THE MIDDLE CLASS GUIDE TO MEDICAID PLANNING

Protect Assets and Get Coverage When You Need It for

Home Health Aides, Assisted Living, and Nursing Home Care

…from some of the best providers

A Community Service Educational Publication of

Shalloway & Shalloway, P.A. Attorneys at Law
1400 Centrepark Blvd., Suite 600
West Palm Beach, FL 33401
www.shalloway.com 561-686-6200

G. Mark Shalloway, Esq. Author

Firm & Attorney Profile

Shalloway & Shalloway, P.A., Elder & Special Needs Law Attorneys, established in 1992 in West
Palm Beach, Florida, is dedicated to preserving the financial security and personal dignity of our
clients. Co-Founder G. Mark Shalloway is certified as an Elder Law Attorney (CELA) by the
National Elder Law Foundation (NELF), a Florida Bar Board Certified Elder Law Attorney charter
class, and is an Accredited Veteran's Administration attorney and holds a AV rating with
Martindale-Hubbell*.

Mr. Shalloway is a Fellow and Past President of the National Academy of Elder Law Attorneys
(NAELA), Past President of the Academy of Florida Elder Law Attorneys, and Past Chair of the
Medicaid Section of the Florida Bar Elder Law Section. Florida Governors Chiles and Bush have
appointed him as the Attorney for the Palm Beach County Long-Term-Care Ombudsman Council
program, inspecting and advocating for residents in nursing homes and assisted living facilities.
He sits on the Stetson College of Law Elder Law Advisory Board and the National Multiple
Sclerosis Foundation and is the author of the Medicaid Chapters of Representing the Elderly in
Florida, published by LexisNexis. Locally, Mr. Shalloway is a Past Chair of Alzheimer's
Community Care and speaks in his field at such national forums as the Special Needs Alliance,
the Red Stone US Military Base, the American Society on Aging in Washington, D. C., and at the
Absolute Litigator’s Conference on Special Needs Trusts. He is the proud recipient of the 2012
Child Advocate Award of the Palm Beach County Legal Aid Society for his pro bono work in
special needs trusts and Medicaid.

Mr. Shalloway is a specialist in Elder Law including Medicaid, Long-Term Care Asset Protection
Planning, establishing and administering Special Needs and Medicare Set-Aside Trusts, Personal
Injury Settlement Consulting, Veterans Benefits, Guardianships, and Wills, Trusts & Estates. The
firm is pleased to sponsor the Area Agency on Aging Elder Advocate Award.

* Martindale-Hubbell AV Preeminent 5.0 out of 5.0 rating

When does the need for home aides, assisted living, or a nursing home arise?
If you or a loved one is a middle class senior, the single greatest threat to your assets and independence
is chronic or long-term illness like Alzheimer’s, stroke, Parkinson’s, lung disease, stenosis, and neuropathy.
Unlike most heart attacks and cancers, these chronic diseases eventually rob you of your ability to dress,
bathe, toilet, eat, and transfer (get in and out of a bed, chair, or car unless you are cued, supervised, or
helped). At some point, you need supervision or care from family, home health aides, assisted living, or a
nursing home for the rest of your life –not just for several weeks or months. Family members are
sometimes frail, lack funds, live out of state, work, or don’t exist. Also, the senior doesn’t want to be a
burden and imposition on family members.

How much do home aides, assisted living facilities, and nursing homes cost?
In Palm Beach County, nursing homes range in cost from $8,000 to $12,000 a month, assisted living
facilities cost $2,000 to $7,000 a month, and at-home aides range in cost from a few hundred to $10,000
a month. These costs can be catastrophic to the middle class and drain their life savings within a couple
of months. Also, studies show that premiums for Long Term Care Insurance can cost from $40,000 to
$100,000 over a 20 year period. (See details below)

Will Medicare pay for my care?

