Implementation by the Illinois Department of Health and Family Services of the Federal Deficit Reduction Act of 2005 (DRA). © 2012

Section 120.385 – Factors Affecting Eligibility for Long Term Care Services

This Section deals other factors that will affect eligibility for long-term care services.

The section goes on to discuss the disclosure of annuities and naming the status remainder beneficiary on annuities, home equity interest treatment and the disclosure promissory notes loans mortgages and assigning the interest in such instruments to the state. Since much has been debated about these three areas I will take them one at a time.

Subsection a) provides that, for purposes of this Section, the terms “institutionalized persons” and long-term care services” shall have the meanings described in Section 120.388. The terms “institutionalized spouse” and “community spouse” shall have the meanings described in Section 120.379(a).

Subsection b) is entitled the Disclosure of Annuity and Naming the State as Remainder Beneficiary.

Requires that:1. With regard to annuities, effective January 1, 2012, an application or redetermination related to an application for long-term care services shall include a disclosure by institutionalized person or his or her community spouse of any interest either or both may have in any annuity or similar financial instrument purchased, regardless of whether the annuity is a revocable or is treated as an asset.

An application or recertification shall also include a statement that the State of Illinois becomes a remainder beneficiary under such annuity or similar financial instrument meant to the extent that the state has provided medical assistance to the institutionalized person. This latter provision seems to set to rest much of the debate that surrounded the treatment of annuities and whether or not federal DRA mandated that a certain class of annuities, such as those found in IRA context, could be exempted from the requirement of naming the state is the remainder beneficiary to the extent of medical assistance provided by the state.

2.         The section goes on to say that if there is a failure to disclose information about the annuity or to name the state is remainder beneficiary or to disclose sufficient information regarding the annuity in order to establish eligibility for long-term care services, this will result in the denial or termination of an out of eligibility. These failures can also be considered to be failure to cooperate under Section 120.308 and hence result in denial or termination of eligibility for failure to cooperate.

Subsection c) deals with home equity interest:

  1. With regard to home equity interest, effective January 1, 2012, persons shall be deemed not eligible for long-term care services of the person’s equity interest in his or her homestead exceeds $750,000. As you recall, in federal DRA the states had the ability to go from $500,00 to 750,000 in this exemption. The State of Illinois has chosen to opt for the higher limit. There is a CPI inflator built-in to the provision. The calculation of the equity shall be based on the rules set forth for appraisals the calculation of current market value.
  2. The eligibility of a person for long-term care services shall not be affected under this subsection c) if any of the following are lawfully residing in the person’s home. Here we have the recurring federal exemptions from the loss of equity attributable to a residence in which there is lawfully residing in the person’s home:
    a.   The person’s spouse,
    b.   The person’s child who is under age 21, or
    c.   The person’s adult child or who is blind or disabled, remain in effect.

The subsection goes on to provide that if eligibility is affected by this subsection, the person may request a hardship waiver. Standards for establishing a hardship waiver are described in the subsection.

Subsection d)

Deals with disclosure of purchaser promissory notes, loans, and mortgages and assigning interest to the State.

  1. In a provision similar to that described above for the disclosure and treatment of remainder beneficiaries with regard to annuities, this subsection requires that,  effective January 1, 2012, an application (or redetermination) for long-term care services shall include a disclosure by an institutionalized person or his or her community spouse of any purchase of a promissory note, loan or other mortgage either or both of them may have made. The application or recertification form shall include a statement that the instrument shall provide for the assignments to the State of Illinois as of the date of death of up to the total amount of medical assistance paid on behalf of the institutionalized person
  2. If there is a failure to disclose, this could result in denial or termination of eligibility.

Section 120.387 – Property Transfers Occurring On or After August 11, 1993 and before January 1, 2007.

The thrust of this section is to classify transfers during the deficit time periods as being allowable or not allowable. Some of the recurring allowable transfers are transfers that occurred more than 60 months before the date of application or more than 60 months before entry into a long-term care facility of more than 60 month before receipt of services provided by the audit Department of Aging under the in-home care program. The same provisions have the 30 month 36 month requirement. The 60 month requirement applies to payments from a revocable trust that are not treated as income and to portions of an irrevocable revocable trust for which no payments could be made, and the 36 month period applies to payments from an irrevocable trust that are not treated as income and to any other property transfers not identified in this section.

