

Medicaid Joint Federal and State Program Provides medical assistance for financially eligible persons who are aged, blind or disabled.

General Eligibility 1.U.S. Citizen or legal alien 2. New Jersey Resident 3. Age 65 or older, blind or disabled 4. Financial Limitations

Income and Resources Limits Income - all income is counted in determining eligibility Income cap - Community Medicaid programs which pay for home health aides and care in Assisted Living facilities have an income cap. In 2008, the cap is $1,911/month. No cap for Nursing Home Medicaid.

Resource Limits Countable resources - all assets in the sole name of applicant, in the sole name of spouse, or in joint names, either with the spouse or another person. Includes pension and retirement assets of BOTH the applicant and spouse. Resource Limits - $2,000 for an individual and $3,000 for a couple. Excess resources - must be spent down.

Excludable Resources Home Automobile Personal Effects and Household Goods Life Insurance - Face Value under $1, Medical Equipment Inaccessible Resources Irrevocable Burial Fund

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 Applicable Look-back Periods - a. 36 months for most transfers. b. 60 months for transfers to a trust.

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 during the 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 uncompensated value of the transferred resource by the average monthly cost for nursing home care as calculated by Medicaid = $6, as of November 1, 2007.

Exempt Transfers Transfer Home To Transfer Home To CS CS Disabled Child Disabled Child Caregiver Child Caregiver Child Sibling with an equity interest Sibling with an equity interest Transfer Non-Home Assets To Transfer Non-Home Assets To CS CS Disabled Child Disabled Child

Exempt Transfers, cont’d Transfer To Trust for Disabled Child Transfer To Trust for Disabled Child Disability Annuity Trust Disability Annuity Trust (d) (4) (A) Trust (d) (4) (A) Trust Pooled Trust Pooled Trust

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 in 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. Effective January , 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 Asset Preservation Planning.

Estate Planning When An Individual is Facing Catastrophic Nursing Home Care Medicaid Planning for an individual facing catastrophic nursing home care typically involves the strategic transfer of the Medicaid applicant’s assets.

Estate Recovery: The Medicaid Lien Federal and State law requires the States to seek, from the estate of a deceased Medicaid recipient, recovery of all Medicaid benefits paid when the recipient was 55 years of age or older when the Medicaid benefits were received.

New Medicaid Rules

Increased Spousal Allowance in “Exceptional Circumstances” Before 1988, nearly all of a married couple’s assets had to be depleted before either could be eligible for Medicaid, leaving the spouse who remained in the community essentially destitute.

Increased Spousal Allowance in “Exceptional Circumstances” (Con’d.) In response, Congress enacted MCCA, designed to end the CS’s pauperization by assuring that the CS had a sufficient amount of income and resources available while the spouse was in a nursing home receiving Medicaid.

Increased Spousal Allowance in “Exceptional Circumstances” Cont’d. In H.D. v. DMAHS, Docket No. A T2, New Jersey’s appellate court held in May 2005 that the CS resource allowance could be increased “due to exceptional circumstances resulting in financial duress”. Expenses which could lead to an increase in the CS allowance include noncovered medical expenses; amounts to maintain or repair the home; and amounts necessary to preserve an income- producing asset.

Increase in the Average Monthly Cost of Nursing Home Care Recently, the New Jersey Medicaid agency increased the average monthly cost of nursing home care, thereby increasing the penalty divisor, to $6, per month.

Medicaid Lien on Testamentary Trust Assets Under federal and state Medicaid laws, assets left to a Medicaid recipient in a testamentary trust are not countable.

Medicaid Lien on Testamentary Trust Assets (Cont’d.) In the recent case of DeMartino v. DMAHS, 373 N.J. Super. 210 (App. Div. 2004), the New Jersey appellate court held that assets in a testamentary trust established under the CS’s will for the benefit of the IS receiving Medicaid were subject to the Medicaid lien.

Annuities For years, New Jersey state law has prohibited the use of annuities to protect family assets for the CS even though the use of annuities for this purpose is permitted under federal law. Specifically, assets in annuities which exceed the CSRA are countable and must be spent-down before the IS is eligible for Medicaid.

Annuities (Cont’d.) Two recent cases, Estate of FK v. DMAHS, 2005 WL (Jan. 4, 2005) and A.B. v. DMAHS, Docket No. A T2 (Jan. 21, 2005), held that NJ’s prohibition on annuities violates federal law.

Annuities (Cont’d.) Now, single premium, immediate annuities with pay-outs equal to or less than the life expectancy of the CS which exceed the amount of the CSRA may be used to protect assets and improve the quality of the CS’s life.

Medicaid Planning by Guardians Until recently, NJ Courts would not permit guardians to engage in estate planning for Medicaid eligibility on behalf of their wards even though such planning strategies would have been permissible if done by a ward during his or her competency.

Medicaid Planning by Guardians (Cont’d.) In re Keri, 181 N.J. 50 (2004) - The NJ Supreme Court held, for the first time, that guardians could engage in Medicaid planning on ward’s behalf, and placed Medicaid planning on a par with traditional estate planning.

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