7 Secrets to Surviving The Medicaid Spend-Down | Chicago Estate & Trust & Elder Law Attorney-CPA, Anthony B. Ferraro

The key to figuring out how to save money by turning to Medicaid is understanding what exactly Medicaid benefits entail and how they may relate to you. These 7 secrets to surviving the Medicaid spend-down will help you be in a better position to protect your hard-earned savings. 1) Many couples end up spending too much money on the first spouse’s long-term care costs because they do not know the rules. An Elder Law attorney can show you the rules and make the healthy spouse’s life better. 2) People give their assets to their children using the wrong method. If you choose to go this route, you must do this right, or it could have terrible consequences. 3) Save money by transforming your assets. Medicaid categorizes your assets as either available or exempt, and an Elder Law attorney can help you convert your available assets into exempt assets so that you keep them. 4) Medicaid application timing is crucial. If your timing is off, you could lose thousands of dollars, and create a Medicaid penalty because you applied too early or too late. 5) Avoid going broke due to giving your assets away in the wrong way. There is a Medicaid ineligibility penalty for seniors who give away their assets in the wrong way to children, churches, or charities within 5 years of applying to Medicaid. 6) Annuities are not always “Medicaid-proof”. Don’t assume just because an annuity is touted as “Medicaid-proof” that it actually is. Instead consult an elder law attorney, to ensure it actually is. Learn all about VA benefits – A wartime veteran and a spouse could potentially receive $2,000 or more for in-home or assisted living medical care. Stay tuned for further elaboration on the 7 Secrets to Surviving the Medicaid Spend-Down. -Anthony B. Ferraro

Medicaid Reform Again, But WORSE!

By Anthony Ferraro on

May 25, 2012

- Blog, Elder Law Articles, Estate Planning, Medicaid and Paying for Nursing Home Care, Probate, Estate, and Trust Administration

The SMART Act SB 2840 will reverse many of the DRA changes Elder Law attorneys fought for on behalf of our clients. The changes include the following:

Legal fees are no longer exempt for 3-month backdating.
Abolishes spousal refusal entirely.
A homestead in Trust is no longer an exempt asset.
Except for the Community Spouse Resource Allowance ($109,560) and Minimum Monthly Needs Maintenance Allowance ($2,739, HFS is no longer limited in how much it can seek when pursuing a support order against a community spouse.
Reverts to the old limits on prepaid funeral contracts.
Reduces the home equity exemption to the minimum allowed under federal law (base figure of $500,000, adjusted annually for inflation, rather than the $750,000 adopted in the DRA rulemaking).
No exception for prepaid funerals for 3-month backdating.

More to come.

Implementation by the Illinois Department of Health and Family Services of the Federal Deficit Reduction Act of 2005 (DRA) © 2011