Subsection a)

Indicates that the provisions for the transfer of assets listed in subsection e) below only apply to institutionalized persons with the transfer occurs on or after August 11, 1993 and before January 1, 2007, or to persons who applied for or whose application for long-term care assistance was filed or approved prior to January 1, 2012.  An institutionalized person is defined as the resident of a long-term care facility, including a resident who is living in the community at the time of transfer, and to individuals who but for the provision of home and community-based services under Section 4.02 of the Illinois Act on Aging would require the level of care and long-term care facility. An institutionalized person also includes an individual receiving home and community-based services under Section 4.02 of the Illinois Act on Aging who was not receiving these services at the time of transfer.

Subsection b)

Provides that the provisions for the transfer of property (assets) listed in subsection e) apply to the transfer of property by an institutionalized person’s spouse in the same manner as if the institutionalized person transferred the property.

Subsection c)

Provides that the transfers of property disregarded as a result of payments made by long-term care insurance policies are not subject to the provisions of this Section.

Subsection d)

Provides that a transfer of assets occurs when an institutionalized person or an institutionalized person’s spouse dies, sells or gives away real or personal property or changes the way property is held. A change of ownership of property to a life estate interest is an asset transfer. For assets held in joint tenancy, other similar arrangements, transfer occurs when an action by any person reduces or eliminates the person’s ownership or control of the asset.  A transfer occurs when an action or actions are taken that would cause an asset or assets not to be received (for example, waiving the right to inheritance).

Subsection e) provides that a transfer is allowable if :

    1. depending on the property transferred, the transfer occurred more than either 60 or 36 months before the date of application, or more than either 60 or 36 months before entry into a long-term care facility or more than either 60 or 36 months before receipt of services provided by the Illinois Department of Aging under the in-home care program described it 89 Illinois Admin 140.643.60 month period applies to payments from a revocable trust that are not treated as income and two portions of the new revocable trust for which no payments could be made;That certain 36 month period applies to payments from in a revocable trust that are not treated as income and to any property transfers not identified in the subsection;
    2. Fair market value was received;
    3. Homestead property was transferred to:
      a spouse,the person’s child under age 21,the person’s child who was blind or disabled,

      the person’s brother or sister who has an equity interest in the homestead and who is residing in the home for at least one year immediately prior to the date the person that became institutionalized; or

      the person’s child who provided care for the person who was residing in the Homestead for two years immediately prior to the date the person became institutionalized.
      The transfer by the institutionalized person was to the community spouse or to another person for the sole benefit of the community spouse;

    4. The transfer from the community spouse was to another person for the sole benefit of the community spouse;
    5. The transfer was to the person’s child or to a trust established solely for the benefit of the person’s child was blind or disabled or to another person for the sole benefit of the person’s child;
    6. The transfer r was to a trust established solely for the benefit of a person under age 65 and was disabled;
    7. The person intended to transfer the assets for fair market value;
    8. It is determined that the denial of assistance would create an undue hardship. Examples are giving given for this exclusion;
    9. The transfer was made exclusively for a reason other than to qualify for assistance. HFS indicates that a transfer from Western???????????? for market value is presumed to not qualify for assistance unless a satisfactory
      showing made to the Department that the community spouse transfer the assets for reason other than to qualify;
    10. The trust transfer by the client was to the community spouse and was pursuant to a court order a court order;
    11. The asset transfers for  less than market value has been returned to the person; or
    12. The transfer was to an annuity, the expected return on the annuity is commensurate with the estimated life expectancy of the person, and the annuity pays benefits that are in approximate equal periodic payments.  In
      determining the life expectancy of the person the Department will use the current actuarial tables of the Social Security Administration referred to as table for C6.

 

 

Subsection f)

Indicates that if a transfer does not meet the provisions of subsection e), the client is subject to a period of ineligibility.

