Medicaid Might Make You Pay Them Back Mom’s Nursing Home Costs:

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Here’s a typical scenario I’ve seen play out: You’ve met with your elder law attorney, you’ve come up with a plan of action, time has gone by, and your parent has entered the nursing home, with Medicaid paying the full cost. Your family members have managed to preserve virtually all of their assets through careful planning, so you feel that the lawyer’s fee was well worth it!

 

A number of years go by and your parent has now passed on to a better place, but before you’ve finished grieving you get a letter from the state Medicaid Recovery Unit requesting repayment of every dime they paid out on your parent’s behalf! You’re depressed, angry, confused. You stare at the paper and can’t believe it. “I thought we were all set, that once Mom was on Medicaid we didn’t have to worry about that any more….Can this be correct?” you ask your siblings.

 

Unfortunately, the answer is “Yes.” What you have just been confronted with is something called Medicaid “estate recovery.” Essentially, it requires repayment of the entire amount of Medicaid benefits that were made during your family member’s stay in the nursing home.

 

 

Prior to 1993, such estate recovery was optional—a state could implement it or not. However, in that year a new federal law was passed (known as OBRA ’93) that mandated that every state must seek estate recovery from its Medicaid-receiving residents, following their deaths.

In essence, while you thought you had qualified your family member for a government handout, all you’ve really received is an interest-free loan. And upon your family’s member’s death, the state wants its loan paid back.

Now if you’re sharp, you may be thinking “Wait a minute…if someone qualifies for Medicaid, they have to be essentially broke. So where exactly is this money coming from to repay the state?” That’s a good question, and the good news is that if your family member died owning nothing, then indeed the state is out of luck. It can’t go after the kids’ money. There must be some assets that the nursing home resident had a legal interest in, at the time of death, in order for the state to be repaid.

In many states, the only “legal interest” of a deceased Medicaid recipient that is taken into consideration is the individual’s so-called “probate estate.” That’s an asset that was titled in the sole name of the individual, or as a “tenant in common” if jointly owned. It’s the assets that will pass under a person’s will. For example, something like a joint bank account, stock owned in “TOD” (transfer on death) form, a bank account with a “POD” (pay on death) beneficiary, an annuity interest, and real estate that’s titled as “JTWROS” or “joint tenants with right of survivorship,” are all non-probate assets and therefore protected against the state’s claim for reimbursement.

A number of other states, however, have passed laws that permit recovery against an “expanded definition of estate.” The federal Medicaid laws permit this. Under such an expanded definition “estate” could now include joint property, life estates, living trusts, and any other asset in which the deceased nursing home resident had any legal interest at the time of death. This even goes against hundreds of years of common law, but it is legal, and there have been a number of court cases that have backed this up.

Now if you live in one of the “probate estate only” states, you should feel lucky, but remember that at any time your state can revise its laws and go with the broader definition. And your family member will not be “grandfathered in” if he or she received Medicaid benefits before the change in law in your state; there have been court cases that have ruled on this, stating that it’s the law in effect as of the date of death of the Medicaid recipient that counts.

Well, what should you do to plan for this, assuming you can do anything at all? And are there exceptions to this harsh rule?

Merely qualifying for Medicaid is not enough if upon your death your family will have to pay back the state every dime of benefits it paid out on your behalf during your lifetime. There must be some planning techniques you can implement, right? Some “secrets” to avoid that harsh rule? Let’s take a look at a few…

First of all, in states where recovery of benefits paid is only made by a claim against your probate estate, all you need be sure of is that the Medicaid recipient has no probate estate at death. Thus, the recipient should only own assets in POD, TOD, joint ownership with right of survivorship, annuity, etc., form. This is similar to those avoid probate techniques, except that you cannot use a living trust: any asset titled in the name of a living trust will be a countable asset for Medicaid purposes, even if it’s ordinarily non-countable were it not in the trust.

For example, you can title an automobile in joint names with a child. So the car would be titled as “Mary Smith and John Smith, JTWROS.” John is Mary’s son, and upon Mary’s death, sole title to the car passes automatically to him outside of probate. “JTWROS” stands for “joint tenants with right of survivorship.” (Be sure to check your state’s motor vehicle titling rules to be sure this will work in your state!) Since one car of any value is exempt during Mary’s lifetime, it’s protected during her life and escapes estate recovery on her death.

