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The 35%Estate Tax is Peanuts! How About the 100% “Medicaid Tax”?|Chicagoland Elder Law Attorney Anthony B. Ferraro

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February 18, 2013

- Chicagoland Elder Law, Medicaid spend down planning, senior estate planning

Why has everybody been so concerned about the Estate tax? For years,  clients of our office have  been very concerned about the Estate tax. I have reassured many clients over the last couple of  years that the Estate tax will not impact you unless you have more than $5,000,000 ($10,000,000 if you are married). Now contrast that to the cost of what I call the “Medicaid tax”. The “Medicaid tax” is  the government’s  requirement that you  spend your assets down to $2,000 (as a single person) before you get any Medicaid  help for your  custodial care or long- term care, either in a Supportive Living Facility (similar to an assisted living facility) or an Intermediate or Skilled Nursing Facility. This terrible governmental  requirement to spend down to $2000 is what I refer to as a 100% Medicaid tax. Because, effectively you have to be down to zero assets before you get any assistance with maladies that require custodial care, such as dementia, Alzheimer’s, Parkinson’s, MS, ALS, COPD,  muscular dystrophy, etc. Therefore, I politely ask my clients to “wake up and smell the coffee”. Quit obsessing over the effect of the Estate tax. It will not affect most of us. On the other hand, consider the government-mandated Medicaid spend down of your assets to paltry $2,000 –  this will affect most of us. Why will this affect most of us? Because, due to the advances of medical science,  most of us are living much longer (thankfully).  However, while we are living much longer, we also need more care as we age. Couple this with the fact that the average cost of a Supportive Living Facility (SLF) is somewhere around $4,000 a month and the average cost of an Intermediate or Skilled Nursing Facility is $6,000 to $10,000 a month, and you have a “perfect storm” scenario that can lead to a Medicaid spend down of your assets to a measley $2,000. And that $2000 has to last you for the rest of your life. This is, in my view, the equivalent of a 100% “Medicaid tax“. How treacherous is it to be spent down to $2000? Let me give you an example. We recently had a client at our office that needed  abscessed teeth to be removed. Our client was 85 years of age and spent down to $2000. She was told that the only available Medicaid dentist  in Cook County would take her, but it would require her to wait 6 to 8 hours in the waiting room. My client had moderate to severe dementia and could not last 6 to 8 hours in a waiting room. It would have been nice if she had come to me earlier so I could set aside a rainy day fund for her. A Solution: This would be a legal and ethical  re-allocation of her assets so that she could have funds for things like teeth extraction,  but still qualify for Medicaid benefits. We had  another client that required hearing aids. Hearing aids cost $6,000.How do you buy them when you’re spent down to $2,000? So we inform our clients that they should not be concerned about the Estate tax unless they are very, very wealthy. The more likely severe financial impact that will hit most of our clients comes from the devastating cost of long-term care. Clients have to understand that they must  plan while they still can. Unfortunately, this window can sometimes close very quickly due to the onset of a stroke, heart attack, accident, or some other catastrophic disability. At The Law Offices of Anthony B. Ferraro, LLC, we are Attorneys and CPAs. We have been serving clients in matters of Medicaid asset protection, long-term care planning, traditional estate planning, senior estate planning, estate tax planning, and estate and trust administration for a combined 45 years. Today’s environment in which our seniors are asked to fend for themselves and protect themselves and loved ones from Medicaid spend down, taxes, the cost of home care, healthcare, long-term care,  creditors, predators, divorcing spouses, and illness, is very complicated to most of our clients. But we deal with this every day. And we are just a phone call away. Consider making the call to our office while you are still are able to plan. Let us provided you with service and guidance that will be essential for your well-being and that of your loved ones. Let us give you options… So you don’t go broke the aging process.     Anthony B. Ferraro Attorney-MSTax-CPA The Law Offices of Anthony B. Ferraro, LLC Attorneys & CPAs The Elder Law, Estate & Trust and Asset Protection Law Firm 5600 North River Rd. Rosemont, Illinois 60018  847-292-1220 www.ABFerraroLaw.com
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I’m scouting nursing homes for my mother, who has Alzheimer’s. Can they ever kick her out if she runs out of money? ? | Chicago, Illinois Elder Law Attorney Anthony B. Ferraro