By Anthony Ferraro on

February 9, 2012

- Elder Law Articles, Medicaid and Paying for Nursing Home Care

I. Introduction This is an article summarizing the implementation by the Illinois Department of Health and Family Services (Department) of the Federal Deficit Reduction Act of 2005 (DRA). Much has been written about these rules over the last several years by various members of the Elder Law Section Council and also other Section Councils. This article will deal mainly with the final rules as adopted in the State of Illinois (ILDRA). This article will be issued in three parts, which will be found in three issues of the Section Council newsletter. The first part will deal with the scope of the federal changes and five specific areas of Illinois law that have been impacted by the new Illinois rules. The second installment will deal with six more areas in Illinois law that have been changed. The third and final installment will deal with the last three areas of Illinois law that have been changed by the adoption of these new rules. The author struggled with the choice of either making this article a short, cursory discussion of the DRA or a long version discussing the DRA and related rules in greater detail. Through discussion with the newsletter staff, we opted for the longer discussion. The reason for this decision is that a short discussion would not address the numerous issues and nuances found in the new provisions and, thus, be rather useless to a practitioner. The longer version, while more time-consuming to digest and use, will hopefully provide a way of reading the new law that is, perhaps, slightly more convenient than reading the statue itself, while not glossing over or missing any of the nuances and issues on which our clients’ cases often turn. This was our intention. Further, it should be noted that much of this article deals with changes that were not part of the DRA. However, because the practitioner reading this article is presumably interested in the Illinois Administrative Rules dealing with long-term care cases and how they are impacted by DRA, a discussion of some of the provisions not mandated by DRA, but nevertheless inserted into this rule change by the state of Illinois, will also be discussed for a more for complete discussion that is relevant for the practitioner. II. Scope of Federal Changes In the federal DRA, the following 14 topical areas were addressed: 1. LOOKBACK PERIOD EXTENDED TO FIVE YEARS 2. COMMENCEMENT DATE OF PENALTY PERIOD 3. UNDUE HARDSHIP 4. DISCLOSURE AND TREATMENT OF ANNUITIES 5. INCOME–FIRST 6. HOME EQUITY CAP UNDER THE DRA 7. IMPLICATIONS OF THE CCRC PROVISIONS OF THE DRA 8. OTHER OPERATIONAL CHANGES TO THE IMPOSITION OF TRANSFER PENALTIES 9. REQUIREMENT TO IMPOSE PARTIAL MONTHS OF INELIGIBILITY 10. ACCUMULATION OF MULTIPLE TRANSFERS 11. PROMISSORY NOTES, LOANS AND MORTGAGES 12. INCLUSION OF TRANSFERS TO PURCHASE LIFE ESTATES 13. EXPANSION OF STATE LONG-TERM CARE PARTNERSHIP PROGRAM 14. EFFECTIVE DATES FOR PROVISIONS OF THE DRA The effect of these federal rules has been discussed in numerous articles written by authors within the state of Illinois and nationwide. As you will recall, the Federal Deficit Reduction Act was passed and signed by President Bush on February 8, 2006. By contrast, the effective date for the implementation of the Illinois version of the DRA is January 1, 2012. The author would like to point out that one cannot simply look in the Illinois Administrative Rules and find these topical areas readily available for discussion as they are listed above. Rather, the content of the above rules is weaved into the Illinois Administrative Rules sections listed below. III. Scope of Illinois Changes To understand the impact of the DRA on the sections of the Illinois Administrative Rules that will be affected by the implementation of the Illinois rules by HFS, see the new Illinois rules at Title 89, part 120 of the Illinois Administrative Code. Below is a list of the sections that are affected. Some of the sections are affected in small part, while some are affected in large part. Some sections have been deleted in their entirety and are noted below. Find Discussion of the following Sections in Installment One: SUBPART B: ASSISTANCE STANDARDS Section 120.10 Eligibility for Medical Assistance Section 120.20 MANG (AABD) Income Standard Section 120.40 Repealed SUBPART C: FINANCIAL ELIGIBILITY DETERMINATION Section 120.60 Community Cases Section 120.61 Long Term Care Section 120.62 Repealed Section 120.63 Repealed Section 120.65 Repealed SUBPART H: MEDICAL ASSISTANCE–NO GRANT (MANG) ELIGIBILITY FACTORS Section 120.308 Client Cooperation Find Discussion of the following Sections in Installment Two: Section 120.347 Treatment of Trusts and Annuities Section 120.380 Resources Section 120.379 Provisions for the Prevention of Spousal Impoverishment Section 120.381 Exempt Resources Section 120.382 Resource Disregard Section 120.384 Spenddown of Resources Find Discussion of the following Sections in Installment Three: Section 120.385 Factors Affecting Eligibility for Long Term Care Services Section 120.387 Property Transfers Occurring on or After August 11, 1993 and Before January 1, 2007 Section 120.388 Property Transfers Occurring On or After January 1, 2007 SUBPART I: SPECIAL PROGRAMS Section 120.TABLE B – Repealed As shown above, the list of Illinois changes seem as though they are a moderate overhaul of the prior Medicaid rules. However, the devil is in the details, and the remainder