Medicaid Planning Osher Lifelong Learning Institute May 4, 2011 David M.

Meranus Schwartz, Manes, Ruby & Slovin 441 Vine St., Suite 2900 Cincinnati OH 45202 (513) 345-1412 MEDICAID – BACKGROUND AND OVERVIEW Medicaid is federal-state matching entitlement program that pays for medical assistance for certain vulnerable and needy individuals and families with low incomes and resources. The Ohio Department of Job and Family Services (“ODJFS”) administers the program in Ohio. MEDICAID – BY THE NUMBERS In 2009, over $300 billion was spent on long-term care. Of this $300 billion, 50% was paid by Medicaid, approximately 19% by Medicare, 19% was private-paid, and 7% was paid by long term care insurance. The average yearly cost of nursing home care was $83,585. Most elderly enter a nursing home between the ages of 83 and 86. But 83% of people requiring long-term care are still at home, according to statistics. Medicaid now realizes that it can take care of five people at home for the same cost as one in a nursing home. Further, now that Medicaid is paying for assisted living, it realizes that it can take care of two people in an assisted living facility for the same cost as one in a nursing home. As of 2010, one out of five people will be over the age of 65. One out of two people over the age of 65 will require some nursing home care in their lifetime, either rehab or as a permanent resident. At the rate of increasing costs of long-term care, no one can afford a facility for long. There are 101 million households in the United States. Of these households: • 63.3 million have assets less than $100,000. • 19.5 million have assets of $100,000 to $250,000 • 10.1 million have assets of $250,000 to $500,000 • 8.0 million have assets over $500,000, with most being between $500,000–$750,000. MEDICAID – PURPOSE

Medicare is insurance. Medicaid will pay as long as the individual meets all of the criteria.” The medically needy are older adults and individuals with disabilities who are considered in need of medical care. MEDICAID – NOT MEDICARE Too often Medicaid is confused with Medicare.Medicaid is welfare. The care that the individual will receive in the nursing home will be identical to the care of a private-pay resident. The state may not discriminate by providing care to one Medicaid recipient while it fails to provide care afforded to another recipient. These individuals must be age 65 or older or must have a disability that meets the Social Security criteria. These individuals may have incomes greater than those permitted for the categorically needy. Mandatory Medicaid Services that every State must cover are: • Inpatient hospital care. If one needs nursing home care and has no money to pay for it. Other differences are: Medicaid Welfare Need based Functional need No co-pay Many services Long term care A. 2 . MEDICAID – SERVICES C. Disability is defined by federal law as the “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or has lasted or can be expected to last for a continuous period of not less than twelve months. but their out of pocket costs for medical care reduce or spend down their income to the eligible amounts. Medicare insurance based on quarters worked disability co-pays and deductibles limited standard services rehabilitation only The Categorically needy are individuals who receive Medicaid services by reason of poverty and age or disability. B. Medicaid is welfare. or blindness.

F. 1. and • Restoration of an individual to the best possible functional level. • Physical therapy. and • Clinic services. and • Transportation. Outpatient hospital and Federally Qualified Health Center services. i. • Targeted case management. Level of Care. • Drugs that are not covered by Medicare D. an individual must be resident of Ohio. • Home health care services (including durable medical equipment) for nursing home care. • Diagnostic screening. These categories are: • age 65 or older. • Services in an intermediate care facility for individuals with mental retardation. or • disabled. Nursing facility services for individuals age 21 and older who require daily nursing care or other rehabilitation services that can only be provided in a nursing facility on an inpatient basis. which is required by federal regulation.D. preventative and rehabilitative services that are recommended by a physician for: • Maximum reduction of physical or mental disability. prosthetics and eyeglasses. must have a medical need and also fall within one of the categories of covered persons. Medical need is established through a “level of care” assessment which establishes that the 3 . • blind. MEDICAL ELIGIBILITY – OHIO In order to be eligible for Medicaid benefits for long-term nursing care in Ohio. E. • Hospice care. • Physician’s services. • Medical and surgical services performed by dentists. dentures. Laboratory and x-ray services. a person must meet both medical and financial requirements. and to elect to be paid by Medicaid often pays less than private pay. • • • MEDICAID – ELIGIBILITY In order to be eligible for Medicaid. Optional services include: • Dental services. One of the problems with receiving the care required is that there must be providers to administer the care.