Subsection g)

Provides that separate penalty period is determined for each month in which a transfer or transfers do not meet the provisions for allowable transfers. Each penalty period is the number of months equal to the total uncompensated amount of assets transferred during a month divided by the monthly cost of long-term care at the private rate.

Subsection h)

Provides that the penalty period begins with a month of the transfer or transfers unless the transfer or transfers occurred during a previous penalty. If so the penalty period begins with the month following the previous penalty ends.

Subsection i)

Provides for transfers by the community spouse that result in a penalty period, and if the community spouse becomes an institutionalized person who is otherwise eligible for assistance, the Department shall divide any remaining penalty equally between spouses.

 

 

Section 120.388 – Property Transfers Occurring On or After January 1, 2007

Subsection a)  General.

In this provision the state starts out by indicating that the provisions of this section are intended to comport with the federal requirements related to the transfer of assets, in particular requirements under 42 USC 1396P and guidance from the US Department of Health and Human Services related to the statutory requirements. State indicates that interpretation application of this section shall be made in light of these requirements. This is a very heavy in the long section. It is replete with complex concepts in the administration of Medicaid rules for long-term care. This section spans of subsections  (a ) through (t ) which spans almost the entire alphabet.  The Subsection starts with the general proposition that a transfer of assets for less than fair market value made on or after January 1, 2007 by an institutionalized person or the spouse of that person within 60 months before applying for medical assistance or transfer an asset shall result in a period of ineligibility for long-term care services for that person area the concept of focus on here in this author’s opinion is the concept of fair market value. This concept pervades much of this section and is the basis upon which the stable make a lot of judgments regarding transfers of assets.

 

Subsection b)

Defines long-term care services are defined as:

  1. services  provided in a long-term care facility as defined in 120.61 a and
  2. services provided under home and community-based waiver programs or under human in-home and community based waiver

Subsection c) is a

Defines institutionalizing individuals or persons as

  1. persons residing a long-term care facility including those who were residing in the community the time of a transfer of assets was made OR
  2.  persons who but for the provisions of home and community based waiver services would require the level of care in a long-term care facility, including those persons receiving home care or community based waiver services were not receiving the services the time transfer was made.

In subsection d) Assets are described:

  1. Assets or property included all income (as defined in 42 USC 13 828a) and resources(as defined in 42 USC 1382b, except subsection A-1 of that section which excludes the home as a resource ) of an institutionalized person and that person’s spouse. Subsection 19 goes on to say that assets and property include but are not limited to cash, savings certificates, stocks, bonds, interest in real property, including mineral rights, rights to inherited real or personal property or income, and accounts and debts receivable.
  2.  assets are defined to also include any income or resources that the person or the person spouse is entitled to but does not receive because of action or inaction by
    a.  certain persons including the person or persons spouse,
    b.  a legal or administrative body authorized to act on behalf of the person or the person spouse, any person acting at the direction or upon the request of the person or the person spouse
    c.  any person including any quarter administrative body acting at the direction or upon the recount we quest of the person or the person spouse or
    d.  or any person who acted (failed to act) to avoid receiving assets to which the person was entitled In subsection d)3) samples are given of the types of actions that would cause assets not to be received for purposes
    of paragraph indeed to, such as actions such as irrevocably waving pension income, waving the right to receive an inheritance, etc.
  3. this subsection 3 goes on to give examples of actions it would cause assets not to be received
  4. provides that failure to take action to receive an asset is not considered a transfer for less than fair market value when evidence is submitted showing the cost of obtaining an asset exceeds the value of the asset.

Subsection e) deals with Transfer. And then several examples are given. Subsection e indicates that a transfer of assets occurs when institutionalized person or institutionalized persons spouse buys, sells or gives away real or personal property or changes the way property is held for example changing property from joint tenancy or tenancy in common. Then sucks subsection he goes on to describe several matters could turn the trick concerning transfers.

Subsection e)1 indicates that changing ownership of property to a life estate is an asset transfer.

Subsection e)2  provides that transactions involving annuities including the purchase of an annuity are considered transfers. Also any action by a person that changes the course of payments to be made by the annuity or the treatment of in, or principal of the annuity is a transfer such as additions to principal, elective withdrawals, request to change the distribution of the annuity, elections to annuitize the contract and any action intended to make an annuity irrevocable or nonassignable.