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July 25, 2012

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

This is a good question that you need to sort out before making a final decision about specific living arrangements for your mother. Medicaid is for individuals who have little or no means to pay for their own care. Eldercare facilities must be certified by the appropriate government entities to serve Medicaid beneficiaries. Some nursing homes and other eldercare facilities simply are not certified to accept Medicaid funding once a resident runs out of his or her own money. And those facilities that do accept Medicaid could have a long waiting list for the beds designated for that type of care. That is why it is so important to figure out the lay of the land and your options before you initially settle your mother into a facility. Find out the monthly cost of a nursing home that interests you and project how much you think you will ultimately be needed. If you think your mother will outlast her funds, you can ensure you choose a provider that will accept Medicaid, when and if the need arises. Families of individuals with Alzheimer’s usually do not want to move their loved ones if they don’t have to, especially not after they have adjusted to their surroundings. Changing locations can be very stressful for a person with dementia.  To learn more about Medicaid, click here.
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Medicaid Reform Again, But WORSE!

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

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February 27, 2012

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

I.          Introduction The following  is Part II of a three part article first appearing on February 9, 2012 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 dealt with the scope of the federal changes and five specific areas of Illinois law that have been impacted by the new Illinois rules. This second installment deals 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. Section 120.347- Treatment of Trusts and Annuities. Subsection a) This Section deals with the treatment of trusts established on or after August 11, 1993. Subsection b) This Section provides that a trust is any arrangement which a grantor transfers property to a trustee or trustees with the intent that it be held and managed or administered by the trustee for the benefit of the grantor or designated beneficiaries. This seems to focus on self settled trusts. The Section indicates a trust also includes any legal instrument or device that is similar to a trust, including an annuity. Subsection c) This Section states that a person shall be considered to have established a trust (and hence the trust is available resource for the person) if the resources of the person were used to form all or part of the principal of the trust and the trust is established (other than by Will) by any of the following:
  1.  the person,
  2.  the person’s spouse; or
  3. any other person, including a court or administrative body with legal authority to act on behalf of or at the direction of the person or the person’s spouse.
Before describing the exceptions to this general rule, it should be noted that the other than by will exception would exclude bypass wills and pour back trusts. Subsection d) This Section provides certain exceptions as to when this section does not apply to certain trusts.
  1. Two exceptions are what is commonly referred to as (d)(4(A) irrevocable trusts and (d)(4)(C) irrevocable trusts. These trusts are the self settled OBRA trusts that are created by an individual for their own benefit.
The section then goes on to describe that for revocable trusts, the Department shall treat as an available resource the amount of the trust from which payment to or for the benefit of the person could be made.  Subsection e) This Section provides that subsections f and g that follow below apply to the portion of the trust attributable to the person and without regard to:
  1.  the purpose of the trust,
  2.  whether the trustee has or exercises any discretion under the trust; or
  3.  whether there are any restrictions on distributions or use of distributions from the trust.
Subsection f) This Section deals with revocable trusts and indicates that the Department shall:
  1. treat the principal as of an available resource
  2. treat as income payments from the trust that are made to or for the benefit of the person, and
  3. treat any payments from the trust is transfers of assets by the person (subject to the provisions of Section 120.387 or 120.388).
Subsection g) This Section provides for the treatment of irrevocable trusts, and indicates that the Department shall:
  1. treat as an available resource the amount of the trust for which payment to or for the benefit of the person could be made,
  2. treat as income payments from the trusts that are made to or for the benefit of the person,
  3. treat any other payments from the trust is transfers of assets by the person   (subject again to section 120.387 or 120.388; and
  4.  treat as a transfer of assets by the person the amount of the trust for which no payment could be made to the person under any circumstances. The date of the transfer is the date the trust was established or, if later, the date that payment to the person was foreclosed. The amount of the trust is determined by including any payments made from the trust after the date that payment to the person was foreclosed.
Subsection h) This Section deals with the treatment of trust income. It indicates that for married couples, income from trusts shall be attributable to each spouse as provided in the trust unless:
  1. payment of income is made solely to one spouse, in which case the income shall be attributed to that spouse;
  2. the payment of income is made to both spouses in which case one half of the income shall be attributed to each spouse, or
