Fong Law Group is a premier law firm in Southern California. We have been serving Cali-fornia for more than a decade. We are a boutique law firm focusing on meeting client’s needs.
Buying long-term care insurance is one way to protect against the high cost of long-term care. However, this type of insurance may not be for everyone, so consider all your options.
Long-term care – care in a nursing home or at home -- may be paid for in four main ways:
Out-of-pocket. If you have sufficient resources, you can pay for your long-term care needs with money you have saved.
Medicare. Medicare covers short-term nursing home stays after an illness or injury that requires hospitalization. Medicare covers up to 100 days of "skilled nursing care" per illness.
Medicaid. If you have limited resources, Medicaid will pay for nursing home care. In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in "countable" assets (it may be higher in some states).
Long-term care insurance. With long-term care insurance, you pay monthly premiums to buy a policy that pays your long-term care costs if you are admitted to a nursing home or need home care (depending on the policy).
Determining whether you need long-term care insurance depends, in part, on your financial situation. The cost of a long-term care insurance policy varies considerably, depending on your age when you purchase the policy, the benefit period, and the level of benefits, among other things, but the premiums can be expensive. Therefore, if you have the resources to self-insure your long-term care and still have money left over, you likely don’t need to buy a long-term care policy. On the other hand, if you cannot afford to pay monthly long-term care premiums, you will likely be able to qualify for Medicaid.
Another factor to consider is your family’s health history. Most nursing home stays are short-term and paid for by Medicare. A common reason for needing extended long-term care is dementia. If you know you have a family history of Alzheimer’s disease, for example, it may make more sense to buy insurance.
Of course, we never really know what the future may bring. Long-term care insurance is like any insurance policy: we don’t know if we will ever need it. In general, long-term care insurance is something to consider if:
you have the resources to pay the premiums, even in retirement,
you want to preserve your estate for your heirs, and
Do you need an attorney for even "simple" Medicaidplanning? This depends on your situation, but in most cases, the prudent answer would be "yes."
The social worker at your mother's nursing home assigned to assist in preparing a Medicaid application for your mother knows a lot about the program, but maybe not the particular rule that applies in your case or the newest changes in the law. In addition, by the time you're applying for Medicaid, you may have missed out on significant planning opportunities.
The best bet is to consult with a qualified professional who can advise you on the entire situation. At the very least, the price of the consultation should purchase some peace of mind. And what you learn can mean significant financial savings or better care for you or your loved one. This may involve the use of trusts, transfers of assets, purchase of annuities or increased income and resource allowances for the healthy spouse.
If you are going to consult with a qualified professional, the sooner the better. If you wait, it may be too late to take some steps available to preserve your assets.
In some circumstances, immediate annuities can be ideal Medicaidplanning tools for spouses of nursing home residents. Careful planning is needed to make sure an annuity will work for you or your spouse.
An immediate annuity, in its simplest form, is a contract with an insurance company under which the consumer pays a certain amount of money to the company and the company sends the consumer a monthly check for the rest of his or her life.
In most states the purchase of an annuity is not considered to be a transfer for purposes of eligibility for Medicaid, but is instead the purchase of an investment. It transforms otherwise countable assets into a non-countable income stream. As long as the income is in the name of the community spouse, it's not a problem.
In order for the annuity purchase not to be considered a transfer, it must meet the following basic requirements:
It must be irrevocable--you cannot have the right to take the funds out of the annuity except through the monthly payments.
You must receive back at least what you paid into the annuity during your actuarial life expectancy. For instance, if you have an actuarial life expectancy of 10 years, and you pay $60,000 for an annuity, you must receive annuity payments of at least $500 a month ($500 x 12 x 10 = $60,000).
If you purchase an annuity with a term certain (see below), it must be shorter than your actuarial life expectancy.
The state must be named the remainder beneficiary up to the amount of Medicaid paid on the annuitant's behalf.
Example: Mrs. Jones, the community spouse, lives in a state where the most money she can keep for herself and still have Mr. Jones, who is in a nursing home, qualify for Medicaid (her maximum resource allowance) is $128,640 (in 2020). However, Mrs. Jones has $238,640 in countable assets. She can take the difference of $110,000 and purchase an annuity, making her husband in the nursing home immediately eligible for Medicaid. She would continue to receive the annuity check each month for the rest of her life.
