Elder Law Update At Large Edition Apr 2010 Vol II

HOW NURSING HOMES AND ASSISTED LIVING FACILITIES CAN AVOID LARGE UNCOLLECTIBLE RESIDENT RECEIVABLES

There has been a common misconception that when a resident engages in Medicaid planning, it is not in the best interest of a nursing home or assisted living facility. What has become clear to us in our practice, however, is that many nursing homes and assisted living facilities now recognize that, without proper Medicaid planning, many of their residents who are at spend down levels will not automatically be qualified for Medicaid. This has the disastrous effect of leaving the nursing home, in many cases, with large uncollectible Accounts Receivable.

If the nursing home’s resident is unable to pay and cannot qualify for Medicaid, the nursing home has a very difficult, if not impossible task, of collecting the outstanding bill. Here are a couple of typical scenarios that have been reported to us by some of our colleagues:

Case #1:

A colleague of mine called us for assistance in connection with a case, where they received a call from a nursing home regarding one of its residents who had a nursing home bill that was over $30,000 in arrears. Apparently, the nursing home had been told several months ago that its resident had spent down all of her assets to the statutory $2,000 and had applied for Medicaid. However, the Medicaid application was denied and the resident had no money to pay the $30,000 outstanding bill.

The nursing home then learned that the application was denied because the resident owned a piece of land that she viewed as worthless because she had been trying to sell it for over the last two years without success.

Apparently, the resident had been listing the property for sale for two years but didn’t receive any offers and, thus, in her mind, the land was worthless. However, as we were able to demonstrate by a review of the Illinois Medicaid rules, the property was appraised at $30,000 and, therefore, was considered a countable asset, even though the resident was unable to sell it. The issue was taken to a fair hearing because the nursing home felt it was unfair to the resident who was trying to do everything possible to sell land; however, the resident died in the interim and the estate did not want to appeal. The nursing home was stuck with a $30,000 bill UNPAID.

With proper Medicaid planning, the resident could have made an uncompensated transfer to a relative while she still had countable assets in her possession for spend down. Then she could have waited out the ineligibility period. With proper Medicaid planning, the resident would not have applied prior to transferring the land and would have qualified upon application. The resident would never have incurred such a large bill and the nursing home would not now have such a large uncollectible Accounts Receivable.

Case #2:

In this case, a colleague called us to explain that he had received a call from one of the children of an Illinois nursing home resident that was denied Medicaid. Apparently, the mother had spent down her assets to less than the $2,000 statutory amount and could not understand why the application had not been approved. By the time the child had received a denial from the state of Illinois, the nursing home bills had grown to over $14,000.

The problem in this case was that, although the mother had less than $2,000 in her bank account, the mother also had an insurance policy with a face value of $3,000 that had cash value of $2,500. She thought that this policy would be exempt. However, under Illinois law, an individual having life insurance with a face value of more than $1,500 will be required to consider the cash value of the of the policy as a countable asset.

Had the proper Medicaid planning been done in advance, the life insurance policy would have been cashed out and the proceeds would have been funded into a prepaid funeral arrangement or otherwise spent down before the application for Medicaid was submitted. Again, the nursing home would not have been stuck with such a large unpaid bill.

Contact Mr. Ferraro to set up an IN-HOUSE Instructional Workshop at 847-292-1220.

 

 

Long Term Care Planning Attorneys

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Anthony B. Ferraro

Attorney-CPA

The Law Offices of Anthony B. Ferraro, LLC

The Estate & Trust, Elder and Asset Protection Law Firm

Columbia Centre I

5600 N. River Road, Suite 764

Rosemont, IL 60018

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