of this series of articles will deal with the above Illinois Administrative Rules sections that, in many cases, are replete with massive changes to the way Medicaid will be administered for long-term care in the State of Illinois. A numerical approach will be used to trace the above listed changes. IV. DETAILED ANALYSIS Following is a discussion of changes in the Illinois Administrative Rules based on Illinois interpretation of the federal DRA. Section 120.10 Eligibility for Medical Assistance. This is not part of DRA specifically, but is telling in that subsections (a)–(g) provide that financial eligibility for medical assistance for persons will be determined depending on their status for Medicaid. This Section is careful to distinguish between persons receiving medical assistance while living in the community, and financial eligibility for medical assistance for purposes of persons receiving long term care services. The various rules are directed to certain MANG (Medical Assistance–No Grant) programs, such as AABD (Aid to Aged Blind and Disabled), and TANF (Temporary Assistance for Needy Families). MANG means Medical Assistance – No Grant. Virtually all cases coming to elder law attorneys are of this type. These types of cases should be distinguished from MAG which is Medical Assistance – Grant. Rarely are these latter cases see by elder law attorneys, at least in the author’s experience. It should also be noted that discussion pertaining to TANF cases will also be “intentionally omitted” (IO) since the elder law attorney is not often concerned with cases of that type. Rather we will focus on AABD type cases which refers to Assistance to Aged, Blind and Disabled. The elder law attorney sees these types of cases frequently. In subsection (a), the basic proposition is that eligibility for medical assistance exists when a person meets nonfinancial requirements of the program and the person’s countable nonexempt income is equal to or less than the MANG standard. Also, going one step further, in AABD cases, the state requires that the person’s nonexempt resources are not in excess of the applicable resource disregards found at Section 120.382, which is generally $2,000 for a person. Financial eligibility for medical assistance for other persons or family units living in the community is determined according to Section 120.60, discussed hereafter. Financial eligibility for medical assistance for persons receiving long-term care services, as defined in Section 120.61(a), is determined according to Section 120.61(a). Subsection (b) of Section 120.10 provides that, for AABD cases, a person’s countable income and resources include the person’s countable income and resources and the countable income and resources of all persons included in the Medical Assistance Standard. The person’s responsible relatives living with the child must be included in the standard. The person has the option to request that a dependent child under 18 in the home who is not included in the MANG unit be included in the MANG standard. Subsection (c) provides for TANF. TANF discussion is intentionally omitted (IO) by the author for the remainder of this article. The next two subsections address the concept of spenddown obligation in the case of both AABD and TANF-type cases. Subsection (d) provides that, for AABD cases, if a person’s countable nonexempt income is greater than the applicable MANG standard and/or countable nonexempt resources are over the applicable resource disregard, the person must meet the spenddown obligation determined for the applicable time period before becoming eligible to receive medical assistance. Subsection (e) provides that, for TANF cases, (IO) Next, subsection (f) provides that a one-month eligibility period is used for persons receiving long-term care services. Nonexempt income and nonexempt resources over the resource disregard, described in Section 120.382 (discussed later in this article), are applied toward the cost of care on a monthly basis, which means they must be used and contributed to the cost of care. Subsection (g) deals with newborns and their status in TANF or a AABD cases. Section 120.20 MANG (AABD) Income Standard. This is not part of the DRA, but this provision indicates that the monthly countable income standard is 100% of the Federal Poverty Level Income Guidelines. Section 120.40 Exceptions To Use Of MANG Income Standard. This Section was repealed. Section 120.60 Community Cases. This is not part of DRA, and is a very long section. This Section applies to persons or family units who reside in the community or community-based residential facilities or settings (such as Community Living Facilities, Special Home Placements, Home Individual Programs, or Community and Residential Alternatives). The discussion of incurred medical expenses that are defined in this section apply to the initial eligibility step for long-term care cases described previously in Section 120.10. Because this Section is so long and much of it deals with limited circumstances that will not be relevant to the practitioner on a day-to-day basis, the discussion of some of its provisions is curtailed below. The reader may always refer to the Administrative Rules for a more complete and exhaustive analysis of these provisions. Subsection (a) provides for the determination of when the eligibility period shall begin for community cases. The eligibility period shall begin with: 1) the first day of the month of application; 2) the first day of any month, prior to the month of application, in which the person meets the financial and non-financial eligibility requirements for up to three months prior to the month of application; OR 3) the first day of a month, after the month of application, in which the person meets the non-financial eligibility requirements. Subsection (b) provides for eligibility without spenddown for MANG cases, and breaks down the cases between AABD cases and TANF cases. 