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Senior Citizen's Guide to Southwest Ohio

Medicaid Series

We are proud to publish a seven part series on how Medicaid works here in Ohio.  Each part in the series is condensed from the author's Estate Medicaid Handbook.  For a free copy of the handbook, you may contact the author at 852-6015 or request a copy from the author's law firm website: woodlamping.com.

  1. Financing Nursing Home Care: An Overview
  2. Medicaid
  3. Medicaid Resource Eligibility - Married Persons
  4. Medicaid's Treatment of Assets in Trust
  5. The New Medicaid "Look Back" Rule
  6. Income Eligibility for Medicaid
  7. Medicaid Estate Recovery

 


Part I:
Financing Nursing Home Care: An Overview

The cost of long term nursing home care is a major concern of persons facing progressive illnesses like Alzheimer's disease and victims of strokes and trauma.  In greater Cincinnati, the cost of nursing care facilities ranges from $185 to $285 per day. These costs will increase with time and will quickly deplete the estate of all but the wealthy and the well prepared.  There are several alternatives available to pay for nursing home care.

Medicare

Medicare is mentioned first because it is probably the best known medical insurance program for the elderly and disabled.  However, in terms of assisting with nursing home bills, it probably should be mentioned last.  Medicare only covers "skilled nursing" care in a Skilled Nursing Facility, not the intermediate care (also called custodial care) required for most nursing home residents.  Even with skilled care, Medicare only provides full nursing home benefits for the first 20 days and limited benefits for an additional 80 days.

Don't count on Medicare to cover the cost of long term care.

Life Care Contracts

A limited number of facilities offer life care contracts.  Generally, the resident signs over all or a portion of his or her assets to the facility in exchange for the facility's promise to provide care for the remainder of his or her life.  The financial stability of the facility is always an issue.  Another major concern is whether all or any part of the lump sum payment is refundable, and if so, under what circumstances.  The resident could die or wish to move after a relatively short period of time.

Long Term Care Insurance

LTC insurance can provide valuable protection.  However, because of its high cost, this is not a realistic option for those of very limited means.  When selecting a policy, keep these points in mind:

  1. Is the insurance company financially sound and reasonable to deal with.
  2. Does the policy pay for skilled, intermediate, and custodial care.  For extra premium, you can also buy coverage for "in-home" care.
  3. When combined with your income, is the daily benefit enough to cover nursing home costs and inflation?
  4. How long does the coverage last?  Three or four years is usually sufficient.
  5. Do the premiums increase dramatically as the policyholder ages?
  6. How long do you have to be in the nursing home before the policy begins to pay?  Sixty to ninety days is common. But, you can usually reduce the annual premium by increasing this period to 120 days?
  7. Does the policy cover pre-existing medical conditions?  If not, how long is it before coverage is provided for such conditions?

More in-depth information on this subject, including information about specific policies can be found in Consumer Reports, Modern Maturity and other publications.  This is a fast changing field so only use the latest information.

Veterans Benefits

The V.A. provides two types of programs for veterans and their surviving spouses:  V.A. Nursing Homes and payments to private nursing facilities, called payments in Aid and Attendance.

Generally, these benefits are available to Veterans and the spouses of Veterans who served during time of war, those who have service related disabilities and career Veterans.  The number of V.A. nursing home beds is limited, and in some cases, the nursing facilities with available beds are not close to the veteran's home.

The Aid and Attendance program is more flexible and provides cash payments which assist with care in a private nursing home. Eligibility for these programs should be reviewed with the V.A. in all cases where the Veteran or his spouse require nursing home care.

Medicaid

Medicaid will pay for long term care.  In fact, Medicaid pays for most of the long term care in this country.  Financial planning for persons facing long term nursing home care often focuses on preserving assets by accelerating Medicaid eligibility.