Subsection e)3 provides that for property held in joint tenancy, tenancy in common or similar arrangements, a transfer occurs when an action by any person reduces or eliminates the person’s ownership or control of the property

Subsection e)4 goes on to say that a transfer of income in the month it is received is considered a transfer of assets if the income would’ve been considered an asset in the following month under  section 120.380 be one. A transfer the proceeds of the loan in the month received is considered a transfer of assets

subsection f) goes on to describe the concept of fair market value. Section indicates that fair market value after and he is an estimate of the value of an asset insole that the prevailing price the time it was actually transferred. Prevailing prices were property would sell for on the open market tweening willing buyer and a willing seller, with neither being required to act in both having reasonable knowledge of the relevant facts.

Subsection F)1 goes on to describe some additional provisions that relate to the concept of fair market value such as the methodologies the state might use in determining fair market value, the type of compensation must be received in order for fair market value to considered it been received,

subsection F)2 indicates that for an asset to be considered transferred for fair market value that compensation must be received for the asset in a tangible form with intrinsic value is roughly equivalent to or greater than the value the transfer asset.

Subsection F)3 indicates transfers of assets for love and affection are not considered transfers for fair market value . This section specifically describes a situation in which caregiver services are provided. In subsection 3 is indicated that a transfer to a friend or family member or relative for care provided for free in the past is a transfer of assets for less than fair market value. Hence it appears as though any payment to the efforts of individuals for services in the past are considered transfer that could be subject to penalty. F3 indicates that the Department will presume that services care or combinations render to a person by a friend or family member are gratuitous and when the ax and without expectation of compensation. This presumption may be rebutted by credible documentarian evidenced that preexist the delivery of the care. Clearly the Department at this point is suggesting that the caregiver contracts be put in place before the delivery of services, and in no caregiver contract will be approved by the state that authorizes compensation for past services. Credible documentation goes on to be described his contemporaneous receipts, logs etc. The state also makes the point of indicating that payment for care services has to be done at the prevailing rate or any payment in excess of prevailing rates shall be considered a transfer for less than fair market value, and hence penalized.

Subsection F)4 goes on to define compensation received. This is described as being the amount of money or value of any property or services received in return for the institutionalized persons assets. Compensation they received may be received in various forms such as cash, promissory notes, stocks bonds, etc.

 

Subsection F)5 term that defines the term uncompensated value as the difference between fair market value of an asset less any debt and the actual compensation received. Finally the state makes it clear that only the uncompensated value of a transfer asset is the subject of the penalty provisions described in this section 120.388.

Subsection G) describes the Look Back. It indicates that the provisions of section 120.388 apply to any asset transfers occurring on or after January 1, 2007 and before the date on which the person is an institutionalized person and has applied for medical assistance.

Subsection h) describes the term Penalty. Penalty is described in a circumstance in which a person transfers assets for less than for market value, in that case the person is subject to a period of ineligibility for long-term care services. The penalty. Is it determined in accordance with subsection J described below. If otherwise eligible, persons subject to a penalty remain eligible for all covered medical services accept long-term care services. This would seem to imply that if there is a penalty. That is burning off of the person is otherwise eligible but for the penalty. They may receive Medicaid services, for doctors, hospitals, pharmacy, but not the long-term care portion of Medicaid services

In subsection i) penalty Calculation is described. It indicates that the penalty period begins with the later of the first day of the month during which you transfer for less than firm market value is made, or the date on which the person is eligible for medical assistance in weatherize be receiving long-term care based on approved application where it not for the imposition of the penalty.. A person is not considered eligible and services are not considered capable of the received under this section until any spend down is not, AND, a penalty period does not occur during any other period of ineligibility under this section. Subsection I also indicates that a notice of penalty. Shall include a statement that the person may appeal the penalty. Pursuant to Illinois administrative code and 89 administrative code section 102.80.