  3. the payment of income is made to either spouse, or both, and to another person or persons, in which case the income shall be attributed to each spouse in proportion to the spouse’s interest, or if payment is made to both spouses and no such interest is specified, one half of the joint interest shall be attributed to each spouse.
Subsection i) Annuities are treated similar to trusts. What the Department apparently means by this is the following:
  1. revocable and assignable annuities are considered available resources
  2. any portion of an annuity for which payment to or for the benefit of the person or the persons house could be made is an available resource. Also, an annuity that may be surrendered to its issuing entity for a refund or payment of a specified amount or provides for a lump sum payment settlement option is an available resource valued at the amount of any such refund, surrender or settlement.
  3. Income received from an annuity by an institutionalized person is considered non-exempt income. Income received by the community spouse of an institutionalized person is treated as available to the community spouse for purposes of determining the community spouse income allowance under 120.379(e).
  4. An annuity that fails to name the State of Illinois as a remainder beneficiary as required under 120.385(b) shall result in denial or termination of eligibility for long-term care services.
Subsection j) This Section indicates that the principal of a trust established under the self-sufficiency trust fund program (set forth under 20 I LCS 1705/21.1) is an exempt resource . See the further discussion and annuities later in this article when we discuss when the transfer of assets in exchange for a and other assets such as an annuity or promissory note is considered to be a transfer for fair market value and hence not a penalizable uncompensated transfer. Section 120.379- Provisions for the Prevention of Spousal Impoverishment. Subsection a) indicates that this Section applies only to an institutionalized person whose spouse resides in the community. For purposes of this paragraph, institutionalized individuals or persons are defined in section 120.388(c). Section 120.380(c) defines institutionalized persons as persons residing in long-term care facilities, including those who were residing in the community at the time a transfer of assets was made or persons who but for the provision of home and community based waiver services would require the level of care in a long-term care facility, including those persons receiving home and community based waiver services were not receiving the services at the time the transfer was made.   Subsection b) Income. This subsection describes the treatment of income in determining the financial eligibility of an institutionalized spouse The Section provides that in determining the financial eligibility of an institutionalized spouse, only non-exempt income attributed to the institutionalized spouse shall be considered available. The Section goes on to describe how income is allocated between spouses based on certain rebuttable presumptions dealing with:
  1. if payment is made solely in the name of one spouse , the income will be considered available only to that spouse,
  2. if payment of income is made in the name of both spouses, one half of the income shall be considered available to each spouse,
  3. if payment of income is made in the names of either spouse, or both, and to another person or persons, income shall be considered available to each spouse in proportion to the spouse is interest or if payment is made to both spouses and no other interest is specified then one half of the joint interest shall be considered available to each spouse
  4. if payment of income is made from a trust income shall be considered to each spouse as provided under 120.340 7H
  5. if there is no trust or instrument establishing ownership, one half of the income shall be considered available to institutionalized spouse and one half the community spouse.
Subsection c) Resources. In determining the financial eligibility of an institutionalized spouse, the following rules apply:
  1. At the beginning of a continuous period of institutionalization, and the total value of resources owned by either or both spouses shall be computed.
  2. The Department, at the beginning of a continuous period of institutionalization  and at the request of the institutionalized spouse, community spouse, or a representative of either, shall conduct an assessment of the couple’s resources for purposes of determining the combined amount of non-exempt resources in which either spouse has an ownership interest area person requesting the assessment shall be responsible for providing documentation and verification. For purposes of this subsection a continuous period of institutionalization is defined as at least 30 days of continuous institutional care. The Section goes on to describe for how long that initial assessment remains effective if there are discharges from a long-term care facility, hospitalization etc.
  3. For purposes of this subsection (c) a continuous, a continuous period of institutionalization is defined as at least 30 days of continuous institutional care. An initial assessment remains effective during that period if:

       a.  a resident of a long-term facility is discharged for a period of less than 30 days and then re-enters the facility;

         b.  a resident of a long-term care facility enters a hospital and then returns to the facility from the hospital;

         c.  a person discontinues receiving home and community case-based services for a period of less than 30 days; or

         d. a person discontinues receiving home and community-based services due to hospitalization and then is

    discharged to receive home and community-based services.            .