Medicaid is funded jointly by federal and state governments.  It is administered in Ohio by the County Departments of Job and Family Services and in Kentucky by the Cabinet For Health and Family Services.  The eligibility rules will be discussed in future issues of this publication.

 


Part II:
Medicaid

Medicaid will pay for long term skilled care.  In fact, Medicaid pays for most of the long term skilled care in this country.  Financial planning for persons facing long term nursing home care often focuses on preserving assets by accelerating Medicaid eligibility.

Medicaid is funded jointly by federal and state governments.  It is administered in Ohio by the County Departments of Job and Family Services and in Kentucky by the Cabinet For Health and Family Services.  Also, there are many rules and procedures not discussed here that may apply to your situation. You are strongly advised to obtain advice from a qualified Medicaid planner.

Level Of Care and Medical Need

To obtain Medicaid benefits in a nursing home, the nursing home placement must be medically justified.  This is documented by a medical evaluation which determines the "level of care" for the patient.  Historically, Medicaid only paid for intermediate (custodial care) and skilled care.  Recently, this has begun to change.

Residency

To obtain Medicaid benefits, the individual must be physically present in the county and state where he or she applies and have the intention to remain there.  There is no minimum period of residency.

Certified Facility

Medicaid applicants must reside in a facility which has a contract with the Dept. of Job and Family Services (in Kentucky, The Cabinet of Human Resources).  It is very important to verify that a facility accepts Medicaid payments before applying for placement.

Resource Eligibility For Unmarried Persons

To qualify for Medicaid nursing home benefits, a patient must pass two tests: a resource test and an income test.  The resource test is the more complicated of the two. To qualify for Medicaid, an individual must have no more than $1,500.00 in COUNTABLE RESOURCES (in Kentucky - $2,000).  Certain resources are exempt in calculating the $1,500.00 resource eligibility standard.  The primary exempt assets are:

  1. Household goods and personal effects.

  2. Engagement and wedding rings.

  3. One vehicle.  For unmarried persons, the value is limited to $4,500.00, regardless of any loan owed on the car (unless it is handicapped equipped or required for medical treatment or other essential daily activity).

  4. Term life insurance policies having no cash surrender value and other life insurance policies having an aggregate face value of $1,500.00 or less.

  5. An irrevocable prepaid burial contract.

  6. Burial Plots for the immediate family.

  7. The principal place of residence is exempt if it is occupied by any of the following:

    • spouse

    • blind or disabled child

    • child over 65 with income of less than $490.00 per month.

If there is no spouse or qualified child in the residence, the home is exempt during the first 6 months that the individual is institutionalized.  The residence must then be listed for sale.  Any offer for 90% or more of the market value must be accepted. There are special rules for homes occupied by a sibling with an equity interest or by a child who provided nursing care.

 


Part III:
Medicaid Resource Eligibility - Married Persons

For married persons institutionalized on or after January 1, 1990, Medicaid has special rules governing countable assets.  Assets belonging to both spouses are counted regardless of how the asset is titled or how it was acquired. In Ohio, if an asset is owned jointly with another person, the account is counted at full value unless the applicant (or spouse) can prove that the co-owner actually contributed to the value of the asset. Kentucky will treat the entire account as an available resource, regardless of contributions by others.  The non-institutionalized spouse is generally entitled to keep all exempt assets and one-half of the couple's countable assets (known as the Community Spouse Resource Allowance).  The non-institutionalized spouse's share of countable assets, however, is subject to a maximum of $101,640 and a minimum of $20,328.1

Resources of Married Applicant

Example 1:

Mr. Thomas enters an Ohio nursing home on January 1, 2005.  He and his wife have CD's totaling $12,000 and a $50,000 home.  The home is exempt because Mrs. Thomas resides there and $12,000 is below the minimum Community Spouse Resource Allowance ($20,328). Mrs. Thomas is entitled to keep the house and the entire $12,000.