Subsection J) describes the Penalty Calculation. A penalty is calculated by dividing the total income uncompensated value of assets transferred to the average monthly cost of long-term care services at the private rate in the community in which the person is institutionalized at the time of application. An example is given in this section. The Department indicates that the it will not round down or otherwise disregard any period of ineligibility calculated under this section. Section goes on to describe a penalty period of being broken down into months days and fractions of days such as 16 months and 7.5 days.

In subsection k) him him multiple transfers are described. It indicates that multiple not allowable transfers made during the look back period shall be accumulated and treated as a single transfer. A single period of ineligibility shall be calculated based on the total uncompensated value of the transfers. Once a penalty period is imposed it continues to run without regard to whether the person continues receiving long-term care services. Hence once a penalty period starts it continues to run.

Subsection l) provides that when transfers by community spouse result in a penalty period for the institutionalized spouse and the community spouse subsequently becomes institutionalized and is otherwise eligible for medical assistance, the Department shall divide any remaining penalty equally between spouses. The section that indicates that if one spouse predeceases the other before the penalty period is ended the remaining penalty period will be added to the survivors penalty period.

Subsection m is a very long subsection. Much is crammed into this subsection so it will be discussed in segments. Subsection m) starts out by indicating that a person shall not be subject to a penalty under this section to the extent that:

  1. Homestead property was transferred
    a.  to the person’s spouse,
    b.  the person’s child who is under age 21,
    c.  the person’s child was determined to be blind or disabled,
    d.  the person’s brother a sister who has an equity interest in the Homestead property and who was residing in the home for at least one year immediately prior to the date the person became institutionalized, or
    e.  the person son or daughter who provided care for the person and who resided in the Homestead property for the two years immediately prior to the date the person became institutionalized provided credible
    tangible evidence is presented.
    I.     In the case of the last provision described above this is the classic child caregiver exception. The section goes on to provide detail about qualification for the child caregiver exception and indicates that
    for purposes of the child caregiver exception, credible tangible evidence is indicated as that which shows that the person was in need of care that would have otherwise required in institutionalized level of
    care. The evidence may consist of the physician statement or evaluation conducted by medical profession well showing the need for institutional level of care. Interestingly the section indicates that a
    diagnosis of Alzheimer’s or other dementia related illness shall be prima facie evidence of the need for institutional level of care.
    II.    The section goes on to say that tangible credible credible evidence should show that the son or daughter resided at the person for two years immediately prior to the person’s institutionalization. The
    evidence may consist of tax returns, drivers license, canceled checks or other documentation this demonstrating residence in the home for lease two years prior to that parents institutionalization.
    III.   Finally the credible tangible evidence should show the son or daughter provided character that person that prevented institutionalization. This evidence may consist of a sworn affidavit or statement
    signed by the son or daughter
  2. the transfer :
    a.  was made by the institutionalized person to
    i.     the institutionalized spouse
    ii.    the person’s child or to a trust established solely for the benefit of the person’s child or to another person for the sole benefit of the institutionalized persons child.
    iii.    A trust established solely for the benefit of a person who is determined to be disabled.
    b.  Several definitions are then the forth to implement this subsection. Specifically the concept of  “ sole benefit of” a person means:
    i.     the transfers are raised in in such a way that no person or entity except the specified beneficiary can benefit from the property transferred,
    ii.     the transfer instrument or document provides for this bending of the funds involved for the benefit of the person on the basis that is actuarially sound extent a life expectancy of the person involved based on                        the Social Security tables. To relief provisions follow indicating that equal or periodic payments are not required for actuarial soundness. And this subsection does not apply the trust described in section                                120.340 7D because those trusts provide for a payback to the state of the death of the beneficiary.
    iii.   benefit is continue to mean that the transfer was a  accomplished via written instrument of transfer such as a trust document that legally bind the parties to a specified course of action and clearly sets out the
    conditions in which under which the transfer was made as well as who can benefit from the transfer. A transfer without such a document he may not be said to have been made for the sole benefit of a person’s
    answers no way to establish without the document that only the specified person will benefit from the transfer.
  3. Section 3 goes on to indicate that a person shall not be subject to a penalty and and under section 120.38 to the the person intended to transfer the property for fair market value. When the property is transferred for less than fair market value a person is presumed to have done so intentionally. The presumption may be rebutted by objectives tangible evidence of the following:
    a.   initial and continuing reasonable good faith efforts to sell the property on the open market,
    b.   it legally binding contract was executed that provided for adequate compensation in a specified form,
    c.   the person acted in good faith and that he was receiving for market value,
    d.   the person has other adequate means are plans for support at the time of transfer.
  4. In subsection m4 a person shall not be subject to a penalty Under section 120.388 the transfer was made exclusively for reason other than to qualify or remain eligible for medical assistance. This section goes on to provide somewhat of a safe harbor provision that was the subject of some controversy in may or may not may not be considered generous depending on your point of view.. The section goes on to indicate that a transfer for less than fair market value is presumed to been made to qualify for assistance. However this  presumption may be rebutted by credible tangible evidence that the person or the spouse had no reason to believe that Medicaid payment of long-term care services might be needed. The sudden loss of income or assets, the sudden onset of a disabling conditions such as stroke or Alzheimer’s or personal injury may provide convincing evidence that there was no reason to interest abated need for long-term care. Subjective statements are not sufficient. Section goes on to describe other examples of credible evidence and include but are not limited to
    a.   police reports,
    b.   evidence that the transfer was made by a person lacking mental capacity,
    c.    and Institute transfers were for everyday living expenses and incidental gifts to family members or contributions to charities or religious organizations and
    d.   other evidence pertaining to the person circumstances of the time of transfer relating to
    i.     physical condition
    ii.     financial situation,
    iii.     need for medical assistance,
    iv.     changes in living arrangements,
    v.     access time between the transfer an application for medical assistance and
    vi.    whether the unexpected events occurred between the transfer and application.
  5. Subsection and goes on to indicate that a person shall not be subject to a penalty for transfers property disregarded as a result of payments made by a long-term care insurance policy approved by the Dir. of Illinois Department of Insurance under the qualified long-term care insurance partnership(see 50 ill admin code 2012)
  6. subsection and continues to indicate that a person shall not be subject to a penalty under this subsection 120.38 to the extent that the assets transferred for less than fair market value have been returned to the person. This is the section dealing with returns of assets. As a general proposition partial returns have donated notwithstanding CMS’s guidance that estate may permit partial returns. The state of Illinois has chosen, as some other states have, to eliminate the availability of partial returns in almost every circumstance and instead commit only complete returns to be made.
    a.   Him The section  indicates that for transfers occurring after occurring prior to January 1, 2012 if only parts of transferred assets are returned a penalty. Shelby reduced but not eliminated. For example if only half of the value is returned the penalty period shall be reduced by one half.
    b.   However for transfers occurring on or after January 1 of 2012 all of the assets transferred for less than fair market value must have been returned to the person. Full or partial returns occurring prior to the imposition of a penalty reduced the and compensated portion of the transfer by the amount returned. Once a penalty is imposed it may only be a limited if all assets transferred for less than fair market value are returned. This section implies that prior to the imposition of a penalty which requires financial eligibility and the submission of the Medicaid application, partial returns are permitted. Once the application is filed only complete returns will be permitted.The section goes on to indicate that when all transferred assets are returned the assets are treated as return on the date the penalty was imposed. The penalty is that he raced in the returned assets are treated as available as of the date the penalty was imposed. For the time period between imposition of the penalty and the return of the assets the Department will treat the assets as available to meet the spend down obligation for that time period only. At the point in time that assets are in fact returned their treated as available assets that may be reduced by a spend down obligation or otherwise. Returned assets that are transferred for less than fair market value may be subject to penalty.
  7. The last provision of subsection m indicates that a person shall not be subject to a penalty. Under section 120.388 to the extent that the Department determines that the denial of eligibility would cause undue hardship as provided in subsection r of this section below. Subsection r has a lot of detail associated with it and will be discussed further below.

Subsection  n) deals with annuities and was the subject of much debate. Subsection and indicates that the purchase of an annuity by or on behalf of an institutionalized person or their spouse shall be treated as a transfer of assets for less than fair market value unless

  1.  the annuity names the state of Illinois as the remainder beneficiary in the first position for up to the total amount of medical assistance paid on behalf of the institutionalized person, or
  2.  second the annuity names the state of Illinois in the second position after the community spouse or minor child or child with a disability and is named in the first position if the spouse or representative of the child disposes of any remainder for less than fair market value.

