WHAT YOU NEED TO KNOW - Elder Law, Medicaid, Estate ...



WHAT YOU NEED TO KNOW

ABOUT ELDER LAW

May 6, 2008

When an individual enters a nursing home, their care will be paid for either privately (by expenditure of their own funds), by insurance (if they are fortunate enough to have long-term care insurance), by Medicaid, or in a limited manner by Medicare. Before I discuss these four sources of payment, I would like to provide you with some background information. This information is designed to give you an understanding of long term care, the pressures on the public funding of that system, and what you should consider in preparation for a loved one’s, be it a parent’s or a spouse’s, admission into a skilled nursing facility.

Recent studies from the Centers for Disease Control and Prevention show that Americans are living longer. In 2003, according to the study, a male’s life expectancy has now reached 74.8 years, and a female’s life expectancy is 80.0 years. With all Americans having an average life expectancy of 77.6 years.

Data from the Department of Health and Human Services 1994 National Nursing Home Survey revealed the following:

Residents in Nursing Homes 1,628,300

Residents in Nursing Homes over 65 years of age 90%

Female Residents in Nursing Homes 72%

Average length of time in a Nursing Home 892 days

since admission

Discharged Residents spend an average of 272 in nursing home

In Pennsylvania, Medical Assistance, according to the Government’s 2004-05 budget was slated to provide nursing facility care to approximately 81,225 residents in 734 licensed county and general nursing facilities. The Governor’s budget contained approximately $4.17 billion for long-term care payments with $2.24 billion or 53.7% of that budget coming from the federal government.

What is Medicaid as compared to Medicare – Medicaid is a means based entitlement program. Medicaid pays for a wide range of health care long-term care services for certain low income populations including children, individuals with disabilities, and the elderly. Medicaid is a federal program administered by the states.

Medicaid should not be confused with Medicare. Medicare is an entitlement program that will pay for skilled nursing care after a three-day hospitalization, provided the individual is admitted into a nursing facility occurs within thirty days after that three-day hospitalization. The patient must also need further rehabilitation.

Under those circumstances, Medicare will pay for the first 20 days fully, and up to an additional 80 days provided that the patient continues to need rehabilitation. Medicare will pay days 21 – 100 subject to a co-insurance amount owed by the Medicare beneficiary which will, in many instances, be paid by a Medicare supplement policy. The 2008 co-insurance is $128 per day. In other words, Medicare will pay everything but $128.00 per day.

In Pennsylvania, Medical Assistance is managed by the Department of Public Welfare (DPW) through its local County Assistances Offices. With respect to the elderly, DPW will pay all or part of the cost of nursing facility care for eligible persons, based on the person’s income, and the Medical Assistance payment rate for the specific facility.

For a medically needy individual, in order to be eligible for Public Assistance, that individual can have no more than $2,400.00 in assets. For a married couple, the maximum amount of assets that the Community Spouse or healthy spouse is allowed to keep is $104,400.00, but no less than a minimum of $20,880.

Let’s discuss what assets are included and what assets are exempt in determining Medicaid eligibility.

1. Countable Resources include cash, mutual funds, and joint assets. All assets that a couple owns jointly, unless they are exempt assets, are deemed available by the Department of Public Welfare for the other spouse’s nursing home care. -- A word of caution, Pennsylvania does not recognize Pre-Nuptial Agreements. In determining eligibility for Medicaid, the Department of Public Welfare will disregard those agreements and deem all of the couple’s assets, except the Community Spouse’s Resource Allowance, available for the patient’s care.

2. Excluded – exempt assets in determining eligibility for Medicaid are:

a) Real Property – used as a principal residence by the applicant, applicant’s spouse, provided that the property is worth less than $500,000, if the institutionalized spouse puts in writing his/her intention to return to the home.

b) Household Goods and Effects.

c) Motor Vehicle.

d) Life Insurance Policy – up to a maximum of $1,500.00.

e) Term Insurance.

f) Burial spaces.

g) Irrevocable burial account.

h) Community Spouse’s Qualified Retirement Plan or IRA.

i) Community Spouse’s Resource Allowance – one-half of the couple’s assets not to exceed in Pennsylvania $104,400.