OAC §5101:1-37-01(A). Medical eligibility for Medicaid depends on the extent to which the person needs assistance with the tasks of daily living (eating. if the person has dementia. or the applicant may seek certification of medical eligibility in advance of application. otherwise the applicant doesn't need Medicaid to pay for the cost of long-term care in a nursing home. Medicaid will not pay for his nursing home expenses. If an individual’s “countable income” is equal to or less than the monthly cost of care. Patient Liability.person needs an intermediate or skilled level of nursing care. iii. the person may not have the reasoning to do the activities of daily living when they should be done. A person’s “countable income” is his or her gross income less certain disregards. the individual meets the income eligibility test. With dementia. If he does not require at least this level of care. bathing and toileting) and also the extent to which he requires skilled care. he or she may qualify instantly. Beginning with the month in which an individual becomes eligible 4 . iv. 1. INCOME ELIGIBILITY The second step is to become qualified financially. the state will determine whether the person requires a level of care that will be covered. such as up to $20 per month is unearned income. 2. dressing. On application for Medicaid. To be medically eligible he must require assistance with at least two of the tasks of daily living and one skilled nursing activity. The income of the applicant must be below the cost of nursing home care. Even if the potential resident can perform all of the activities of daily living. which makes him or her automatically an approved nursing home candidate. ii. G. Countable Income.

3. must be paid to the nursing facility. iii. OAC §5101:1-39-22. where a married couple is involved.1. Medical insurance premiums. with a minimum 5 . In calculating the individual’s patient liability. RESOURCE ELIGIBILITY . Only the individual’s income is used to establish the patient liability.500 in countable resources to be eligible for Medicaid benefits.LONG-TERM NURSING CARE BENEFITS 1. Single Individuals.for Medicaid benefits. H.821 (the “Minimum Monthly Maintenance Needs Allowance” or “MMMNA”). Past Medical Expenses. v. also. it does not include the income of his or her spouse. the community spouse is entitled to retain a “Community Spousal Resource Allowance”. OAC § 5101:1-39-22. If the Community Spouse’s (“CS”) income is below a certain level. However. Allowances. ii. This additional amount of income from the institutionalized spouse is called the Monthly Income Allowance (“MIA”). which is currently a minimum of $1. OAC § 5101:1-39-05. or “CSRA”.500 in countable resources to be eligible for nursing home Medicaid benefits. A married person must. This is the person’s “patient liability”. Monthly Income Allowance. several deductions are permitted: i. Family Allowance. iv. Married Individuals. Personal needs allowance of $40 each month. A single individual must have no more than $1. except several allowances discussed below. all of his or her countable income. the community spouse may retain enough of the institutionalized spouse’s income to reach monthly minimum. which is equal to one-half of the couple’s countable resources as of the first day of institutionalization. 2. have no more than $1.

spouse.000 in countable resources. Irrevocable funeral arrangements for both ii. Household goods and personal effects. real property. annuities. As of October 20. One motor vehicle regardless of value if for community spouse or for medical transportation. a 2002 Buick and have about $225. 2010. 6 .912 and a maximum amount of $109.560 and Paul is entitled to retain up to $1. 2010. stocks. OAC § 5101:1-39-05. Countable Resources. OAC § 5101:6-7-02. if occupied by the individual (and for first 13 months in nursing home). Certain resources are not included in the definition of countable resources: i. Paul will be eligible for Medicaid benefits to pay for his nursing care when they have spent their countable resources down below $110. or a sibling with a verified equity interest in the home who has lived there at least a year. EXAMPLE Paul and Mary. Paul enters a nursing home on October 20. Paul and Mary own their own home.500. iii. promissory notes. v.560. IRAs (from which an individual is not drawing an irrevocable stream of periodic payments).060 since Mary is entitled to retain a CSRA of $109. savings. otherwise value is limited to $4. 3. 4.500 Life insurance with a face (cash) value less than $1. are married. Exempt Resources. both age 75. child over age 65. iv.amount of $21. dependent (under 21). life estates which can be transferred. The principal residence. brokerage accounts. the cash value of life insurance policies. “Countable resources” include all of a person’s or a couple’s cash. OAC § 5101:139-31.500. blind or disabled child. and any other asset which can be liquidated.