Subsection o) also deals with annuities and is replete with very complex provisions designed to limit those types of annuities that will be treated as allowable and not penalized as a transfer made for less than fair market value. Section o indicates that the purchase of an annuity by or on behalf of institutionalized individual shall be treated as a transfer of assets for less than fair market value unless

  1. one of three conditions are met, first the annuity is considered either:
    A.   an individual retirement account or
    B.   a deemed it individual retirement account under a qualified employer plan. will the new shelter
  2. the annuity is directly purchased with proceeds from one of the following:
    a.   traditional IRAs,
    b.   certain accounts or trusts treated as a traditional IRA under section 408 a of the Internal Revenue Code
    c.   a simple for simplified employee  pension, or
  3. the annuity meets all of the following requirements
    a.   Was  purchased from a commercial financial institution or insurance company,
    b.   is actuarially sound based on the estimated life expectancy of the person in accordance with the Social Security tables. Parentheses. Certain annuities that pay over term less than the persons expected life except that life expectancy shall be treated as actuarially sound)
    c.   is your irrevocable and nonassignable and
    d.   pays benefits in approximately equal periodic payments no less than orderly with no deferred or balloon payments.

Subsection p) deals with Life Estate. This is a provision that provides that the purchase of a life estate in another person’s home shall be treated as a transferred for less than fair market value unless the purchaser resided in the home for at least 12 consecutive months after the date of the transfer. If the purchaser resides in the home for less than 12 consecutive months the entire purchase amount will be considered a transfer for less than fair market value . What may be fleshed out later in the policy manual will be a determination of how the calculation is 12 consecutive months is determined. What if there is a one-week hospitalization stay during the 12 consecutive months. What if there is a private pay nursing home stay during the 12 consecutive months. How to these impact the determination of whether the standard is 12 consecutive months has been met? Perhaps this will be fleshed out in the policy manual.

Subsection q) deals Promissory Notes, Loans and Mortgages. This is another DRA concept. Prior to these Illinois rules, the administrative rules and policy manual never dealt with the concept of promissory notes, so here Illinois it is been kind of a guessing game as to what the estate’s expectations about promissory notes are. Now with the new Illinois rules we have some guys. Some of the promissory note provisions mimic those of the annuity provisions described above. But it is worth examining each of the provisions. The rule states that the purchase of a promissory note loaned, or mortgage by a person shall be treated as a transfer of assets for less than Merrill for market value unless certain conditions are met:

1)     A written instrument recording the transaction is executed signed and dated on the effective date of the transaction.
2)    To instrument provides for repayment term is actuarially sound again is determined and Social Security tables. Instruments that provide for a repayment term that is less than the person’s life expectancy shall be
treated as actuarially sound
3)   The instrument provides for repayment to be made in equal installments, no less than monthly during the term of the loan with no deferral and no balloon payments.
4)   The instrument prohibits the cancellation of the balance upon the death of the lender.
5)   A tangible verifiable record of consistent timely payments and amount provided in three above demonstrates a good faith attempt to repair the instrument. Unpaid installments that are delinquent three months or
more recent will result in the Department treating the amount remaining unpaid on the instrument as a non-allowable transfer.
6)   The instrument provides for the assignment to the state of Illinois as of the date of death of up to the total amount of medical assistance paid on behalf of the institutionalized person, estate shall be placed in the first
position of assignment or in the second position after the community spouse or minor child or child with a disability and is named in the first position if the spouse or representative of the child disposes of any
remainder for less than fair market value.

Subsection r deals with hardship waiver. Hardship waiver was debated substantially during the rulemaking process. All what we’re left with is really two layers of hardship waiver. One is the general hardship waiver rules that will apply going forward into the future in the administration of the Medicaid rules. However the state also carved out a separate hardship waiver provision applicable only to transfers prior to November 1, 2011.