1) For an AABD case, if the person’s countable income during the eligibility period is equal to or below the applicable AABD income standard and nonexempt resources are not in excess of the applicable resource disregard (see Section 120.382), the person is eligible for medical assistance from the first day of the eligibility period. The Department will pay for covered services during the entire eligibility period. 2) For a TANF case, IO. 3) This paragraph indicates that the person is responsible for reporting any changes that occur during the eligibility period that might affect eligibility for medical assistance. If changes occur, appropriate action shall be taken by the Department, including termination of eligibility for medical assistance. If changes in income, resources or family composition occur that would make the person a spenddown case, then a spenddown obligation will be determined and subsection (c) of Section 120.60 will apply. 4) A redetermination of eligibility will be made at least every 12 months. Subsection (c) addresses eligibility with spenddown for MANG cases, both AABD and TANF. This is a long section that has 9 parts. We will discuss only those provisions that seem most relevant to the practitioner on a daily basis and just briefly discuss those other provisions that do not seem to have as much day-to-day relevance for most practitioners. 1) For AABD community cases, if the person’s countable nonexempt income available during the applicable eligibility period is greater than the applicable AABD income standard and/or nonexempt resources are over the applicable resource disregard, the person must meet the spenddown obligation determined for the eligibility period before becoming eligible to receive medical assistance. The spenddown obligation is the amount by which the person’s countable income exceeds the MANG AABD income standard and/or the amount of nonexempt resources in excess of the applicable resource disregard (see Section 120.384). 2) For TANF cases, IO. 3) A person meets the spenddown obligation by incurring or paying for medical expenses in an amount equal to the spenddown obligation. Persons also have the option of meeting their income or resource spenddown by paying or having a third party pay the amount of the spenddown obligation to the Department. A) Incurred expenses are expenses for medical or remedial services: i) recognized under state law; ii) rendered to the person, the person’s family or a financially responsible relative; iii) for which the person is liable in the current month for which eligibility is being sought or was liable in any of the 3-month retroactive eligibility period described in subsection (a) of this Section; and iv) for which no third party is liable in whole or in part unless the third party is a State program. B) Incurred medical expenses shall be applied to the spenddown obligation in the following order: i) Expenses for necessary medical or remedial services, as funded by DHS or the Department on Aging from sources other than federal funds. The expenses shall be based on the service provider’s usual and customary charges to the public. The expenses shall not be based on any nominal amount the provider may assess the person. These charges are considered incurred the first day of the month, regardless of the day the services are actually provided. ii) Payments made for medical expenses within the previous six months. Payments are considered incurred the first day of the month of payment. iii) Unpaid medical expenses. These are considered as of the date of service and are applied in chronological order. C) If multiple medical expenses are incurred on the same day, the expenses are applied in the following order: i) Health insurance deductibles (including Medicare and other co-insurance charges). ii) All copayment charges incurred or paid on spenddown met day. iii) Expenses for medical services and/or items not covered by the Department’s Medical Assistance Program. iv) Cost share amounts incurred for in-home care services by individuals receiving services through the Department on Aging. v) Expenses incurred for in-home care services by individuals receiving or purchasing services from private providers. vi) Expenses incurred for medical services or items covered by the Department’s Medical Assistance Program. If more than one covered service is received on the day, the charges will be considered in the order of amount. The bill for the smallest amount will be considered first. D) If a service is provided during the eligibility period but payment may be made by a third party, such as an insurance company, the medical expense will not be considered towards spenddown until the bill is adjudicated. When adjudicated, that part determined to be the responsibility of the person shall be considered as incurred on the date of service. E) AABD MANG spenddown persons may choose to pay or to have a third-party pay the amount of their spenddown obligation to the Department to meet spenddown. The following rules will govern when persons or third parties choose to pay the spenddown: i) Payments to the Department will be applied to the spenddown obligation after all other medical expenses have been applied per subsections (c)(3)(A), (B) and (C) of this Section. ii) Excess payments will be credited forward to meet the spenddown obligation of a subsequent month for which the person chooses to meet spenddown. iii) The spenddown obligation may be met using a combination of medical expenses and amounts paid. 4) This subsection provides for an additional eligibility determination for applications for medical assistance in cases eligible with a spenddown obligation that do not have a QMB (qualified Medicare beneficiary) or MANG(P) member. This discussion is intentionally abbreviated by the author. 