The same approach can even be taken for her house. Since a Medicaid recipient’s house is normally exempt during lifetime (for an unmarried person, up to between $500,000 and $750,000 of equity value, depending on the state), it’s only at the recipient’s death that there’s a problem. So to avoid the house being included in the parent’s probate estate, once again you can title the house as JTRWOS. CAUTION: Adding another person’s name to the deed is a gift of an interest in the house, effective upon the date of the deed. Thus, when Mary has her attorney add her son John’s name to the deed, she has just made a gift of 50 percent of the house to him. Although gift tax is rarely an issue, it should be considered. More importantly, though, is that this is a Medicaid-disqualifying transfer, with a large penalty attached. If Mary wants to go this route, she may be unable to apply for Medicaid for five years after she signs the deed.

Also, what if John is sued or divorced? Mary may still think of the entire house as “hers,” but the creditor or divorcing spouse will view that 50 percent interest in the house as an asset of John’s, and it could be subject to attack. Mary may find herself out on the street if the house has to be sold to satisfy the judgment or divorce settlement.

Some states permit adding another person to the deed by giving them less than 50%, which could reduce the amount of the gift, but that is something only your attorney can determine for you. Sometimes what the rule is for real estate law differs from the rule for Medicaid purposes. So, a word to the wise: be sure that the attorney who is doing the new deed for you is up-to-date on the effect that will have on your Medicaid eligibility!

It’s not enough to qualify for Medicaid unless you also plan for the possibility of “estate recovery.” That’s when the state presents a bill to the estate of the person who had been receiving Medicaid, for all Medicaid payments it made on behalf of the Medicaid recipient, following that person’s death. There are some exceptions, however, that prevent such recovery. Let’s take a look at a few of these.

If you were under age 55 at the time you received Medicaid benefits other than nursing home care, then you will be exempt from estate recovery.

If you are survived by a spouse, a child under age 21, or a blind or totally and permanently disabled dependent, you will also be exempt from estate recovery. Technically, the federal law states that recovery can be made “only after the death of the individual’s surviving spouse.” So if, for example, the surviving spouse dies a month after the Medicaid recipient spouse, a state could file a claim for recovery at that time. Many states, however, have taken a more liberal reading of this, and so long as there is a surviving spouse, no recovery will be made, no matter how long or short the surviving spouse lives. Once again, you’ll need to check your state’s own laws to find out which rule applies to your situation.

Notwithstanding the above, even in a state where recovery may be made after the surviving spouse’s death, there typically is an additional limitation that applies to all claims against an estate: all states have a statute of limitations that bars claims against an estate that are made more than a certain number of months after the death. In many states, that limit is one year. So, in a state with this rule, if the surviving spouse dies more than a year after the Medicaid recipient spouse, it will be too late for the state to file its claim for estate recovery.

If a state can only file a claim when there is no child under 21, can they wait until the child attains age 21 and then file their recovery claim? Once again, this must happen within the statute of limitations period, assuming there’s not a blanket exemption if there’s a surviving child under age 21, period.

There will be no recovery made against the exempt home of the Medicaid recipient (i.e., it will not have to be sold to pay back the state) in either of these two scenarios:

  1. A sibling of the Medicaid recipient was living in the house for at least one year immediately prior to the date the recipient was admitted to the nursing home and who has continuously lived in the house since then
  2. There is a son or daughter (of any age) of the Medicaid recipient who was living in the house for at least two years immediately prior to the date the recipient was admitted to the nursing home, who has continuously lived in the house since then, and who provided care to the Medicaid recipient prior to his or her entering the nursing home which permitted the recipient to delay entering the nursing home.

If all else fails, there’s an exemption against estate recovery if such recovery would work an undue hardship on the surviving family members. One example would be where the exempt asset is a working farm, and a forced sale of that farm would throw surviving family members out of work.


 

How the Affordable Care Act Affects Seniors and Family Caregivers

Obamacare? Affordable Care Act? What if you already have insurance? What if you can’t afford insurance? Let’s cut through the chaos and find out how the new law will affect you and your family.

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Read on for some good information from , Caring.com author.

What is it?

President Obama signed the Affordable Care Act (ACA) into law in 2010 to increase the quality of healthcare and decrease costs. The ACA aims to lower rates for the uninsured by expanding public and private health coverage, in multiple phases lasting through 2020.