Example 2:

Mrs. Lyons enters an Ohio nursing home on March 1, 2006.  She and her husband do not own a home but have $50,000 in the bank.  Half of $50,000 is $25,000.  Since $25,000 is above the minimum Community Spouse Resource Allowance ($20,328) and below the maximum ($101,640), Mr. Lyons is entitled to keep $25,000.  The remaining $25,000 will have to be "spent down" to the $1,500 eligibility standard.

In addition, when the community-based spouse's income is less than the monthly minimum income, a state hearing officer may award a Spousal Resource Allowance above the amount in the formula just described.

In "spending down" the institutionalized person's share, it is wise to plan carefully.  This will be discussed in a later issue.

Three very important factors in the calculation of resource eligibility:

  1. In Ohio, the couple's assets are valued as of the date of institutionalization (called the snapshot date).  Whenever Medicaid assistance is sought in Ohio, the Department of Job and Family Services will look back to the date of institutionalization to determine the proper division of assets.

    In Kentucky, the couple's assets are valued as of the date of the first Medicaid application.  Therefore, in Kentucky, it is often important to file an application immediately upon institutionalization;

  2. Medicaid eligibility is calculated as of the LAST DAY OF THE MONTH.  Therefore, if the applicant has successfully reached the spend down target on the last day of the month, he or she will be eligible for Medicaid benefits for that entire month.  This fact becomes very important in cases where a person may be only a few dollars over the eligibility standard.  Spending down at the end of one month rather than at the beginning of the next can result in significant savings; and

  3. Medicaid benefits may be approved retroactively for up to 3 months prior to the month of application.

__________
1 These figures are adjusted annually for inflation.

 


Part IV:
Medicaid's Treatment of Assets in Trust

Assets held in a trust for the institutionalized spouse or a community-based spouse may be counted as available resources.  When and how these assets are counted depends on the type and conditions of the Trust. The rules governing trusts were rewritten in November 2002. Major changes were made.  All Trusts, both new and old, must be re-evaluated in light of these new rules.

Revocable Trusts

There are two possible circumstances:

  1. Revocable Trusts where the applicant or applicant's spouse holds the power to revoke.  In this circumstance, all trust assets are counted as available resources.

  2. Revocable Trusts created after August 10, 1993 where the power to revoke is held by someone other than the applicant or applicant's spouse.

    1. If the trust contains assets that came from the applicant or applicant's spouse, then the value of any payment that the Trustee can legally make to the applicant or applicant's spouse will be treated as income (not a resource) - even if the payment is never actually made.  Furthermore, any contribution to the trust by the applicant or spouse will be subject to the transfer rules.

    2. If the trust only contains assets from a third party, the value of any payment that the applicant or applicant's spouse is legally entitled to receive is counted as income, not resources.  A beneficiary is legally entitled to receive a trust distribution if he or she has met any ascertainable standard contained in the trust, even where the Trustee may have discretion.

Irrevocable Trusts

If the trust was created by the applicant or applicant's spouse after August 10, 1993 and is not revocable, then the value of any payment that may be made to the applicant or spouse is treated as income (not resources) - even if the payment is never actually made.  Medicaid will assume that the Trustee will exercise his or her discretion in favor of the applicant or applicant's spouse to the fullest possible extent.  Furthermore, if the Trust contains assets that may be traced back to the applicant or the applicant's spouse, then those assets are subject to the transfer rules.  In these cases, the "look back" is 60 months.

The only exceptions to these rules are the Special Needs Trusts, Pooled Trusts, Supplemental Services Trust and Qualifying Income Trusts (QlTs).

Special Needs Trusts

A special needs trust is a trust established by a Medicaid applicant or his or her spouse, parent, grandparent or court for the benefit of a disabled person under 65 years old.  The trust is then "funded" with the applicant's own money.  This often is used to protect money from a personal injury case or other lump sum.  Upon the beneficiary's death, the trust must apply any remaining assets to reimburse the Medicaid program for the benefits it has paid.   These trusts are often called Medicaid Payback Trusts.  Assets in such a trust do not affect eligibility of the beneficiary.  It is also possible to put money from a third party (parents, grandparents, etc.) into these trusts.