     4.    At the time of the institutionalized spouse’s application for medical assistance, all non-exempt resources held by either the institutionalized person, the community  spouse or both are considered available to the institutionalized spouse. From this amount may be deducted and transferred to the community spouse the Community Spouse Resource Allowance ( CSRA). This means that at all assets of both spouses are added up, and then $109,560 is allocated to the community spouse, and the rest is considered an available resource to the institutionalized spouse. Subsection d)  Transfer of resources to the community spouse. From the amount of non-exempt resources considered available to the institutionalized spouse, a transfer of resources is allowed by the institutionalized spouse to the community spouse or to another individual for the sole benefit of the community spouse in an amount that does not exceed the CSRA i.e. $109,560. The CSRA is further defined to be the difference between the amount of resources otherwise available to the community spouse and the greater of:
  1. the amount established annually by the US Department of Health and Human Services, which as of January 1, 2011 was $109,560,
  2. the amount established through a fair hearing under subsection (f)(3)F3 of this Section, or
  3. the amount transferred under a court order against an institutionalized spouse for support of the community spouse.
Subsection e) Deductions are allowed from an institutionalized spouse’s post-eligibility income for the community spouse income allowance and family allowance as set forth in Sections 120.60 1(d) and (e). Subsection f) In this Section, there is a discussion of fair hearings that either the institutionalized spouse orr the community spouse may request if there is dissatisfaction with  the CSRA allowance, or if there is a request  for an increase in the MMMNA (Minimum Monthly Maintenance Needs Allowance). Subsection g) This Section describes the appeal of a fair hearing. Subsection h)   If a transfer of resources as permitted under subsection (d) is made from the institutionalized spouse to the community spouse, then such transfer shall be made as soon as practicable after the date of the initial determination of eligibility and before the first regularly scheduled redetermination of eligibility, taking into account such time as baby necessary to obtain a court order under subsection (d)(3) of this Section. If the transfer of resources has not been made by the first scheduled redetermination and no petition for an order the spousal report support is pending judicial review, the resources shall be considered available to the institutionalized spouse Subsection  i) This Section deals with assignment of support rights and generally deals with the concept of spousal refusal, which is very controversial in the formation of these rules. The concept of spousal refusal is grounded in federal law.  There has been litigation regarding this in other states, and depending on how this provision is administered, it could be controversial here in Illinois as well. This Section indicates that the institutionalized spouse shall not be ineligible by reason of resources determined under Section (c)(4) to be available to the cost of care when: 1. institutionalized spouse has assigned it to the state any rights to support from the community spouse, 2. the institutionalized spouse lacks the ability to execute an assignment due to physical or mental impairment but the state has a right to bring a support proceeding against the community spouse without that assignment or 3. the state determines that the denial of eligibility would work an undue hardship.   Subsection j) Finally, Subsection j) indicates that the Department may pursue any available legal process to enforce its right of assignment to support against the community spouse or any other responsible party pursuant to section 120.319. These procedures may include, but are not limited to, the administrative support procedures set forth under Illinois 89 Illinois admin code section 103. Section 120.380 – Resources. Subsection a) This Section indicates that unless otherwise provided that the term “resource” as defined in 42 USC 1382b, (except subsection (a)(1) of that section, which excludes the home as a resource) means cash or any other personal or real property that a person owns and has the right, authority or power to liquidate. The global nature of this Section is reminiscent of Section 61 of the Internal Revenue Code wherein Congress sought to describe gross income. No doubt here the state is trying to be as expansive as possible in the definition of resources. Subsection b) Subsection b indicates that a resource is considered available to pay for the person’s own care when at the disposal of that person; when the person has a legal interest in the liquidated sum and has the legal ability to make the sum available for support, maintenance or medical care; or when the person has the lawful power to make the resource available or to cause the resource to be made available. Subsection c) This Section indicates that the value of non-exempt resources shall be considered in determining eligibility for any means-tested public benefit program administered by HFS, the Department of Human Services, or the Department of Aging. Subsection d) Subsection d is entitled determination of resources. This subsection is divided into three sub paragraphs: 1. The first paragraph provides that in determining financial eligibility for medical assistance, the Department will consider non-exempt and verified resources available to a person as of the date of decision on the application for medical assistance. The date of verification is referred to in Section 120.308(f), and may be prior to the date of decision.  Resources applied to a spend down obligation in a retroactive month shall not be treated as available in the determination of financial eligibility. Importantly, money considered as income for a month is not considered a resource for that same month. If income for a month is added to a bank account that month, the Department will subtract the amount of income from the bank balance to determine the resource level. Any income remaining in the following month is considered a resource. 2. The second subparagraph provides that in determining financial eligibility for a retroactive month, the Department will consider the amount of income and resources available to a person as of the first day of each month of the backdated months for which eligibility is sought. A new provision provides that resources spent prior to the end of the month of application to purchase a prepaid funeral burial contract, to pay for incurred medical expenses, or to pay legal fees up to $10,000 incurred in the month of application or in any of the three months prior to the month of application that are related to the eligibility application for long-term care insisted assistance shall not be considered available. 3. The third subparagraph provides that in determining a person’s spend down obligation  (see Section 120.384), the Department considers the amount of non-exempt resources available as of the date of decision in the case of initial eligibility, and the first day of the month, in the case of retroactive eligibility, that are in excess of the applicable resource disregard. Subsection e) This Section provides that the entire equity value of jointly held resources shall be considered available in determining a person’s eligibility for this assistance unless:
  1.  the resource is a joint income tax refund, 
  2. when one party documents that he or she does not have access ro the resource,
  3. jointly held accounts, and other related accessibility issue situations.
Subsection f) This Section deals with determining the eligibility of a person for long-term care services whosespouse resides in the community. It indicates that all non-exempt resources owned by the institutionalized spouse, the community spouse, or both shall be considered available to the institutionalized spouse in determining his or her eligibility for medical assistance. From the total amount of such resources may be deducted the CSRA, fo example $109,560. Subsection g) This Section provides that the treatment of certain trusts established prior to August 11, 1993, shall be treated as described in section 120.346. Subsection h) This Section provides that the treatment of trusts established after August 11, 1993, shall be treated in a manner described in section 120.347 Subsection i) Subsection i describes the treatment of life estates and indicates that the value of a life estate will be determined at the time the life estate in the properties established and at the time the property is liquidated. The section goes on to describe the value of life estates.  The section also refers to the value of the remainder interest and how values for these components can be determined by looking at tables located in Section 120. Table A . Subsection j) This Section indicates that the value of a person’s entrance fee into a continuing care retirement community shall be considered an available resource to the extent the person has the ability to use the entrance fee to pay for care, the person is eligible for refund when they die or terminates the community care contract and leaves the community, and if the entrance fee does not confer anownership interest in the continuing care community. Subsection k) This Section provides that non-homestead real property (including homestead property that is no longer exempt pursuant to Section 120.381(a)(1)) is considered an available resource unless:
  1. the property is exempted as income producing to the extent permitted under Section 120.381(a)(3) (limiting equity to $6,000); however the $6,000 equity limitation shall not apply to farmland property and personal property used in the income-producing operations related to farmland;
  2. ownership of property consists of a fractional interest of such a small value is substantial loss to the person would occur if the property were sold,
  3. the property has been listed for sale, in which case the property will not be counted is available for at least six months as long as the person makes a continued good effort to sell the property; or
  4. the homestead property that is no longer exempt is producing annual net income for the person an amount that is not less than 6% of the person’s net income. In making this calculation, the Department will recognize business expenses allowed for federal income tax purposes.
Section 120.381 – Exempt Resources Subsection a) This Section lists the exempt resources n determining eligibility for medical assistance:
  1. homestead property;
  2. personal effects and household goods;
  3. resources (for example, land, buildings, equipment and supplies or tools) necessary for self-support up to $6,000 of the person’s equity in the income-producing property, provided the property produces a net annual income of at least 6% of the excluded equity of the value of the property;
  4. automobile;
  5. life insurance policies of the total face value of $1,500 or less and all term life insurance policies. If the total face value exceeds $1,500 the cash surrender value must be counted as a resource
  6. a description of equity value is provided.
Subsection b) This Section describes the treatment of burial spaces, prepaid funerals /burial contracts, and other funds that are set aside for burial expenses and a whole list of other specialized exempt resources and assets based on public policy initiatives such as certain disaster relief and payments made to our Armed Forces. Subsection c) Describes the treatments of one’s  monies that are set aside for burial expenses. Subsection d) Deals with prepaid/burial contracts. Subsections e) through p) Deal with the treatment of other very specialized resources. Section 120.382 – Resource Disregard In this section the rule sets out the exempt resources that, in addition to those listed in Section 120.381, the cash value of certain resources shall be disregarded for AABD MANG cases: Subsection a) This Section provides $2,000 for a person, and $3,000 for a person and one dependent residing together. Subsection b) Provides $50 free to each additional dependent residing in the same household. Subsection c) Indicates that special provisions are made for the determination of resources on behalf of a person under a qualified long-term care insurance policy. Subsection d) Provides that eligibility for medical assistance or for the benefits described in Sections 120.72 and 120.73 does not exist when non-exempt resources exceed allowable disregards. Subsection e) Deals with qualified Medicare beneficiaries.  Section 120.384 – Spend down of Resources This Section provides that in determining a person’s resource spend down obligation, the Department will compare the non-exempt resources available to the person to the appropriate asset resource disregard.  The amount of resources in excess of the disregard determines the amount of the spend down. The Section then goes on to describe how spend down is met. Subsection a) Provides that if a person presents verification that excess resources are no longer available, the Department will make the appropriate changes the month following the month the person dispose of the resources. Subsection b) Provides that persons enrolled in spend down are not eligible for payment of covered medical services until spend down is met. A resource spend down is met by presenting allowable medical bills or receipts to the Department they will be amount of the person’s non-exempt excess resources. Subsection c) Provides that once excess resources have been used to meet spend down, whether or not the excess amount has actually been reduced, they are no longer considered. However, at reapplication/redetermination the Department will consider any excess non-exempt resources remaining as currently available.           
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Are you thinking of buying into a comfortable retirement community?