No. You may think Medicare or your insurance policy(s) will pay for help you need from at-home aides,
assisted living, or a nursing home. It won’t. Unless you’ve specifically purchased “long-term care
insurance,” all other insurances, including the military Tri-care for Life, will not pay for this so-called
“unskilled” or “custodial” care. In other words, you don’t require a doctor, nurse, or therapist to supervise
or help you dress, bathe, feed, or toilet. So Medicare and its various Advantage Plans and Supplemental
or Medigap policies are called “short-term skilled” care insurance coverages and will not pay for care any
care longer than about 100 days –whether you are in a nursing home, your personal residence, or
anywhere else.

If I am a veteran, will the VA pay for my care?

Generally, no. Many veterans and their families mistakenly believe the VA will pay for at-home health
aides, assisted living and nursing home care because they use VA doctors and get their prescriptions from
the VA. Typically only service-connected disabled vets may be an exception, but not for his or her spouse.
Not even Tri-Care for Life will pay for pure unskilled custodial care in a nursing home. The separate “Guide
For Veterans & Families: How to Create Eligibility for up to $24,000/year tax free income from an Earned
Pension with Aid & Attendance Supplement” can be referenced for further information on this issue.

Will a long term care policy pay for these costs?

Unless you are healthy enough to be deemed insurable and can afford premiums for over 20 years, a LTC
Policy is not always the most affordable way to finance care.

A LTC policy may be a wonderful tactic to stem the cost and play a role along with Medicaid planning.
However, seniors often express the seven 7 problems listed below. As a result, you may add Medicaid
Planning to provide gap or primary coverage to your LTC Policy. This may freeze, reduce, or eliminate your
costs in LTC policy premiums:

1. I don’t have a LTC policy, and I can’t afford it. Studies show I will likely pay $40,000 to $100,000 in
premiums over 20 years until I file a claim to start coverage (if I file a claim at all and not die of a
heart attack before, as an example.)
2. I can’t get a LTC policy because I’m too sick and considered uninsurable.
3. My policy only pays for nursing home coverage and I only need at-home aides or assisted living.
4. My policy doesn’t pay enough: Only $200/day and care is costing $300/day.
5. What do I do when my LTC policy runs out? It’s good for 3 or 5 years and I’m using it up.
6. What if they raise my premiums and I can’t afford it? I’ll have to drop it and it will lapse.
7. What if the LTC Company goes bankrupt, as Conseco and Penn Treaty did, or stops writing LTC
policies to individuals and only sells group LTC Policies, as Met Life did?

How Can Medicaid Help?

Medicaid can pay for care in three places:

1. Free home aids up to 5 hours a day. For example Sally the aide comes in the morning from 7am
to 9am to help Betty dress, bathe, eat, toilet, and take pills, then returns at 5pm to repeat, and
leaves a 8pm. Medicaid will also pay for optional adult day care, diapers, prescriptions, medical
transportation, physical and occupational therapy, and more. You can add or hire more hours a
day to this on your own if you need.
2. Care at the assisted living facility. You pay for room and board (rent and food); Medicaid will pay
the care portion of the monthly bill. For example, if the assisted living costs $3,200 a month,
Medicaid will pay $1,200 for care, and you pay $2,000 for rent for the apartment and food for the
month.
3. Medicaid Pays the entire nursing home bill after your personal monthly income copay. Your
share of cost in a nursing home is never more than your personal monthly income. For instance,
if the nursing home costs $10,000 a month private pay, and you only have a social security check
of $1,000, you only pay about that, or slightly less. If you are married, your spouse may be entitled
to keep a portion of your income for his or her own living expenses lowering your care costs even
more.

The goal in planning is to protect assets and not always have to wait 5 years. Later in this guide we address
“ Four Myths and Concerns about Medicaid.”

What happens if you do not plan to qualify for Medicaid coverage?

Without planning, Medicaid wants you to think you must spend down your life savings to $2,000. You can
keep one home, most cars, and a few minor items. If married, your spouse (who is not applying for
coverage) can hold about $100,000 in his or her name. With the exception of the items listed above, the
rest of your assets are subject to these caps. Medicaid hopes you are uninformed and mislead into
spending down your assets such as checking, savings, CD’s, stocks, bonds, mutual funds, annuities, IRA’s,
401k’s, brokerage accounts, cash surrender value of life insurance, and real estate.
Can I gift or transfer my assets to qualify for Medicaid?
If you try to get “poor on paper” by gifting or transferring your accounts within 5 years of applying for
Medicaid, you must disclose or you will be denied benefits and coverage. While you can strategically gift
for planning, this guide explores alternatives.