While a home or other assets may be non-countable assets in determining an individual’s eligibility for Medicaid, that does not mean that the state, under its estate recovery program, cannot “lien” the home or other assets for the amount of its Medicaid claim after an individual dies. Let’s take two examples:

First Example -- an individual has a home worth less than $500,000, let’s say $450,000. The individual is not survived by a spouse. This individual has no other assets other than the $2,400.00 exemption she is able to keep. This individual would be eligible for medical assistance provided that he/she has not made any transfers of assets not for fair consideration within sixty (60) months. However, the state could “lien” the property after the individual’s death for the services received while that individual was in the nursing home.

Second Example – H & W own a $450,000 house. Wife becomes ill and enters a nursing home. Their assets are $208,800. Husband gets to keep $104,400 as his Community Spouse resource allowance and Wife transfers home to Husband. Assuming that the Husband survives his Wife, the asset is not in Wife’s estate at the time of her death and not subject to a “lien” for Wife’s nursing home expenses. A transfer between spouses is not an uncompensated transfer. A word of caution, under these facts, Husband must change his Will to leave only a statutory share to the Wife, in case the Husband dies first.

Under The Deficit Reduction Act, the look-back period when applying for Medicaid has been lengthened to 60 months for any transfers of resources made without fair consideration after the enactment date of The Deficit Reduction Act on February 8, 2006. Pennsylvania defines “fair consideration” as compensation in cash or in kind which is approximately equal to the fair market value of the transferred property. Therefore, when the application for Medicaid is filed, the state will now look back 60 months (the look-back period) to determine if transfers of assets were made without fair consideration. (Note: a 36-month look-back period still applies to transfers made prior to February 8, 2006.) If such a transfer was indeed made within that 60-month look-back period, the penalty for that transfer (unless 60 months has expired from the date of the gift) will be assessed on the date the individual enters the nursing home. Yes, it is true that an individual can transfer all of their assets to their children, wait five years, and then apply for Medicaid. They will be eligible under that limited set of facts for medical assistance. No such transfer should be made unless an attorney is consulted.

To calculate the period of ineligibility resulting from uncompensated transfers, the Department of Public Welfare divides the fair market value of the property transferred by the state’s penalty divisor ($6,757.67 currently) which is a figure based upon the average standard cost of nursing home care. This penalty devisor figure does change periodically.

As mentioned, the Deficit Reduction Act requires the penalty period to begin on the date the transfer was made, or the date when the applicant would otherwise be eligible for benefits, but for the transfer, whichever is later. For example, if an individual applicant gives her grandson $125,000 for college today then applies for benefits 4 years from now (because she has Alzheimer’s and needs nursing home care), and assuming she has spent all of her other resources down to $2,400.00 (under certain circumstances the resource limit may be as high as $8,000.00), the 18.49 month period of ineligibility will begin at the time of the application. (Therefore, this individual is penalized and has no other assets to pay for her care.)

Spend Down of Assets Achieving Resource Eligibility

In order to achieve resource eligibility, funds must be depleted below the applicable resource limit. This is commonly referred to as SPEND DOWN.

In cases where there is a community spouse, resources exceeding that spouse’s protected share may be properly spent down for the benefit of either spouse. Since there is no period of ineligibility for transfers to or for the benefit of an applicant’s spouse, excess resources may be used to purchase items or services not only for the benefit of the institutionalized spouse, but also for the community spouse. There is no rule (and there is a common misconception) that says that the unprotected half following the resource assessment must be spent down for the benefit of the institutionalized spouse. Example, Husband enters the nursing home. The couple has $300,000 of assets, besides a home worth less than $500,000. Wife gets to keep the home, she gets to keep ½ of the couple’s assets not to exceed $104,400. The remaining $195,600 would be available for spend down. Spend down should be made from the Institutionalized Spouse’s share.