5) Cases with a spenddown obligation that do not have a QMB, a MANG(P) member or person on a waiting list or who would be on a waiting list to receive a transplant if he or she had a source of payment, will be reviewed beginning in the sixth month of enrollment. There are several other rules applying to these limited circumstances. This discussion is intentionally omitted by the author. 6) This subsection provides that the person is responsible for reporting any changes that occur during the enrolment period that might affect eligibility for medical assistance. If changes occur, appropriate action shall be taken by the Department, including termination of eligibility for medical assistance. 7) For MANG AABD cases, if changes in income, resources or family composition occur, appropriate adjustments to the spenddown obligation and date of eligibility for medical assistance shall be made by the Department. Notification requirements are set out as well. A) If income decreases, or resources fall below the applicable resource disregard and, as a result, the person has already met the new spenddown obligation, eligibility for medical assistance shall be backdated to the appropriate date. B) If income or resources increase and, as a result, the person has not produced proof of incurred medical expenses equal to the new spenddown obligation, the written notification of the new spenddown amount will also inform the person that eligibility for medical assistance will be interrupted until proof of medical expenses equal to the new spenddown obligation is produced. 8) For TANF cases, IO. 9) Reconciliation of Amounts Paid-in to Meet Spenddown. A) The Department will reconcile payments received to meet an income spenddown obligation for a given month against the amount of claims paid for services received in that month and refund any excess spenddown paid to the person. Excess amounts paid for a calendar month will be determined and refunded to the person six calendar quarters later. Refund payments will be made once per quarter. B) The Department will reconcile payments received to meet a resource spenddown obligation against the amount of all claims paid during the individual’s period of enrollment for medical assistance. Excess amounts paid will be determined and refunded to the individual six calendar quarters after the individual’s enrollment for medical assistance ends. C) When payments are received to meet both a resource and income spenddown obligation, the Department will first reconcile the amount of claims paid to amounts paid toward the resource spenddown. If the total amount of claims paid have not met or exceeded the amount paid to meet the resource spenddown by the time the individual’s enrollment ends, the excess resource payments shall be handled per subsection (c)(3)(C) of this Section. Once the amount of claims paid equals or exceeds the amount paid toward the resource spenddown, the remaining amount of claims paid will be compared against the amount paid to meet the income spenddown per subsection (c)(3)(B) of this Section. 10) The Department will refund payment amounts received for any months in which the person is no longer in spenddown status and the payment cannot be used to meet a spenddown obligation. The payment amounts shall not be subject to reconciliation under subsection (c)(9) this Section. Refunds shall be processed within six months after the case status changed. Again, the author would like to reiterate that there are numerous other new parts in this Section, but because they do not deal with DRA directly, they can be read at the reader’s convenience. Section 120.61 Long Term Care. While this Section is not part of the DRA, the purpose of it is to provide, in long term care cases, for initial eligibility steps and post-eligibility steps. Because this Section deals with long term care cases, we will go into more detail, as it seems to be relevant for most practitioners handling long term care cases in the practice of elder law. Subsection (a) defines “long term care facility”. It provides that a long term care facility is: 1) an institution (or a distinct part of an institution) that meets the definition of a “nursing facility”, as that term is defined in 42 USC 1396r. 2) licensed Intermediate Care Facilities (ICF and ICF/DD), licensed Skilled Nursing Facilities (SNF and SNF/PED) and licensed hospital-based long term care facilities; and 3) Supportive Living Facilities (SLF) and Community Integrated Living Facilities (CILA). Note that the Department has added CILAs to this definition. Subsection (b) states that the eligibility period shall begin with: 1) the first day of the month of application; 2) up to three months prior to the month of application for