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February 20, 2012

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

 

Are you thinking of buying into a comfortable retirement community?

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That is often a good idea but, think again carefully.

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The new Illinois Medicaid law taking effect on January 1, 2012 dramatically change the treatment of entrance fees at Continuing Care Retirement Communities

Continuing Care Retirement Communities (CCRCs) are communities that provide a full continuum of care for its residents.  They have flexible accommodations designed to meet their resident’s health and housing needs as their needs change over time. They offer independent living, assisted living and nursing home care, usually all in one location.  As a requirement for admission to most CCRCs, residents are required to pay an entrance fee or a lump sum “buy-in” which, in addition to other things, guarantees the resident’s right to live in the facility for the remainder of their lifetime.  In addition to the entrance fee, residents also pay a monthly service fee. The entrance fee is often, but not always, reimbursable (at least partially) if the individual moves from the facility, if they pass away while a resident at the facility, or if they otherwise terminate the contract.  Many contracts also contain a provision wherein an individual is able to use a portion of their entrance fee toward their monthly resident charges if the resident exhausts his resources and becomes otherwise unable to pay. PRIOR LAW Prior to the new Medicaid law (the Deficit Reduction Act of 2005, hereinafter “DRA”), the entrance fee was generally not considered an available asset for Medicaid eligibility purposes. NEW  LAW Under the new DRA, that took effect on January 1, 2012, a CCRC entrance fee is considered an available or “countable” asset if: (1) the contract provides the entrance fee may be used to pay for care should the resident run out of money and become unable to pay their monthly charge; or (2) the individual is eligible for a refund of any remaining entrance fee when the individual dies, leaves the community or otherwise terminates the life care contract; and (3) the entrance fee does not confer an ownership interest in the CCRC. Also, under the new law, CCRC’s are given the authority to include in their contacts a provision which requires residents to spend all of their resources on their care prior to applying for Medicaid benefits (essentially disallowing any Medicaid planning or asset protection once the contract is signed). Thus,   when an individual applies for admission to a CCRC, the application may request full disclosure of an individual’s resources. Prior to the new law, regardless of the amount of resources an individual declared, the CCRC could not prohibit the individual from doing any long-term care planning or asset protection planning and then applying for Medicaid. PROBLEM CREATED BY NEW LAW Now CCRC’s can contractually require a resident to spend down all of the assets they declared at the time of admission before applying for medical assistance. This new provision will greatly limit the ability of CCRC residents to protect their assets once admitted to the community.  Some residents may not care about the ability to protect their assets once they are admitted to the community. But for those of you that do care about protecting assets from being lost to the devastating cost of long-term care, the inability to plan with your remaining dwindling resources is a big deal! CONCLUSION It is a good idea to consult with an experienced elder law attorney prior to entering into a contract at a Continuing Care Retirement Community. This ensures that you understand how your entrance fee/”buy-in” agreement may financially and legally impact your  long term care plan and any asset protection planning that you may have in mind. CCRC’s can do a nice job of providing care, but there is no substitute for getting the appropriate legal advice before you enter into a binding contract with anyone.
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Implementation by the Illinois Department of Health and Family Services of the Federal Deficit Reduction Act of 2005 (DRA) © 2011