For example: the Community Spouse could use the unprotected half to:

1. Pay off debts.

2. Purchase excluded assets such as clothing, eyeglasses, irrevocable burial resource, or a new car.

3. Repair exempt assets.

4. Make home improvements.

5. Purchase a Medicaid qualifying annuity.

a) irrevocable and nonassignable;

b) actuarially sound;

c) provide equal payments;

d) name DPW as primary beneficiary;

e) provides the Community Spouse with monthly income that when combined with all other income available to the Community Spouse is less than or equal to the Community Spouse’s monthly maintenance needs allowance.

Planning for Living

It is important to plan for a time when you may become incapacitated or disabled, either temporarily or permanently, as well as for end of life decision making.

Make sure that you have the following documents in place:

a) An Advanced Health Care Directive and Durable Health Care Power of Attorney. Durable means that it survives an individual’s incapacity or disability.

b) A Financial Power of Attorney.

All too frequently Durable Powers of Attorney tend to be an afterthought in the estate planning process. They should be drafted to reflect the unique issues that might arise for a particular client. It is important for a client to have a well drafted power of attorney that can provide for the effective management and protection of his/her assets.

Care must also be given to prevent abuse by the agent who holds these powers. Children must be chosen who will abide by their parents’ wishes, and not dip into their parents’ assets for their own benefit.

There are two other types of Powers of Attorney.

Springing or Non-Springing.

In a Springing Power of Attorney, a principal may state that the Power will not become effective until the happening of a future contingency such as the disability or incapacity of the principal. These powers are most frequently utilized where there is a low trust level between the principal and the agent. Springing Powers must also address three issues:

1) The definition of incapacity.

2) The method of establishing that it has occurred.

3) The acceptance of the fact of incapacity by a third party such as a bank or other financial institution.

In a Financial Power of Attorney, the principal must appoint an agent to manage their affairs.

1) Issues can occur as to the number of agents that can be appointed. The Pennsylvania Estate and Fiduciary Code provides that a principal may provide for the appointment of more than one agent who can act jointly, jointly and severally, or in any combination. Multiple agents may reduce the chance for abuse, but it may be difficult for them to act in concert with each other.

Issues Regarding Powers of Attorney.

Gifting – Should it be limited or unlimited?

a. Gifting without fair consideration in return can be an uncompensated transfer and could make an individual ineligible for Medicaid. It is a common misconception that an individual is limited to gifting only $12,000 per person per year. You can gift up to $1 million over a lifetime without triggering a gift tax return. However, the gifting of any amount over $12,000 in a year impacts the unified credit exemption for federal estate and gift taxes.

b. Overriding Equitable Rule – Any gift made by an agent must be made in accordance with prudent estate planning or financial management for the principal, considering the probable or known interest of the principal with regard to the disposition of the estate.

c. A Power of Attorney should spell out the classes of permissible donees and whether the gifts to the donees must be made equally.

If a Power of Attorney is in place, a Guardianship will, under many circumstances, not be necessary. Guardianships are expensive, require the permission of the Court to act in many cases, and the proceedings can be difficult for the family.

Advanced Directives and Health Care Powers of Attorney.

It is a basic concept of law that that no patient should be treated without his or her consent. The fundamental right to self-determination in health care matters has long been recognized at common law and has been held to exist as part of the right of privacy found within the constitutional guarantee of individual liberty. In re Quinlan.

Advance care planning involves the right of individuals to prepare for their possible future incapacity, either by indicating in advance their goals and preferences for medical care, or by designating a surrogate decision maker who is authorized to speak for them.

The right of an individual to refuse medical treatment is not an absolute right. It must be balanced against the legitimate interests of the state in the general welfare of its citizens. The four interests of the state that are recognized in Pennsylvania are:

1. Preservation of life.

2. Protection of the ethical integrity of the medical community.

3. Protection of third parties, primarily dependents of the individual who could be left emotionally and financially bereft if the individual if the individual refused medical treatment.