any month in which the person meets both financial and non-financial eligibility requirements. Eligibility will be effective the first day of a retroactive month if the person meets eligibility requirements at any time during that month; OR 3) the first day of a month, after the month of application, in which the person meets non-financial and financial eligibility requirements. The most controversial part of this subsection is that in order to obtain eligibility for any of the prior three months prior to the submission of the application, the state will require that persons meet the financial eligibility requirements in any or all of the three prior months if eligibility is sought for any or all of the three months prior to the month of application. While this is not specifically required by DRA, the Department is requesting this. This will affect residents who need to pay for expenses during the application process. Subsection (c) addresses eligibility without spenddown. 1) This subsection indicates that a one-month eligibility will be used. If a person’s nonexempt income available during the eligibility period is equal to or below the applicable income standard AND nonexempt resources are not excess of the applicable resource disregard (described in Section 120.382), the person is eligible for medical assistance from the first day of the eligibility period without a spenddown. 2) This subsection goes on to say that if, during the eligibility period, there is any change from the initial calculations made, this must be reported to the Department. Specifically, if changes in income, resources or family composition occur that would make the person a spenddown case, a spenddown obligation will be determined and subsection (d) of this Section will apply. Subsection (d) addresses eligibility with spenddown. 1) If countable income available during the eligibility period exceeds the applicable income standard and/or nonexempt resources exceed the applicable asset resource disregard, a person has a spenddown obligation that must be met before financial eligibility for medical assistance can be established. The spenddown obligation is the amount by which the person’s countable income exceeds the income standard or the nonexempt resources exceed the applicable resource disregard. 2) A person meets the spenddown obligation by incurring or paying for medical expenses in an amount equal to the spenddown obligation. Medical expenses shall be applied to the spenddown obligation as provided in Section 120.60(c) of this Part. See prior discussion of Section 120.60(c). 3) Projected expenses for services provided by a long term care facility that have not yet been incurred, but are reasonably expected to be, may also be used to meet a spenddown obligation. The amount of the projected expenses is based on the private pay rate of the long term care facility at which the person resides or is seeking admission. 4) A person who has both an income spenddown and a resource spenddown cannot apply the same incurred medical benefits to both. Incurred medical expenses are first applied to an income spenddown. The next two subsections discuss post-eligibility income and deductions. Subsection (e) provides that, if non-financial and financial eligibility is established, a person’s total income, including income exempt and disregarded in determining eligibility, must be applied to the cost of the person’s care, minus applicable deductions provided under subsection (f) of this Section. Subsection (f) describes various deductions that can be used to reduce post-eligibility income. The effect of the deductions is that they increase the amount which the Department will pay for residential services on behalf of the person, up to the Department’s payment rate for the facility (approximately $3,500 per month). The deductions that are contemplated are: 1) certain SSI benefits; 2) a personal needs allowance (usually $30 per month); 3) the community spouse income allowance ($2,739 in 2011); 4) a family allowance; 5) an amount to meet the needs of qualifying children under age 21 who do not reside with either parent, who do not have enough income to meet their needs and whose resources do not exceed the resource limits; 6) amounts incurred for certain Medicare and health insurance costs not subject to payment by a third party; 7) certain expenses not subject to third party payment for “necessary medical care” recognized under state law, but not a covered service under the Medical Assistance Program. The term “necessary medical care” has the meaning described in 215 ILCS 105/2 and must be proved as such by a prescription, referral or statement from the patient’s doctor or dentist. The following are allowable deductions from a person’s post-eligibility income for medically necessary services: A) expenses incurred within the six months prior to the month of an application, provided those expenses remain a current liability to the person and were not used to meet a spenddown. (The author understands that there may be some controversy in limiting medical expenses to those incurred within the six-month period prior to the month of application. It will remain to be seen how this will be resolved.) Medical expenses incurred during a period of ineligibility resulting from a penalty imposed under Section 120.387 or 120.388 of this Part are not an allowable deduction; B) expenses incurred for necessary medical services from a medical provider, so long as the provider was not terminated, barred or suspended from participation in the Medical Assistance Program at the time the medical services were provided; and C) expenses for long term care services, subject to the limitations of this subsection (f)(7) and provided that the services were not provided by a facility to a person admitted during a time the facility was subject to the sanction of non-payment for new admissions. 