Does Medicaid have an income cap?

Medicaid has a monthly income cap for the applicant (not for a spouse) that can be cured with a qualified
income trust. The details go beyond this guide, but note that if you need such a trust and you plan, it
works.

Medicaid Planning Examples:

Example 1: A Single Applicant (Widowed, Divorced or Never Married)

Betty is single, has a home and a car, and $100,000. She pays her $1,000- a- month social security check
to the nursing home. Betty has created and signs a Medicaid compliant Care Advocacy Agreement with
her daughter Sue. Under the agreement, Betty hires her daughter who lives out of state to be a care
supervisor. Betty transfers her $100,000 to an account in Sue’s name or a Care Trust Sue operates. Betty
is approved for Medicaid immediately. No five year look-back rule or penalty is triggered. Betty did not
gift Sue the money but hired her daughter for fair market value.

Example 2: A Single or Married Applicant

Betty needs at- home aides to age in place. This time Betty has her $100,000 in an IRA. We set up her tax
annual required minimum distributions (RMD) to a monthly Medicaid and tax compliant pay-out schedule.
Betty is immediately approved for Medicaid. The IRA no longer counts as an asset, throwing Betty over
the $2,000 cap. The IRA is only treated as an income stream payment. Betty appears poor on paper in
assets and has only two income streams: a Social Security check, and an IRA check.

Example 3: Married Applicant

Mike and Betty have been married for 50 years. They own a home, car, and $300,000 in savings and
investments. Betty needs care. The home and car are exempt assets. All the assets can be transferred to
healthy husband Mike penalty-free under Medicaid rules. The 5-year look-back rule does not apply.

Transfers between spouses are unlimitedly exempt and penalty free. Betty now has $2,000 or less. Mike
has $300,000. Mike loans $225,000 to their kid(s) at the time a Medicaid application for Betty is filed.
Betty’s Medicaid is approved penalty free right away. Mike did not gift any funds, but merely lent
them. The kids received the funds income tax free and used the borrowed money to repay the loan. The
loan only counted as a monthly income stream check to Mike. Medicaid treats Mike as having only
$75,000 in countable assets in his name alone and 2 income checks, his social security and loan repayment
check. The day after Betty’s Medicaid application is approved, the kids can repay the loan in full. Mike is
allowed to go over his asset cap at that point.

Medicaid Planning is a Buffet of Strategies, not a single item or document. Planning involves numerous
techniques listed in Medicaid-enhanced powers of attorneys, wills, trusts, and other Medicaid compliant
documents.
Medicaid Planning is not about using only one tactic. Good planning includes creating and using, when
needed, multiple options. Normally, most people already have a power of attorney and a will. Some even
have the popular Living Trust. Those documents are typically well-drafted. What may be missing is
Medicaid planning language that contains authority to carry off the techniques similar to those given in
the planning examples in this guide.

As another example, imagine wife Betty is on Medicaid, with no assets in her name, and husband Mike
dies first. Under the husband’s old will, he leaves everything outright to his wife, throwing her over her
$2,000 asset cap for Medicaid. Mike can add language to his Will and Trust to say that if Betty is on
Medicaid at the time he dies, the assets are held in a special needs trust for the benefit of Betty, as the
surviving wife, so she can keep her Medicaid. The special needs trust can be used to upgrade Betty’s care
while on Medicaid.

Four Myths and Concerns About Medicaid

1. Medicaid planning is legal, but is it ethical?

Unfortunately in our government today, we have health care coverage discrimination by disease. Warren
Buffet can get his triple by-pass paid for by Medicare, but retired firemen and teachers with Alzheimer’s
who need long term care may go broke using their life-savings to pay nursing home costs before Medicaid
will help. Both Medicare and Medicaid are funded by taxes. Why favor heart attacks for billionaires?