The IS in either case can only have $1. Income producing property with a value of up to $6. All countable assets are pooled together on the snapshot date for a married couple. RESOURCE ASSESSMENT. the assets are divided between the spouses. For single people. the assets are divided between the spouses.spouses. For single people. Once the snapshot date has been reached. This is known as the Snap-shot Date.000 which produces at least 6% return on equity. 2. Spend Down Once the snapshot date has been reached. Snap-shot Date The snapshot day is the first day of the first 30-day stay in a nursing home of the institutionalized spouse (IS). The IS in either case can only have $1. SNAP SHOT & SPEND DOWN When a married individual applies for Medicaid. plus burial spaces for family members.500. The community spouse (CS) can have half of the assets or $104. All assets owned by the husband. ODJFS will conduct a resource assessment to determine a couples countable resources. the assets are whatever he or she has on the snapshot date. wife and those assets held jointly by the couple or by the individual and a third party are counted as available assets. ix. There is only one snapshot date. The amounts over these figures must be spent down before the applicant can be approved to receive Medicaid benefits to pay for his or her care in a nursing home. The hospital stay prior to the transfer directly to a nursing home counts in the 30 days. 1. the assets are whatever he or she has on the snapshot date. I. The community spouse (CS) can have half of the assets or $109. The amounts over these figures must be spent down before the applicant can be approved to receive Medicaid benefits to pay for his or her care in a nursing home. Non-transferable life-estates Certain retirement accounts Long-term care insurance partnership vii.500. viii. vi. 7 .400.500.

2011. iv. Look-Back Date. If an improper transfer has been made. it is rebuttably presumed to have been made in order to hasten Medicaid eligibility and is. to income in approved limited Any allocation to a community spouse in whole or in part as a result of a fair hearing or court order. ii. TRANSFERS OF ASSETS Even if all other eligibility requirements have been met. So really. Any expenditure spent on the applicant. Medicaid approves the following for a proper spend down: i. regardless if a trust is involved or not. The look-back period for all applicants will be five years from the date of application for Medicaid benefits for an institutionalized individual. 2. iii. the presumption is rebuttable. Any conversion circumstances. If there is a transfer. 3. Again. Calculation of Penalty Period. Now the look-back period will be five years for all transfers. The period of restricted coverage is calculated by dividing the amount of the improper transfer by the current average monthly private cost of 8 . Any transfers to exempted persons or trusts. the applicant’s spouse or a dependent of the applicant. 2006. a person might not be eligible for Medicaid benefits if the applicant or his or her spouse has transferred assets in an attempt to hasten Medicaid eligibility. however. an improper transfer. Improper Transfer.3. it will not be treated as improper. is that this new five-year look-back is only for transfers on or occurring after February 8. five years. 1. The previous look-back period was three years or if a trust was involved. If a large transfer can be shown to have been made for non-Medicaid related reasons. a period of “restricted coverage” for Medicaid benefits is calculated. J. or the date on which the individual applies for Passport assistance. One thing to make clear. there can be no full five-year look-back until February 8. therefore. The look-back period began on the day that the potential Medicaid recipient applied for Medicaid benefits.