4. Prevention of suicide.

Remember – if an individual is competent, they are entitled to make their own treatment decisions. The U.S. Supreme Court recognized in Cruzan vs. Director Medical Department of Health that a competent individual has a constitutional right to be free of unwanted medical treatment but the Court left to the states the regulation of this right on behalf of incompetent patients.

Act 169 in Pennsylvania finally makes available to Pennsylvanians the approaches to end-of-life decision making that were sanctioned by the U.S. Supreme Court in Cruzan. Pennsylvania permits the following:

a) Living Wills;

b) Appointment of Health Care Agents; and

c) Health Care Representatives can be appointed when there is no agent named by the principal who is able and willing to serve.

A word about Health Care Representatives and Act 169.

Before anyone can validly act as a health care representative for an individual, the following conditions must be met:

a) The attending physical must determine that the individual is incompetent;

b) The individual does not have a health care power of attorney; or

c) The health care agent named in the power of attorney is not

a. Reasonably qualified

b. Has indicated an unwillingness to act

c. No Alternate Agent is available.

Who may act as a Health Care Agent is determined in this descending order of priority:

a) Spouse

b) Adult child

c) Parent

d) Adult brother or sister;

e) Adult grandchild

f) Any adult who has knowledge of the principal’s preferences and values.

CAUTION: Act 43 states that children can be liable for their parents’ nursing home bills. This is a filial responsibility bill. While it is on the books, it is being used mainly in egregious circumstances.

Long-Term Care Insurance – The Basics

a) Issued by private companies and generally guarantee a fixed monthly cash payment in the event that the insured requires daily personal care assistance. There are generally indemnity policies that pay a fixed dollar amount each day.

b) Premiums can increase – most policies offer inflation protection by increasing the daily payment by a set percentage each year.

c) Some life insurance companies have begun to offer life insurance and long-term care insurance policies. If the person enters a nursing home and collects from the policy, the amount of the death benefit decreases.

d) State Insurance Partnerships – permit exemption of assets that would otherwise be exposed.

e) The most important part of a policy is coverage. Policies may cover skilled nursing care, custodial, personal, and home care. You, as the purchaser, should only buy a policy if it includes health care benefits for care in an assisted living facility.

f) Generally policies are sold to individuals between 50 – 84.

g) Premiums vary greatly.

h) What triggers payment under a long-term care policy?

a) Inability to perform a specified number of activities of daily living.

b) Necessity for supervision because of cognitive impairments.

c) Necessity for long-term care occurs because of medical necessity.

Activities of Daily Living include dressing, eating, bathing, mobility and toileting.

i) Long Term Care policies can be purchased with deductibles called elimination periods. A longer elimination period should be considered if a client has sufficient assets. Many individuals are willing to accept six, nine, or even twelve month’s payments of nursing care expenses.

j) Most policies waive the premium when the insured begins to collect benefits.

k) Check with several companies and agents before you buy and compare premiums against similar benefits.

l) IRC 213 (a)(1)(c) includes qualified long-term care services as a deductible expense.

m) Amounts paid by taxpayers as premiums for long-term care insurance can be deducted as medical expenses limited by the age of the individual.

50 – but less than 60 $1,110

60 less than 70 $2,950

more than 70 $3,680

See your tax advisor.

Good reasons to purchase long-term care insurance:

1. Protect the value of your estate against potentially high costs of long-term care.

2. Provide for and protect the well-being of the community spouse.

3. Fear of relying upon Medicaid to pay for nursing home care.

4. Using insurance to cover a period of ineligibility for Medicaid because of gifts.

5. Desire to remain in the home with home health or custodial care.

Disadvantages:

1. Costly – may effect lifestyle.

2. Other ways to preserve assets.

Prescription Drug Coverage

PACE To be eligible an individual must be 65 years of age or older, a PA resident for 90 days and not be enrolled in DPW’s Medicaid prescription benefit program.