Consider this:

Why should a person who spends money on travel, fancy clothes, and restaurants, then gets sick, and
applies for nursing home care be approved for Medicaid immediately due to a lack of savings, while
another who saves for a rainy day is told “spend down your life-savings on care” before Medicaid will
help? Is planning ethical? You decide what’s right for you.

2. What about the quality of care and choice of nursing homes?

Over 95% of all nursing homes participate in Medicaid. In fact they depend on Medicaid as much as doctors
depend on patients paying with some form of health insurance. Some of the very finest nursing homes
participate, and it is illegal to discriminate on quality of care. The health care aides and nurses don’t know
who pays privately and who gets Medicaid. Remember planning protects assets so you can more closely
cover your basic care with Medicaid then upgrade your care to a private room and private duty aides, as
desired in some cases, from your sheltered savings. While assisted living communities are more limited
in participation, the trend is increasing and Medicaid home health may be brought into a non-
Medicaid assisted or independent living community.

3. What if the Medicaid rules change or are different?

Historically, people who plan have grandfathered themselves in with protection from reforms to the law.
Since Medicaid was passed in 1965, changes have been enacted going forward. Risks remain even if you
buy or have a long-term care policy. (See the seven consumer concerns in this guide). If needed, your plan
can be designed to include strategies to work in more than one state. In short, with the population’s age
exploding, it’s hard to see Medicaid going away: maybe it will be renamed and reformed, but gone? Highly
unlikely.

Since there are no guarantees with your health, public entitlements, or long-term care insurance, aren’t
you better off stacking the odds in your favor that one or more of these solutions will be there if you plan
for as many as is reasonably suitable? Remember an alternative to these strategies, such as not acting, is
likely to produce a far worse outcome since good planning incorporates multiple tactics and contingencies.

4. Do I lose my Medicare if I’m on Medicaid?

You can keep your Medicare and add Medicaid. In fact you can choose to be on Medicaid, Medicare, and
if eligible, VA benefits, long-term care insurance, and a Medicare supplemental policy all at the same time!

Selecting a Lawyer Specializing in Elder Law

You may have never needed the services of an attorney before, but maybe now you do. Obviously, you
want a lawyer who can handle your particular legal situation and who has expertise in the area of law
relating to your legal needs. To assist you in finding such a lawyer, the Supreme Court of Florida directed
The Florida Bar to offer a “Board Certification” program for Florida Lawyers. The program is designed to
help the public make an informed decision when seeking and selecting a lawyer.

While all lawyers are allowed to advertise, only certified attorneys are allowed to identify themselves as
“Florida Bar Board Certified” or as a “specialist”. Certification is the highest level of recognition by the
Florida Bar of the competency and experience of attorneys in the areas of law approved for certification
by the state Supreme Court.

A lawyer who is a member in good standing of The Florida Bar and who meets the standards set by the
Supreme Court of Florida may become a “Board Certified Elder Law Specialist.” Certified lawyers in Elder
Law deal with legal issues involving health and personal care planning, including the following: advance
directives, lifetime planning, family issues, fiduciary representation, capacity, guardianship, power of
attorney, financial planning, public benefits and insurance, resident rights in long-term care facilities,
housing opportunities and financing, employment and retirement matters, income, estate and gift tax
matters, estate planning, probate, nursing home claims, age or disability discrimination, and
grandparent’s rights.

Every lawyer certified in Elder Law had practiced law on a full-time basis for at least five years. Each
certified lawyer has had substantial involvement- 40% or more- in the practice of Elder Law during the
two years immediately preceding certification. To be certified, the lawyer was required to have
substantial involvement in all aspects of planning for aging, illness, and incapacity in the five years
preceding certification. Each certified lawyer has passed peer review, completed 60 hours of continuing
legal education within the three years immediately preceding application, and has passed a written
examination demonstrating knowledge, skills, and proficiency in the field of elder law to justify the
representation of special competence.

Board certification is valid for five years, during which time the attorney must continue to practice law
and attend The Florida Bar approved continuing legal education course. To be recertified, requirements
similar to those for initial certification must be met. Those who are board certified have taken the extra
step and for that have their competence and experience recognized. Elder Law Certification was approved
from The Florida Bar members by the Supreme Court of Florida.

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