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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.
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Could the Draconian New Medicaid Rules for Long-Term Care in Illinois (effective Jan. 1, 2012) Really Be A Cloud With A Silver Lining?

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February 1, 2012

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

New Rules As you may have read in recent columns, Illinois has adopted new rules for Medicaid coverage for long-term care for our citizens and the state of Illinois (“DRA”). These new rules took effect January 1, 2012.  The new rules are going to require that our clients engage in what we call “Five-Year Planning.” This “Five-Year Planning” has become  necessary because of the fact that there will be a new five-year lookback for all Medicaid applicants when there are asset transfers that take place after January 1, 2012. The Silver Lining What may come as a surprise to many of our clients is that the unintended consequences of these rules may be that long-term care planning for our clients may actually be enhanced in some ways. The silver lining in all of this is that while the lookback period and the need to plan further in advance is one of the negative aspects of the new law, the need to use trusts of a very specialized type in order to comply with the five-year look back may actually provide some very positive consequences. How to take advantage of the New Rule Following is an example of how the new rules could work in your favor.  Instead of leaving assets for their children outright, parents can now consider leaving assets in trust for their children. Leaving assets in trust for children carries with it the following benefits:
  1. the ability to protect the assets inherited by a child from the creditors and predators of the child, such as divorcing spouses, business creditors, tort creditors, etc.;
  2. the ability to allow the management of the assets to continue under the supervision of the parents’ financial advisor who may have assisted the parents over the years in accumulating a critical mass of assets that can provide for many years of security for the children;
  3. the ability to meet the five-year lookback requirement of the new Medicaid laws;
  4. and, finally, the ability to prevent the children from squandering or losing the assets that the parents carefully accumulated during their lifetime.
We are currently experiencing the greatest intergenerational transfer of wealth in the history of the world. However, there are often problems with transfers of wealth. Quite often, the parents pass away and the baby boomer generation will take funds in what used to be a well-managed and profitable brokerage account, and the money is randomly moved or, worse yet, squandered shortly after it is received. So I often ask both our clients and their financial advisors if they would  be interested in establishing a systematic relationship for the management of assets so that a client’s family can continue to retain the benefit from financial management even after parents pass away? The recent adoption by the state of Illinois of the DRA will provide an entrée and solution to this problem for all. In the past, this was sometimes difficult to do. The opportunity to avoid the unintended squandering and loss of assets at the death of the parents now exists with the increased usage and importance of so called Five- Year Planning as part of our “senior” estate planning process.  This planning always existed, but is now more critical than ever, with the passage of DRA in Illinois and the required “5 year or 60 month lookback period.” My preference is to work with clients and their advisors  who appreciate the wisdom of keeping client assets protected from creditors and under  management of the financial advisor. Call To Action If this interests you, then please call my office so that we can schedule a time to meet and I can discuss this new law with you. I think you’ll be amazed at the opportunities that the law presents to the older generation, as well as to the younger generation. You have our best wishes for the new year! I hope to speak with you soon.
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How the Tough New Medicaid Rules for Long Term Care Affect You!!