In most instances, the purchase of an annuity should wait until the unhealthy spouse moves to a nursing home. In addition, if the annuity has a term certain -- a guaranteed number of payments no matter the lifespan of the annuitant -- the term must be shorter than the life expectancy of the healthy spouse. Further, if the community spouse does die with guaranteed payments remaining on the annuity, they must be payable to the state for reimbursement up to the amount of the Medicaid paid for either spouse.
All annuities must be disclosed by an applicant for Medicaid regardless of whether the annuity is irrevocable or treated as a countable asset. If an individual, spouse, or representative refuses to disclose sufficient information related to any annuity, the state must either deny or terminate coverage for long-term care services or else deny or terminate Medicaid eligibility.
Annuities are of less benefit for a single individual in a nursing home because he or she would have to pay the monthly income from the annuity to the nursing home. However, in some states immediate annuities may have a place for single individuals who are considering transferring assets. Income from an annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer. In such cases, the annuity is usually short-term, just long enough to cover the penalty period.
In short, immediate annuities are a very powerful tool in the right circumstances. They must also be distinguished from deferred annuities, which have no Medicaid planning purpose. The use of immediate annuities as a Medicaid planning tool is under attack in some states, so be sure to consult with a your attorney before pursuing the strategy described above.
The COVID-19 pandemic has been particularly devastating for nursing homes and their residents. Aside from the tragically disproportionate loss of life, care for surviving residents has been delayed or interrupted due to infection, facility lockdowns or other health system disruptions. In such cases, Medicare beneficiaries who qualified for skilled nursing facility (SNF) coverage may be eligible for an additional 100 days of coverage. Whether all qualified beneficiaries will actually get the extended coverage is another question.
Medicare does not pay for long-term care, just for "medical" care from a doctor or other health care professional or in a hospital. But there's a partial exception to this rule. Medicare will pay for up to 100 days of care per “spell of illness” in an SNF as long as the following two requirements are met:
Your move to an SNF followed a hospitalization of at least three days; and
You need and will be receiving skilled care.
After the 100 days of coverage ends, a new spell of illness can begin if the patient has not received skilled care, either in an SNF or a hospital, for a period of 60 consecutive days. The patient can remain in the SNF and still qualify as long as he or she does not receive a skilled level of care, but only custodial care, during that 60 days.
Following the declaration of a public health emergency this spring, the federal Centers for Medicare and Medicaid Services (CMS) issued a letter granting a waiver to allow Medicare beneficiaries coverage for an additional 100 days in an SNF, without satisfying the new spell of illness requirement, in certain COVID-19 related circumstances. The letter stated that the policy will apply only to skilled-care beneficiaries whose process of care was interrupted by the public health emergency. (The letter also waived the three-days-in-a-hospital rule in certain cases.)
Six months after that letter, however, there is still confusion about which COVID-19 related circumstances qualify for the waiver. Importantly, according to the Center for Medicare Advocacy, CMS recently confirmed that beneficiaries do not necessarily have to have a COVID-19 diagnosis to qualify for the additional 100 days of coverage. Rather, as described by Skilled Nursing News, “[t]he question is whether the emergency situation interrupted the patient’s path to 60 consecutive days of non-skilled, custodial care.”
In an August 26, 2020, memorandum, CMS attempted to clarify how it would determine whether a disruption in care was related to the public health emergency: “This determination basically involves comparing the course of treatment that the beneficiary has actually received to what would have been furnished absent the emergency. Unless the two are exactly the same, the provider would determine that the treatment has been affected by – and, therefore, is related to – the emergency.”
However, in some cases, nursing homes do not understand how the waiver applies or are not inclined to help patients with a waiver application. The Center for Medicare Advocacy offers a detailed case example of an individual who appears to meet the criteria for additional Medicare coverage but who has encountered multiple barriers in getting it.
In addition to confusion over who qualifies for the extended coverage, the Center for Medicare Advocacy has found that the “waiver that extends SNF benefits by up to 100 days does not appear to afford beneficiaries the same rights as the first 100 days of statutory coverage,” including rights to appeal coverage denials. The Center reports that it “has received an increasing number of requests for guidance on expanded Medicare coverage in skilled nursing facilities.” In response, the organization has compiled self-help materials to assist beneficiaries and their advocates.