8) Certain expenses to maintain a residence in the community for up to six months, when the person does not have a spouse and/or dependent child, and the physician has certified that the stay in the facility is temporary and the individual is expected to return home within six months. The amount of the deduction must be based on the rent or property expense allowed under the AABD MANG standard if the person was at home and the utility expenses that would be allowed under the AABD MANG standard if the person was at home. Sections 120.62, 63, and 65. These Sections were repealed. With regard to Section 120.65, it should be noted that, before this rule was repealed, persons living in Community Integrated Living Arrangements (CILAs) were treated as living in the community. With this Section being repealed by this rule change, those persons will now be treated as long term care cases and provisions dealing with asset transfers and resource limitations will now apply to this group. SUBPART H: MEDICAL ASSISTANCE – NO GRANT (MANG) ELIGIBILITY FACTORS Section 120.308 Client Cooperation. This section is not part of the DRA, but it should be discussed. The thrust of this Section in subparagraphs (a)-(h) is to set out the terms of cooperation that an applicant is required to demonstrate and what cooperation is expected by HFS. Subsection (a) provides that cooperation by applicants is required in the determination of eligibility, including the acquisition and verification of information upon which eligibility may depend, and applying for all financial benefits for which they may qualify and to avail themselves of those benefits at the earliest possible date. Subsection (b) provides that clients are to avail themselves of all potential income and resources and to take appropriate steps to access and receive these resources, including those steps to be taken by the person’s spouse as later set out in Section 120.388(d)(2). Subsection (c) states that, when eligibility cannot be conclusively determined because the individual is unwilling or fails to provide essential information or to consent to verification, the client shall be ineligible. Subsection (d) requires that, at screening, applicants shall be informed, in writing, of any information they are to provide at the eligibility interview. Subsection (e) provides that, at the eligibility interview, or at any time during the application process, when the applicant is requested to provide information in his or her possession, the Department will allow 10 days for the return of information requested by the Department. There are specific rules that describe the beginning and ending of the 10 day period. There are also rules for returning information to the Department when requested. Subsection (f) states that, at the eligibility interview or at any time during the application process, when the applicant is requested to provide third party information, the Department shall allow 10 calendar days for the return of the requested information or for verification that the third party information has been requested. If the applicant does not provide the information or verification that the information was requested by the date on the information request form, the application shall be denied on the following work day. 1) Third party information is defined as information that must be provided by someone other than the applicant. 2) The Department shall advise clients of the need to provide written verification of third party information requests and the consequences of failing to provide that verification. 3) If the applicant requests an extension either verbally or in writing in order to obtain third party information and provides written verification of the request for the third party information, an extension of 45 days from the date of application shall be granted. 4) If an applicant’s attempt to obtain third party information is unsuccessful, upon the applicant’s request, the Department will assist in securing evidence to support the client’s eligibility for assistance. Subsection (g) requires that any information or verifications requested under this Section must be returned to the Department or its agent’s office in the manner indicated on the information request form. Information mailed or otherwise delivered to an address not indicated on the form will not toll the timeframes for providing information under this Section. Subsection (h) provides that failure to cooperate in the determination of eligibility under this Section, including failure to provide requested information or verifications, is a basis for the denial of an application for benefits. The Department goes on to provide somewhat of a safe harbor by indicating that the Department shall not deny an application: – when the delay is beyond the control of the person following a timely request to the third party, or – for failure to timely provide information in the applicant’s possession if the person has made a good faith attempt to retrieve the information and is unable to do so due to incapacity, illness, family emergency or other just cause.