Paul gave his son his entire life savings of $235.000 on January 15.000 in nursing home costs each month which Paul cannot pay for himself.500 or so.000. The following are permissible transfers: i. and would be approved for Medicaid benefits but for the ineligibility due to an improper transfer.care in a nursing facility which is currently $ by $6023. EXAMPLE Paul is applying for nursing home Medicaid benefits on October 15. hoping to qualify for Medicaid as soon as possible if he needed nursing care. 2011.000 and a cost of care at the nursing home of $7. Paul would have kept $117. This would have put Paul on Medicaid after 19 months. he gave his son $115. The penalty period starts when the applicant is in the nursing home requiring care. An $117. Paul has monthly income of $1. It is very important for a person who is considering making gifts to retain sufficient assets to privately pay through any period of ineligibility. 2010. 2007. Transfers of non-homestead property to a blind or disabled child. ii. OAC § 5101:1-39-07. On April 20. with his son being able to keep all of the $117.500 which he could have used to pay his own way for that period of time. 4. it is an improper transfer. Even if Paul’s son pays the additional $6. EXAMPLE Contemplating needing nursing care.500 transfer would have created a penalty period of 19 months. 2011 and applies for Medicaid immediately. Had Paul thought about the optimum gift in January. Paul’s period of restricted Medicaid coverage will last a total of 39 months. Transfer of the residence to the community 9 . he probably would have come up with a gift of around $117. Since the transfer was within 5 years prior to the application date. 2011. The period of Medicaid restricted coverage is 19 months (the calculation is always rounded down to the next whole month). according to Medicaid as of the writing of this presentation. Paul enters a nursing home in February. which is the average private pay rate of nursing home cost per month. the gifted funds will run out after 39 months.500 gift.000. Exceptions to the Improper Transfer Rule.

OAC § 5101:1-39-07. or misuse. These are established for a disabled person under age 65. Established by a third 2. or adult child who lived with applicant for at least 2 years and provided care which delayed institutionalization. an improper transfer has occurred. adult child who is blind or disabled. TRUSTS Because of the use. of trusts in Medicaid planning. MEDICAID QUALIFYING TRUSTS These trusts. 3. These trusts are used to provide supplemental benefits for a Medicaid recipient if the recipient’s income exceeds the Medicaid income limit). Supplemental Services Trusts. Requires Medicaid payback.spouse. 1993. These trusts are considered countable resources to the extent income and/or principal can be used for the applicant’s benefit. 10 . SELF-SETTLED TRUSTS – AFTER AUGUST 11. There is a Medicaid payback provision. B. A trust established by a non-profit entity in which all participants’ assets are pooled and used for supplemental benefits. iv. Special Needs Trusts. 4. Transfers of the residence to the individual’s spouse. Qualifying income trusts. 1993. To the extent irrevocable transfers are made into such a trust and cannot be used for the applicant’s benefit. EXEMPT TRUSTS. sibling who had an equity interest in the residence for at least one year. there are a number of rules specific to trust planning: A. See OAC § 5101:1-39-27. child under age 21. Transfers to a trust established for the sole benefit of an individual under age 65 who is blind or totally disabled. are not treated as countable resources if there is no discretion to invade principal for the applicant. established prior to August 11. iii. 1. C. Pooled Trusts.

” A RISA will be considered exempt only if it cannot be cashed-in or if an individual must terminate employment to cash it in. At least 50% of trust assets must be paid to State at beneficiary’s death. it is treated as a countable resource. These types of accounts are referred to in the Medicaid regulations as “retirement and income supplementing accounts” or “RISAs. the Department of Job and Family Services does not agree to that interpretation of the statute. B. new annuity rules were promulgated last year. spouse. Trusts established by Will for the benefit of the surviving If the community spouse owns a commercial annuity prior to the other spouse’s institutionalization. This can significantly hasten a person’s eligibility for benefits. 6. OAC § 5101:1-39-22. If the community spouse irrevocably annuitizes it over his or her life expectancy before the snapshot date. Annuities. the annuitization of the annuity will NOT be treated as an improper transfer to the community spouse. ANNUITY PURCHASED AFTER SNAPSHOT DATE If the annuity is purchased AFTER the snapshot date for the benefit of the community spouse.8.party (parent. usually) for the benefit of a person receiving benefits through MR/DD or county board of mental health. are important because they can be converted from a countable resource to a stream of income. These rules clarify what planning can be done with commercial annuities. as planning tools. IRAs AND QUALIFIED RETIREMENT ACCOUNTS – RISAs IRAs and other qualified retirement accounts are generally considered countable resources. A. without any reduction for income taxes which may be due when distributions are taken.000 (increases by $2. ANNUITIES Because of a great deal of abuse with regard to annuity purchases. the annuitization will be treated as an improper transfer to the extent the annuity amount was in excess of the CSRA. 5.000/year). Maximum limit of $220. ANNUITY OWNED BY COMMUNITY SPOUSE AT SNAPSHOT DATE Trusts established by someone else for the applicant’s benefit and which are totally discretionary. C. However. 11 . The language of the new annuity rule is still less than clear in many respects and a community spouse may even be able to annuitize the annuity after the snapshot date.