The Center is asking those with experiences pursuing coverage under the public health emergency rules, waivers, or guidance to contact it at Communications@MedicareAdvocacy.org
If you plan to move states, can you take your Medicare or Medicaid plans with you? The answer depends on whether you have original Medicare, Medicare Advantage, or Medicaid.
Medicare If you have original Medicare (Plans A and B), you can move anywhere in the country and you should still be covered. Medicare is a federal program, run by the federal government, so it doesn’t matter what state you are in as long as your provider accepts Medicare. Your Medigap plan should also continue to cover you in the new state, but your premiums may change when you move. The exception is if you move to Massachusetts, Minnesota, or Wisconsin because those states have their own specific Medigap plans.
Both Medicare Part D (prescription drug coverage) and Medicare Advantage plans have defined service areas, which may or may not cover more than one state. If you have Part D or Medicare Advantage, you will need to determine if your new address falls within the plan’s service area. When you move to a new service area, you have a special enrollment period in which to change plans outside of the annual open enrollment period (which runs October 15th through December 7th). If you tell your current plan before you move, your special enrollment period begins the month before you move and continues for two full months after you move. If you tell your plan after you move, your chance to switch plans begins the month you tell your plan, plus two more full months.
Medicaid Medicaid is a joint federal and state program, with each state having its own eligibility rules. This means you cannot keep your Medicaid plan when you move to a new state. Medicaid eligibility depends on your income, your assets, and the level of care you need. If you have Medicaid and are planning to move, you should contact the Medicaid office in the state to which you are moving to find out the eligibility requirements in that state. Before you can apply for benefits in the new state, you need to cancel your benefits in the old state. You should file an application in the new state as soon as possible. Usually, if you qualify for benefits, the benefits will be retroactive up to three months before the date you applied. If you end up having to pay for any health care services out of pocket while you are waiting for your application to be approved, save the receipts since you may be able to get reimbursed.
Under our "system" of paying for long-term care, you may be able to qualify for Medicaid to pay for nursing home care, but in most states there's little public assistance for home care. Most people want to stay at home as long as possible, but few can afford the high cost of home care for very long. One solution is to tap into the equity built up in your home.
If you own a home and are at least 62 years old, you may be able to quickly get money to pay for long-term care (or anything else) by taking out a reverse mortgage. Reverse mortgages, financial arrangements designed specifically for older homeowners, are a way of borrowing that transforms the equity in a home into liquid cash without having to either move or make regular loan repayments. They permit house-rich but cash-poor elders to use their housing equity to, for example, pay for home care while they remain in the home, or for nursing home care later on. The loans do not have to be repaid until the last surviving borrower dies, sells the home or permanently moves out. (Warning: If both spouses are not on the reverse mortgage deed and the spouse who is on the deed dies first, the surviving spouse would be required to repay the mortgage loan in full or face eviction.)
In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. The lower the interest rate and the older the borrower, the more that can be borrowed. To find out how much you can get for your house, use a reverse mortgage loan calculator.
Homeowners can get the money in one of three ways (or in any combination of the three): in a lump sum, as a line of credit that can be drawn on at the borrower's option, or in a series of regular payments, called a "reverse annuity mortgage." The most popular choice is the line of credit because it allows a borrower to decide when he or she needs the money and how much. Moreover, no interest is charged on the untapped balance of the loan.
Although it is often assumed that an elderly person would want to use the funds from a reverse mortgage loan for health care, there are no restrictions--the funds can be used in any way. For instance, the loan could be used to pay back taxes, for house repairs, or to retrofit a home to make it handicapped-accessible.
Borrowers who take out a reverse mortgage still own their home. What is owed to the lender -- and usually paid by the borrower's estate -- is the money ultimately received over the course of the loan, plus interest. In addition, the repayment amount cannot exceed the value of the borrower's home at the time the loan is repaid. All borrowers must be at least 62 years of age to qualify for most reverse mortgages. In addition, a reverse mortgage cannot be taken out if there is prior debt against the home. Thus, either the old mortgage must be paid off before taking out a reverse mortgage or some of the proceeds from the reverse mortgage used to retire the old debt.