For a single person income must be $14,500 or less and a married couple $17,700 or less.

PACENET 65 years of age or older, PA resident for 90 days, not in DPW’s prescription drug benefits program. Single person - $14,500 and $23,500. Married couple $17,700 to $31,500.

PACE PLUS Wraps around Medicare Part D.

Home Health Care

Pennsylvania Department of Aging 60+ Waiver Program is a program devised to reduce state expenditures by providing home and community – based services. PDA Waiver provides the following services: personal care services, respite care, Adult Daily Living Centers, environmental modifications, personal emergency response system, companion services. Income Cap of $1,911.00. The resource limit is $8,000 for a single person and $104,000 to $20,800 for a couple.

If it is possible to safely care for an individual at home for less than the average statewide medical assistance payment for a nursing home, the applicant may choose PDA Waiver rather than care in a facility.

The existence of PDA Waiver slots depends on program funding and the actual supply of qualified home-care providers in the market place at the time of need.

OUT OF HOSPITAL DNR ORDERS – an order in the standard format supplied by the Department of Health and the Commonwealth of Pennsylvania and issued by an attending physician, directing emergency service providers to withhold cardiopulmonary resuscitation from the patient in the event of a respiratory or cardiac arrest. The orders may be required when an individual has an end-stage condition or is permanently unconscious.

Quoting from the Law – Out of Hospital Do Not Resuscitate Orders.

Legislative Findings and Intent.

The General Assembly finds and declares as follows:

(1) Although cardiopulmonary resuscitation has saved the lives of individuals about to experience sudden, unexpected death, present medical data indicates that cardiopulmonary resuscitation rarely leads to prolonged survival in individuals with terminal illnesses in whom death is expected.

(2) In many circumstances, the performance of cardiopulmonary resuscitation may inflict unwanted and unnecessary pain and suffering.

(3) Existing emergency medical services protocols may require emergency medical services personnel to proceed to cardiopulmonary resuscitation when an individual is found in a cardiac or respiratory arrest even if the individual has completed an advance health care directive indicating that the individual does not wish to receive cardiopulmonary resuscitation.

(4) The administration of cardiopulmonary resuscitation by emergency medical services personnel to an individual with an out-of-hospital do-not-resuscitate order offends the dignity of the individual and conflicts with standards of accepted medical practice.

(5) This subchapter provides clear direction to emergency medical services personnel and other health care providers in regard to the performance of cardiopulmonary resuscitation.

Orders, Bracelets and Necklaces.

(a) Issuance. An attending physician, upon the request of a patient who is at least 18 years of age, has graduated from high school, has married or is an emancipated minor, or the patient’s surrogate if the surrogate is so authorized, shall issue to the patient an order and may issue at the request of the patient or the patient’s surrogate a bracelet or necklace supplied by the department. The patient may, at the patient’s option, wear the bracelet or display the order or necklace to notify emergency medical services providers of the patient’s DNR status.

(b) Format of order. The department shall, with the advice of the Pennsylvania Emergency Health Services Council and with the assistance of the regional emergency medical services councils, make available standard orders for issuance to patients by attending physicians of this Commonwealth.

(c) Format of bracelet. The department shall, with the advice of the Pennsylvania Emergency Health Services Council and with the assistance of the regional emergency medical services councils, make available standard bracelets for issuance to patients by attending physicians. The bracelets shall be uniform in design and shall, at a minimum, on the face clearly indicate out-of-hospital DNR and the name of the patient and attending physician as well as the dated signature of the attending physician.

Notice: To comply with certain U.S. Treasury regulations, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this document, including attachments if any, is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Code.

Legal Disclaimer -

The material you read on this site has been prepared for informational purposes only. This information should not be construed as legal advice or tax advice and it is not necessarily current or complete.

If you are seeking personal legal assistance, please contact an attorney.

All material is presented solely as education information.

Receipt of this information does not create an attorney-client relationship.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download