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
- 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.
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: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.
- the person,
- the person’s spouse; or
- 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.
- 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 purpose of the trust,
- whether the trustee has or exercises any discretion under the trust; or
- whether there are any restrictions on distributions or use of distributions from the trust.
- treat the principal as of an available resource
- treat as income payments from the trust that are made to or for the benefit of the person, and
- treat any payments from the trust is transfers of assets by the person (subject to the provisions of Section 120.387 or 120.388).
- treat as an available resource the amount of the trust for which payment to or for the benefit of the person could be made,
- treat as income payments from the trusts that are made to or for the benefit of the person,
- treat any other payments from the trust is transfers of assets by the person (subject again to section 120.387 or 120.388; and
- 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.
- payment of income is made solely to one spouse, in which case the income shall be attributed to that spouse;
- the payment of income is made to both spouses in which case one half of the income shall be attributed to each spouse, or
- 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.
- revocable and assignable annuities are considered available resources
- 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.
- 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).
- 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.
- if payment is made solely in the name of one spouse , the income will be considered available only to that spouse,
- if payment of income is made in the name of both spouses, one half of the income shall be considered available to each spouse,
- 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
- if payment of income is made from a trust income shall be considered to each spouse as provided under 120.340 7H
- 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.
- At the beginning of a continuous period of institutionalization, and the total value of resources owned by either or both spouses shall be computed.
- 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.
- 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:
- the amount established annually by the US Department of Health and Human Services, which as of January 1, 2011 was $109,560,
- the amount established through a fair hearing under subsection (f)(3)F3 of this Section, or
- the amount transferred under a court order against an institutionalized spouse for support of the community spouse.
- the resource is a joint income tax refund,
- when one party documents that he or she does not have access ro the resource,
- jointly held accounts, and other related accessibility issue situations.
- 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;
- 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,
- 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
- 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.
- homestead property;
- personal effects and household goods;
- 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;
- 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
- a description of equity value is provided.
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.
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:
- 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!