The most widely available reverse mortgage product -- and the source of the largest cash advances -- is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. High-end borrowers must look to the proprietary reverse mortgage market, which imposes no loan limits. The national limit on the amount a homeowner can borrow is $765,600.
Reverse mortgages are not right for everyone. Consult with your attorney about whether a reverse mortgage fits into your long-term care planning.
Although people are willing to voluntarily care for a parent or loved one without any promise of compensation, entering into a caregiver contract (also called personal service or personal care agreement) with a family member can have many benefits. It rewards the family member doing the work. It can help alleviate tension between family members by making sure the work is fairly compensated. In addition, it can be a be a key part of Medicaid planning, helping to spend down savings so that the elder might more easily be able to qualify for Medicaid long-term care coverage, if necessary.
The following are some things to keep in mind when drafting a caregiver contract:
Meet with your attorney. It is important to get your attorney's help in drafting the contract, especially if qualifying for Medicaid is a goal.
Caregiver's duties. The contract should set out the caregiver's duties, which can be anything from driving to doctor's appointments and attending doctor's meetings to grocery shopping to help with paying bills. The length of the term of the contract is usually for the elder's lifetime, so it is important to cover all possibilities, even if they are not currently needed. The contract can continue even if the elder enters a nursing home, with the caregiver acting as the elder's advocate to ensure the best possible care.
Payment. Payment to the caregiver can either be made with a lump-sum payment or in weekly or monthly installments. For Medicaid purposes, it is very important that the pay not be excessive. Excessive pay could be viewed as a gift for Medicaid eligibility purposes. The pay should be similar to what other caregivers in the area are making, or less. To calculate a lump-sum payment, take the monthly rate and multiply it by the elder's life expectancy. (Note that some states, Georgia for example, do not recognize the ability to create a lump sum contract based upon life expectancy.)
Taxes. Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives.
Other sources of payment. If the elder does not have enough money to pay his or her caregiver, there may be other sources of payment. A long-term care insurance policy may cover family caregivers, for example. Also, there may be state or federal government programs that compensate family caregivers. Check with your local Agency on Aging to get more information.
Reversing a three-year decline, the number of people covered by Medicaid nationwide rose markedly this spring as the impact of the recession caused by the outbreak of COVID-19 began to take hold.
Yet, the growth in participation in the state-federal health insurance program for low-income people was less than many analysts predicted. One possible factor tempering enrollment: People with concerns about catching the coronavirus avoided seeking care and figured they didn’t need the coverage.
Program sign-ups are widely expected to accelerate through the summer, reflecting the higher number of unemployed. As people lose their jobs, many often are left without workplace coverage or the money to buy insurance on their own.
Medicaid enrollment was 72.3 million in April, up from 71.5 million in March and 71 million in February, according to the latest enrollment figures released last week by the Centers for Medicare & Medicaid Services. The increase in March was the first enrollment uptick since March 2017.
About half of the people enrolled in Medicaid are children.
Illegal evictions of Medicaid nursing home residents are nothing new, but the coronavirus pandemic is exacerbating the problem, according to an investigation by the New York Times.
Some states have asked nursing homes to accept coronavirus patients in order to ease the burden on hospitals. Even as the virus has devastated nursing homes, some have been welcoming these patients, who earn facilities far more than do Medicaid patients. To make room for these more lucrative coronavirus patients, the Times found that thousands of Medicaid recipients have been “dumped” by nursing homes. Many of the residents were sent to homeless shelters.
Nursing homes make far more money from short-term Medicare residents than from Medicaid residents, especially since the federal Centers for Medicare and Medicaid Services changed the reimbursement formula last fall. Now, writes the Times, a nursing home can get at least $600 more a day from a Covid-19 patient than from other, longer-term residents. In other cases, it wasn’t about the money but simply pressure from states to accept Covid patients.