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December 23, 2011

- Blog, Medicaid and Paying for Nursing Home Care

As we have been anticipating for over a year now, the Department of Healthcare and Family Services (“the Department”) has finally adopted amendments to  “Medical Assistance Programs”, which can be found in 89 Illinois Admin. Code Part 120. These amendments will become effective on January 1, 2012, and will serve to implement the provisions of the Federal Deficit Reduction Act of 2005 (“DRA”) regarding Medicaid assistance for long-term care in Illinois. Before being finalized, the rule changes went through many different revisions. Myself and several other elder law attorneys participated in the review of these rule revisions. The rules that have changed are many and complex.  For example, the new rules change the lookback period for reviewing prior transfers to as far back as January 1, 2007. This means that the rules regarding transfers are being applied retroactively despite outcry from the elder law community and many other industry groups.  The new rules will be applied to persons who file an application for Medicaid long-term care assistance on or after January 1, 2012. Also, regarding asset transfers for which a Medicaid applicant has received less than fair market value, (for example gifts to children or other persons- other that  what the Department considers “incidental”), there will be a period of Medicaid ineligibility for long-term care. This period of ineligibility will not begin,  however,  until the Medicaid Applicant is in the nursing home, spent down to poverty level and a Medicaid application is filed. Then, and only then,  will the ineligibility period begin to run! More specificity about how the new rules are  implemented will hopefully be available once the state issues its Policy Manual about the new rules. As of this date, no revision to the Policy Manual has been published to reflect the new rules. Read more about the devastating impact these rules will have on the senior and disabled community and why “Senior” Estate Planning is more important than ever. A more in depth discussion can be found in the “Elder Law Articles” section of our website. Look for many future blog entries on this topic. This is a “sea change” in the way our taxpayer – clients will become eligible for Medicaid payment for their nursing home care in the days ahead.  
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New Medicaid Law Changes Pose Challenges to Nursing Homes and Residents

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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
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Illinois Medicaid Rules for Nursing Home Coverage

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December 9, 2010

- Blog, Elder Law Articles

New Medicaid rules are coming soon to a state near you. By February 9, 2011, the State of Illinois is expected to adopt the Deficit Reduction Act of 2005, as amended by federal changes in 2006. Implementation is anticipated by next year. The time frame, however, is not set in stone. Discussions between the Elder Law Bar and state officials are ongoing, and I have had the privilege of participating in them. Representatives of the state have graciously solicited feedback from elder care experts like myself, in order to analyze various aspects of the new rules and their consequences, but we have yet to determine exactly how they will be implemented. Issues we are still discussing pertain to retroactivity, hardship waivers, and partial returns. When more concrete information becomes available about how the new rules will be implemented, we will certainly update you. In the meantime, here are a few thoughts about elder law and long-term care planning: First, if you are physically and financially able, we recommend you obtain long-term care insurance. Long-term care insurance is the first line of defense for protecting assets, especially for the middle class in our country. Second, please be aware that traditional estate planning is not the same as long-term care planning. Estate planning deals with what happens upon your death, or in certain cases, disability. By contrast, long-term care planning prepares you to manage the costs of chronic illness and the sophisticated care for many years it often requires. The tools and objectives of long-term care planning are different than in traditional estate planning. Don’t confuse the two! Finally, do not underestimate the value of proactive planning. While you still have plenty of time, take advantage of it! When we are faced with an urgent trigger, like sudden illness, we are compelled to engage in crisis planning. While crisis planning can potentially save substantial amounts of your assets, proactive planning is ideal. Proactive long-term care planning can turn your desirable objectives for your hard-earned assets into a reality. Don’t wait to get started! During our fast-paced lives, the holidays provide a unique opportunity to share time with family. Investing some of that family time in a conversation about long-term care planning will reap the best rewards you could ask for: preservation of your wealth and your peace of mind. Happy Holidays!
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