New Medicaid Law Changes Pose Challenges to Nursing Homes and Residents

By Anthony Ferraro on

December 22, 2011

- Alzheimer's Care, Blog, Elder Law Articles, Medicaid and Paying for Nursing Home Care

The New Landscape In February of 2006, due to changes brought about by Congress through the federal Deficit Reduction Act of 2005 (DRA), there were massive changes in the federal Medicaid law as it relates to the gifts or asset transfers. Now, on January 1, 2012, Illinois will finally adopt those provisions of the DRA and, thus change Illinois Medicaid law for long-term care forever. You may recall that under the old Medicaid law (expiring on December 31, 2011), a gift or other uncompensated transfer created a period of ineligibility starting on the date of transfer.

For example: Prior to January 1, 2012, a $70,000 gift made by someone in Chicago, Illinois would create a 10 month penalty from the date the gift was made. (Assume Skilled Nursing Facility (“SNF”) cost of $7,000 a month. $70,000 divided by $7,000 = 10 months). Thus, if the gift were made 12 months prior, the penalties would have already expired.
Under the new Illinois DRA law for Medicaid, for gifts made after January 1, 2012, the same 10 month penalty period will not begin until the following requirements are all met:

1. The person is in the nursing home, 2. Assets are spent down to $2,000 and 3. An application for Medicaid is filed. Only at that time will the penalty period start! In such a case any gifted funds would then have to be used for the cost of care to get through the penalty period. But there will be many circumstances in which the gifted funds are no longer available. If, for example, one of the gifts were made by an Alzheimer’s patient to fund college tuition or given to an individual in the family who simply no longer has the gifts. What will happen in that case? This is a major pitfall brought about by the new Medicaid law and one with which nursing homes will have to deal in the days that are coming. In other words, prior to the passage of this new Illinois law, various asset transfers would not cause major problems for nursing homes since the penalties associated with the prior transfers were self-correcting, in that the penalty would have expired by the time the applicant was spent down. But now, under the new Illinois law, every transaction will be examined. All small transfers will be accumulated and added together and they will cause penalties which won’t even begin to run until the person is otherwise spent down, in the nursing home, and the Medicaid application is filed. Nursing Homes Need to Change Procedure In the past, it has been very common to see nursing homes kindly helping residents with Medicaid applications. There was not a lot of risk associated with this under prior law. That has now all changed. Under the new laws, the same practice may be very risky from a legal and cash flow perspective. That is because it will be now be essential to verify exactly what assets have been spent and transferred without value received in exchange, because the new law will have no safe harbor for prior asset transfers without adequate compensation.

So let’s review another example: Assume Mr. Applicant is a resident of the Gracious Nursing Facility located in Chicago, Illinois and that he has been paying the Gracious Nursing Facility privately for some months. He will be ready to apply for Medicaid in September, 2012 because at that time he will be spent down.
However, in January, 2012, after the new law came into effect, Mr. Applicant made a gift to his granddaughter for tuition at a local college.
Assume that the amount of tuition payment was $70,000. Under the old law, that would have meant that there would be a penalty of 10 months ($70,000 gift divided by $7,000, which is the cost for a semi private room on a private pay basis at Gracious Nursing Facility=10 month penalty). Under the old laws, the 10 month penalty calculation would begin on the date of the transfer. Thus, the penalty would have ended by August, 2012.
However, under the new laws, the penalty won’t start until September, 2011, when Mr. Applicant is spent down to $2000. This means he may not be eligible until the same 10 month penalty period ends in June, 2013!

How is Mr Applicant going to pay from September of 2012 to June of 2013, after he has already spent down? Now if the social worker at the nursing home kindly tries to assist the family by filling out the application and doesn’t understand how the new law will affect Mr. Applicant’s situation, then the application will be filed with an expectation that Medicaid will be approved. However, you can imagine the disappointment of the nursing home administrator and the family when they later find out (usually some 90 to 120 days after the submission of the application) that the application was properly denied because the new rules are in effect. What will the nursing home do a case like this? What will the family of Mr. Applicant do in such a case? The proper recourse could consist of filing a request for hardship exception. Illinois, however, has not had a great history of granting hardship exceptions. Furthermore the granting of hardship exceptions is for the benefit of the resident. The hardship exception is not designed to make sure that the nursing home can maintain its cash flow for properly serving a resident. Thus you can see that these issues will, in the coming days, be very difficult for nursing homes and families dealing with the documentation required for the resident. Many residents will not have the ability to reconstruct the financial history to the extent required by law (60 months). In addition, seeking hardship waivers is a very difficult process and will require proving up certain pleadings. For these reasons this new Illinois law is something that the commentators have called “The Nursing Home Bankruptcy Act of 2006.” HARSH BUT TRUE! While I’m not suggesting that the world is ending, I am sure that this new law will cause enormous hurdles for nursing homes and their residents to overcome. What was at one time a simple Medicaid application should no longer be viewed that way. The services of an elder law attorney who thoroughly understands the new rules and Medicaid changes as well how to deal with asset issues, property transfers and Medicaid denials will become more important now and in the days ahead. Anthony B. Ferraro Attorney – CPA