According to federal law, a nursing home can discharge a resident only if the resident's health has improved, the facility cannot meet the resident's needs, the health and safety of other residents is endangered, the resident has not paid after receiving notice, or the facility stops operating. In addition, a nursing home cannot discharge a resident without proper notice and planning. In general, the nursing home must provide written notice 30 days before discharge, though shorter notice is allowed in emergency situations. A discharge plan must ensure the resident has a safe place to go, preferably near family, and outline the care the resident will receive after discharge.
According to the New York Times, nursing homes have been discharging residents without proper notice or planning. Because long-term care ombudsmen have not been allowed into nursing homes, there has been less oversight of the process. Old and disabled residents have been sent to homeless shelters, rundown motels, and other unsafe facilities. The Times heard from 26 ombudsmen, from 18 states, who reported a total of more than 6,400 discharges during the pandemic, but this is likely an undercount. In New Mexico, all the residents of one nursing home were evicted to make room for coronavirus patients.
If you or a loved one are facing eviction, you have the right to fight the discharge. Contact your attorney to find out the steps to take.
To read the New York Times article about the evictions, click here.
Transferring assets to qualify for Medicaid can make you ineligible for benefits for a period of time. Before making any transfers, you need to be aware of the consequences.
Congress has established a period of ineligibility for Medicaid for those who transfer assets. The so-called "look-back" period for all transfers is 60 months, which means state Medicaid officials look at transfers made within the 60 months prior to the Medicaid application.
While the look-back period determines what transfers will be penalized, the length of the penalty depends on the amount transferred. The penalty period is determined by dividing the amount transferred by the average monthly cost of nursing home care in the state. For instance, if the nursing home resident transferred $100,000 in a state where the average monthly cost of care was $5,000, the penalty period would be 20 months ($100,000/$5,000 = 20). The 20-month period will not begin until (1) the transferor has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer. Therefore, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018 and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.
Transfers should be made carefully, with an understanding of all the consequences. People who make transfers must be careful not to apply for Medicaid before the five-year look-back period elapses without first consulting with an elder law attorney. This is because the penalty could ultimately extend even longer than five years, depending on the size of the transfer.
Be very, very careful before making transfers. Any transfer strategy must take into account the nursing home resident's income and all of his or her expenses, including the cost of the nursing home. Bear in mind that if you give money to your children, it belongs to them and you should not rely on them to hold the money for your benefit. However well-intentioned they may be, your children could lose the funds due to bankruptcy, divorce, or lawsuit. Any of these occurrences would jeopardize the savings you spent a lifetime accumulating. Do not give away your savings unless you are ready for these risks.
In addition, be aware that the fact that your children are holding your funds in their names could jeopardize your grandchildren's eligibility for financial aid in college. Transfers can also have bad tax consequences for your children. This is especially true of assets that have appreciated in value, such as real estate and stocks. If you give these to your children, they will not get the tax advantages they would get if they were to receive them through your estate. The result is that when they sell the property they will have to pay a much higher tax on capital gains than they would have if they had inherited it.
As a rule, never transfer assets for Medicaid planning unless you keep enough funds in your name to (1) pay for any care needs you may have during the resulting period of ineligibility for Medicaid and (2) feel comfortable and have sufficient resources to maintain your present lifestyle.
Remember: You do not have to save your estate for your children. The bumper sticker that reads "I'm spending my children's inheritance" is a perfectly appropriate approach to estate and Medicaid planning.
Even though a nursing home resident may receive Medicaid while owning a home, if the resident is married he or she should transfer the home to the community spouse (assuming the nursing home resident is both willing and competent). This gives the community spouse control over the asset and allows the spouse to sell it after the nursing home spouse becomes eligible for Medicaid. In addition, the community spouse should change his or her will to bypass the nursing home spouse. Otherwise, at the community spouse's death, the home and other assets of the community spouse will go to the nursing home spouse and have to be spent down.
Permitted transfers
While most transfers are penalized with a period of Medicaid ineligibility of up to five years, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:
Your spouse (but this may not help you become eligible since the same limit on both spouse's assets will apply)
A trust for the sole benefit of your child who is blind or permanently disabled.
Into trust for the sole benefit of anyone under age 65 and permanently disabled.
In addition, you may transfer your home to the following individuals (as well as to those listed above):
A child who is under age 21
A child who is blind or disabled (the house does not have to be in a trust)
A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.