Second. the new Ohio statute dealing with this. Presumably. As of July 1. the State is in the position of any other general creditor with regard to non-probate assets. however. 2005. First. whichever is later. OTHER ESTATE RECOVERY REQUIREMENTS In order to be entitled to recovery. In a probate estate. 2005. the State must assert a claim no later than one year after the date of death or 90 days after receiving notice from the estate fiduciary. ORC § 5111.11(A) (1)(b). Recovery can only be sought if there is no surviving child under age 21 or who is blind or permanently disabled. no such notification requirement seems to be present with regard to non-probate assets. It does not give the State any special claim to those assets. However. general creditors are typically unable to collect against non-probate assets. Ohio sought recovery only from a decedent’s probate estate. Recovery is sought against the “estate” (which includes non-probate assets) of the survivor of the Medicaid recipient and his or her surviving spouse. B. Prior to July 1. Estate recovery can also be waived upon a demonstration of undue hardship. only authorizes the State to seek recovery against nonprobate assets.11. does the State’s right to file a claim ever expire? 2. there are still several open issues with regard to the State’s ability to collect against non-probate assets: 1. See ORC §§ 2117. PROBATE AND NON-PROBATE ASSETS ARE NOW SUBJECT Ohio is required by the federal government to seek recovery for what it has paid in Medicaid benefits. while there are forms as part of the probate process which are used to notify the State as to its right to make a claim for recovery. the Medicaid recipient must have been at least 55 years old when services were rendered and lived in a nursing facility or received home and community-based services. Absent fraud. the State is authorized to seek recovery from both probate and non-probate assets that pass from a Medicaid recipient or his or her surviving spouse. although the State had been very aggressive in asserting that any transfers which avoided a probate administration were fraudulent as to the State’s claim for reimbursement. Where there is no probate estate.7.061 and 5111. ESTATE RECOVERY A.See OAC § 5101:1-39-22. 12 .

She now has $160. Before the individual or couple will be entitled to Ohio Medicaid assistance. Jennifer and Kimberly. then there is no required spend down because of the $21.912 floor. (181049_1) 13 . When a couple is involved.000. Most expenditures. Similarly. other than gifts. and pays off her debts.000. Take two couples with a pending nursing home stay on the part of the husband. If the original amount was $300. will qualify for this purpose.560). and upon application for Ohio Medicaid.000. An example will illustrate the importance of understanding these rules.000 in the bank.000. subject to a $25. Kimberly does nothing until after her husband enters the nursing home.000 in investments. Accordingly. Kimberly does not have to spend any money on the nursing home and the facility begins to receive Ohio Medicaid vendor payments immediately. this amount is cut in half and the assets must be spent down to $50. Medicaid law and practice should allow Kimberly to later sell the home and place the proceeds in investments. The wives. She could then pay off the other credit card debt and end up with $160. the assets of the couple at the time the first of the them had a period of institutionalization of thirty days or more is utilized. the excess resources must be expended in some permissible manner. and credit card debt of $15.560. this will generally mean that the countable resources must be reduced by half. Jennifer's husband then is placed in the nursing home. She does this by paying off the mortgage.000 when the one spouse entered the nursing home. whereas Jennifer would only have $80.000. In determining values. if the original amount was $15. assets in the bank worth $50. So she sells their home." The floor is currently $21. the ceiling comes into play and more than half must be spent (maximum that can be retained by the healthy spouse is $109. The ceiling is currently $109. are in the exact financial situation.912. places the proceeds from the sale in the bank. she is told they must spend down $80.Ohio Medicaid Spend-Down Rules Medicaid spend-down applies when an individual or a couple have countable resources in excess of the eligibility limits.000 mortgage. Jennifer decides that she should take care of a few things before her husband enters the nursing home. Each has a home worth $150. so she must spend down $25.000. if the countable assets were $100. subject to a "floor" and "ceiling. She has $50.000.000.000 of countable assets.000.