It is the biggest change in healthcare since the creation of Medicare and Medicaid. Here are the positives:

  • Easier to get coverage
  • Financial help for those meeting income requirements
  • Improved consumers’ rights
  • No coverage denial for preexisting conditions, gender, or residence
  • Essential benefits mandatory in all health insurance plans

How the ACA affects Medicaid

The most significant change will be seen with Medicaid, the federal program that pays healthcare costs for people with limited income. Historically, millions have been ineligible for Medicaid. However, the ACA has raised the income limit to 138 percent of the 2012 federal poverty level (that level is about $12,000 for a single adult, and $15,000 for a couple). Before, adults without dependent children could not qualify, and income included assets. Now eligibility is determined by Moderate Adjusted Gross Income (MAGI). This is income after deduction and other credits; it does not take into account most assets (such as vehicles, etc.). For most, it will be the same as the adjusted gross income (AGI). You can find this number on your tax return from last year.

Many of the new provisions of Medicaid are optional. States that opt in will provide additional home- and community-based long-term services and supports. Even if your state does not choose to expand its Medicaid program, it must change the enrollment process and eligibility requirements. Find out what is offered in your state at www.healthcare.gov.

I don’t qualify for Medicaid. What are my healthcare options?

If you do not get insurance through an employer or you are self-employed, unemployed, or have been denied coverage, you can seek coverage through the Marketplace or Exchanges, a collection of participating plans in your area. There are four different levels of coverage: bronze, silver, gold, and platinum. Levels do not indicate quality of care but the amount the patient pays out of pocket and for premiums. A person with a bronze plan may have 60 percent of healthcare costs covered and pay 40 percent out of pocket. Cost information for the levels became available on October 1, 2013, the day that open enrollment began. Open enrollment ends March 31, 2014. Coverage begins January 1, 2014 (or as soon as you enroll after that date). If you qualify for Medicaid, you may enroll at any time. You can find state-by-state Marketplace information atwww.healthcare.gov.

Can I get help to pay for insurance?

There are options outside of Medicaid for people who have to buy their own coverage. If your insurance costs more than 9.5 percent of your income or does not cover 60 percent of your medical costs, you may qualify for tax credits to help you pay for your health insurance. These tax credits are only for health coverage purchased through the Marketplace. If you are single and make less than $46,000, in a family of three making less than $78,000, or in a family of four with less than about $94,000 in income, you may get a tax credit from the government to help you pay for your premium. Then you can use the credit as a deduction when you file your taxes.

In order to pay for this additional coverage, more healthy people are needed to pay for coverage. Increasing the risk pool enables more people to get preventive care and theoretically decreases the amount spent on care in the future. The ACA includes a financial penalty to ensure that everyone chips in to keep the program viable. In 2014, almost everyone will need coverage or will pay a penalty in their 2014 taxes. The first year the penalty is $95 for each adult and $47.50 for each child (up to $285) — or 1 percent of your household income, whichever is greater.

Penalties will go up each year and are expected be significant once the program has grown. You will not have to pay a penalty if you:

  1. Were uninsured for less than three months.
  2. Are not required to file a federal tax return.
  3. Would qualify for Medicaid, but your state did not expand the program.

There will be other ways to avoid this penalty; call your state-specific exchange or the federal exchange for additional information.

What do I need to do?

This is an exciting time for people who have been responsible for paying for their own or their loved ones’ healthcare. The best action you can take is to be prepared; get started by taking these three steps:

1. Organize your documents and be sure to include:

  • Social security numbers (or document numbers for legal immigrants in your household)
  • Employer and income information for every member of your household who needs coverage (pay stubs, W-2s, wage or tax statements)
  • Policy numbers for any health insurance plans covering members of your household

2. Complete the employer coverage tool for every job-based health insurance plan you or someone in your household is eligible for. This form is required even if you are not enrolled; it is available at www.healthcare.gov.

3. Sign up in person, online, or by phone. Some states operate their own Marketplaces. There is a menu on www.healthcare.gov that will direct you to your state’s site. If the federal government operates your state’s Exchange, you will still need to go to http://www.healthcare.gov to create an account, compare plans, and purchase insurance.

Anyone, regardless of where they live, can call (800) 318-2596 to get started and ask questions.

There have been significant wait times to enroll, and some state websites have crashed or had other technical problems. However, the bugs are being worked out and wait times are decreasing. Don’t give up, and find the plan that works best for you and your loved ones.