  1. The hardship waiver provision starts by indicating that the Department shall waive a penalty. If it determines that the application the penalty will create an undue hardship. The state then goes on to describe that undue hardship exists when application of a penalty would deprive institutionalized person:
    a.   of medical care, endangering the person’s health or life, or depriving the institutionalized person
    b.   of food clothing shelter or other necessities of life.
  2. persons who request a hardship waiver shall have the burden of proof that actual not just possible hardship exists. The Department can require person to provide written evidence to substantiate the circumstances of the transfer, attempts to recover the uncompensated value of the transfer, reasons for the transfer and the impact of ineligibility for long-term care services. The state goes on to indicate that the following criteria shall be considered in determining whether the hardship waiver shall be granted:
    a.   indent a whether credible evidence is presented that the person in good faith and to the best of their ability has taken all equitable and legal means to recover and asset that is been transferred for less than for market
    value. Estate points out that in cases that involve alleged threat fraud elder abuse or other misappropriation of assets, evidence of referrals to the police or other law or regulatory agency is required,
    b.   the medical condition mental capacity financial liability and other factors that have affected the person time of decision transfer the assets,
    c.   the denial assistance would force the person to move and
    d.   subject to the availability of beds the person would be prohibited from driving a spouse in a facility or form entering a facility that is close in proximity to his or her family.
  3. For transfers prior to November 1, 2011. This provision indicates that notwithstanding the prior rules described above dealing with hardship exception, and notwithstanding the January 1, 2012 implement implementation date of the look back., For transfers occur in prior to November 1, 2011 at hardship waiver shall be granted if the applicant signs and attestation form stating that the penalized transfer was made in reliance on the administrative rules in effect at the time of the transfer and that without a waiver of the person faces deprivation of the elements described above. It is unknown what the attestation form can look like. Perhaps this will be fleshed out policy manual. Attestation could mean an act to affirm that what has been stated is true.
  4. This  provision indicates that a facility in which it institutionalized persons residing may request a hardship waiver on behalf of that person under subsection are provided written consent has been obtained from the person if the person is legally competent to give that consent or from the person’s personal representative who may include the person who signed the application for medical assistance on behalf of the resident. This is an attempt to allow facilities to seek a hardship exception on behalf of one of the residence.

Subsection s) Records Production. This provision indicates that the Department or its agent may request any and all records necessary to determine the existence and extent of any transfers of property under this section. Persons are required to operate in providing requested information information and Derek staycation in accordance with section 120.308. The Department will provide any needed assistance requested by a person and will use reasonable measures requesting records taking into account the age significance relevancy and difficulty obtaining their of obtaining the records, the medical condition and mental capacity to person and other factors that may affect the person’s ability to retrieve records.

Subsection t) is  the last section of subsection of section 120.388 and deals with Notice. The notice provisions are set forth in two paragraphs.

  1. The first paragraph indicates a Department shall issue a notice to the person who is subject to a penalty. Not less than 10 days prior to the imposition the penalty. The notice must inform the person of the period of ineligibility, for long-term care services and include a statement that the person may appeal the decision to impose the penalty. Pursuant to 89 ill admin code 102.80.
  2. The last section of the notice provision indicates a notice imposition of a penalty period shall inform the person that a hardship waiver under our may be requested and that the personal facility in which the person resides may submit in writing pursuant to sub subsection are to evidence that hardship exists. The evidence can be submitted to the Department which will shall review the information and based on the criteria determined under subsection are determine whether or hardship waivers should be granted. Upon complete completion of its review the Department shall issue a notice of decision I request for hardship rate waiver that showing who the statement that the person may appeal the decision pursuant to 89 Illinois admin 102.80 that is the end

 

Certain life expectancy tables have been revealed at section 120 point table be. Interestingly however 120 point table a dealing with the value of a life estate remainder interest remain in effect.

V. Conclusion

That is the end of the written text of the old rules. As a final comment, and as I’ve said before a thorough reading of these rules is required understand the impact of the array and Illinois Medicaid rules. Hopefully some of the unanswered questions in these rules will be clarified with the forthcoming issuance of the policy manual and workers action guide

Respectfully Submitted,

Anthony B. Ferraro

Attorney – CPA

 

 

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