Pooled Trusts

These trusts work the same as Special Needs Trusts but are managed by a non-profit association which "pools" the assets of many other beneficiaries.  In some "pooled" trusts, any unused portion remaining at the death of the beneficiary stays with the "pooled" funds.  In other "pooled" trusts, the remaining assets can be left to a named beneficiary, subject to Medicaid payback, or left to a charity.

Supplemental Services Trusts (Ohio only)

These are testamentary trusts or living trusts designed to supplement the support of Ohioans receiving Medicaid who are also eligible to receive benefits from a state or county board of MRDD or the Department of Mental Health.  Currently, there is a maximum of $226,000 for 2007 that may be placed in these trusts.  This maximum is adjusted upwardly $2,000 annually.  These trusts cannot be funded with the applicant's own money - only money from a third party may be used.  Half of the assets remaining in the trust at the beneficiary's death must be given to the State.

Qualified Income Trusts

These are trusts funded only with the pension, social security and other income of the individual.  The trust assets still affect the Patient Liability and must be used to reimburse Medicaid upon the beneficiary's death.

Discretionary Trusts

These are trusts set up by a third party and "funded" with assets that never belonged to the Medicaid applicant or his or her spouse.  These can be either a living trust or a testamentary trust.  The key element is language in the trust that describes what the trustee is to do with the trust funds.  If the Trustee has complete and unfettered discretion to make whatever distribution the Trustee elects, the trust will qualify as a discretionary trust.  If a trust has any ascertainable standard by which the Trustee could be compelled to distribute money to a Medicaid recipient, it will not qualify under this doctrine.  There cannot be any language like "support", "welfare", "standard of living" or even "quality of life".

These Trusts are wonderful tools for families with a permanently disabled child or grandchild.

 


Part V:
The New Medicaid "Look Back" Rule

The "look back" rule is a rule in determining resource eligibility for Medicaid.  Anyone applying for Medicaid after February 8, 2006, must report any asset transferred for less than full value within 60 months before the Medicaid application date.  Before that, the "look back" was only 36 months.  The Dept. of Job and Family Services will presume that any transfer made during the "look back" period was transferred for the purpose of qualifying for Medicaid.  The applicant DOES have the right to try to prove that the transfer was for non-Medicaid reasons, but this is difficult.

For Example:

On June 1, 2001, John Jones, age 70, gave his son $40,000 as a down payment for a new home.  Mr. Jones was in excellent health, and, in fact, was employed on a full time basis.  On July 4, 2001, Mr. Jones was severely injured in a traffic accident and required nursing home care.  Mr. Jones' gift to his son will not create a penalty because the circumstances demonstrate that the transfer was not made in order to qualify for Medicaid.  Rather, the gift was for a clear purpose and his accident was not foreseeable.

Certain other transfers are permissible:

Transfer Penalties

Unless you qualify under one of the exceptions, transfers made during the look back period will result in Medicaid ineligibility.  The length of the period of ineligibility is calculated by dividing the value of the transferred resource by the average private pay rate - $5,247 per month in Ohio and $2,796 per month in Kentucky.  It is the size of the gift that determines the period of ineligibility.  THIS IS IMPORTANT BECAUSE THE INELIGIBILITY PERIOD CAN BE LESS OR GREATER THAN THE "LOOK BACK" PERIOD.

Medicaid recently changed when the period of ineligibility begins to run.  This is probably the most important change in the "new" rules.  Under the old rule, the period of ineligibility began to run on the date of the gift.  But, as of February 8, 2006, the period of ineligibility begins when the applicant otherwise becomes eligible for Medicaid (the date when all remaining money runs out).

Since gifts made more than 60 months prior to application do not need to be reported, you can avoid a penalty by simply waiting 60 months before applying for benefits.  THEREFORE, IN MANY CASES, APPLYING FOR MEDICAID TOO SOON CAN BE DISASTROUS.

Three additional points are clear:

Gifts made before February 8, 2006 will be treated under the old transfer rules.

 


Part VI:
Income Eligibility for Medicaid

To qualify for Medicaid benefits, an application must pass both an "asset test" and an "income test".  Thirty days after going into a nursing home, only the income of the institutionalized spouse is considered in determining income eligibility.  Income payable solely to the patient is considered all his or hers.  Income payable to the patient and/or another party is pro-rated.

With a few exceptions, a patient meets the income eligibility standard if his or her nursing home expenses exceed his or her income.  Once this test is met, Medicaid then calculates how much of the patient's income must be paid to the nursing home.  This is called "Patient Liability".  Medicaid then pays the balance of the nursing home bill.

The Patient's Liability is determined by subtracting certain allowances from his or her total monthly income.  These allowances include:

  1. A personal needs allowance of $40 per month.

  2. Health Insurance Premiums.

  3. A Monthly Income Allowance for the non-institutionalized spouse.  This allowance varies depending upon the income and shelter costs of the family. The maximum of all spousal allowances is $2,489 except in rare circumstances (2006).  This figure is adjusted annually for inflation.

This is an example of the calculation of Patient Liability:

Mr. Jones enters the nursing home with gross income of $1,800 per month.  Mrs. Jones has an income of $600 per month and pays condominium fees in the amount of $100 per month, insurance in the amount of $40, property taxes in the amount of $100, a mortgage payment in the amount of $400 and is given a standard utility allowance of $429 per month2.  Mr. Jones has a Medicare Supplement Policy which has a premium of $140 per month.

Calculation of Monthly Income Allowance (MIA) for Mrs. Jones:

Condo fee:

$100

Insurance (property):

$40

Taxes (real estate):

$100

Mortgage:

$400

Standard Utility Allowance:2

$429

Total:

$1069

 

 

Less Excess Shelter Allowance Standard:2

$495

Mrs. Jones' Excess Shelter Allowance:

$574

 

 

Minimum Monthly Maintenance Needs Allowance:2

$1650

Plus Mrs. Jones' Excess Shelter Allowance:

$574

Total:

$2224

 

 

Less Mrs. Jones' Income:

$600

Mrs. Jones' Monthly Income Allowance:

$1624

 

 

 

 

Mr. Jones' Patient Liability is calculated as follows:

        

 

Mr. Jone's Gross Income:

$2,100

 

 

Less:

 

1.    Personal Needs Allowance:

$40

2.    Mr. Jones' Medical insurance premium:

$140

3.    Mrs. Jones' MIA:

$1,624

 

 

Patient Liability (paid to nursing home):

$296

 

This means that Mrs. Jones will keep her own income of $600 per month AND she will keep $1624 of Mr. Jones's income. Mrs. Jones will have a total of $2224 to live on per month.

__________
2 These figures are adjusted annually for inflation.

 


Part VII:
Medicaid Estate Recovery

A combination of new state and federal law mandate the recovery of Medicaid benefits against the estate of a Medicaid recipient.  This includes assets that pass outside of probate (as of 9/05). This can be done by either filing a lien against the property of a Medicaid applicant or by filing a claim or a collection suit against his or her estate or heirs.

Ohio only has a claim against those assets owned by the Medicaid recipient at the time of his or her death.  Ohio does not have a claim beyond that.

Recovery from the estate can only be made:

It is very important to be sure that when a married person qualifies for Medicaid, all assets are transferred to the community based spouse right away.  This includes all bank accounts (except one account for the Medicaid recipient's income and expenses), securities, the residence and life insurance policies.  This is not only required by the Medicaid rules but it also can significantly protect against Medicaid Estate Recovery.

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