UNDERSTANDING THE RULES MEDICAID PAYMENT FOR …

UNDERSTANDING THE RULES

MEDICAID PAYMENT FOR

NURSING HOME CARE

This Document Provided exclusively to:

? 2011 Zacharia & Brown P.C.

111 W. McMurray Road ? McMurray, PA 15317 (724) 942-6200 4500 Walnut Street ? McKeesport, PA 15132 (412) 751-5670

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About This Booklet

The decision to move a family member or loved one into a nursing home is one of the most difficult decisions you can make. Perhaps the move is being made because the family member can no longer care for himself or herself...or has a progressive disease like Alzheimer's...or has had a stroke or heart attack.

No matter the reason, those involved are almost always under great stress. At times like these, it's important that you pause, take a deep breath and understand that there are things you can do. Good information is available and you can make the right choices for you and your loved one.

Understanding the Rules: Medicaid Payment for Nursing Home Care is designed to help provide you with information and answers to some of the questions you will encounter. These are questions which we, as Elder Law attorneys and nursing home professionals, deal with on a daily basis.

Our clients have found this guide to be a valuable resource, and we hope you will find it useful too.

Be aware however, that this booklet was written in the fall of 2006 and updated in 2011 and discusses only Pennsylvania law. The law can and does change often. You must seek the advice of a skilled elder law attorney. We can help. Feel free to call.

DISCLAIMER! PLEASE READ!

This is one of the most complex and complicated areas of law we've ever seen. If you take any action on your own without the continuing guidance and advice of an experienced elder law attorney, you are on your own. You will likely make mistakes and they may cost you dearly. You may not rely solely on the contents of this book as guidance.

The information contained herein does not constitute legal advice; nor does it create an attorney-client relationship. The information contained herein should not be viewed as factual nor valid, particularly because of the changing nature of this area of law. This is a very complicated and complex area of law. You must see a qualified and competent attorney before taking any action.

111 W. McMurray Road ? McMurray, PA 15317 (724) 942-6200 4500 Walnut Street ? McKeesport, PA 15132 (412) 751-5670

? 2011 Zacharia & Brown P.C.

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Introduction

Americans are living longer than ever before. At the turn of the 20th century, the average life expectancy was about 47 years. As we now begin the 21st century, life expectancy has almost doubled. As a result, we face more challenges and transitions in our lives than those who came before us.

One of the most difficult transitions people face is the change from independent living in their own home or apartment to living in a long term care facility or "nursing home." There are many reasons why this transition is so difficult. One is the loss of home...a home where the person lived for many years with a lifetime of memories. Another is the loss of independence. Still another is the loss of the level of privacy we enjoy at home, since nursing home living is often shared with a roommate.

Most people who make the decision to move to a nursing home do so during a time of great stress. Some have been hospitalized after a stroke, some have fallen and broken a hip, still others have progressive dementia, like Alzheimer's disease, and can no longer be cared for in their own homes. Often times the decision is made by a physician and you have no say over the matter.

Whatever the reason, the spouse or relative who helps a person transition into a nursing home during a time of stress faces the immediate dilemma of how to find the right nursing home. The task is no small one, and a huge sigh of relief can be heard when the right home is found and the loved one is moved into the nursing home. For many, the most difficult task is just beginning: How to cope with nursing home bills that may total $5,500 to $8,500 per month or more?

In America, No One Should Lose Their Home Simply Because They Got Sick.

Not only can you lose your home, without proper planning, you can lose everything you have. Not a week goes by without a client coming to us and telling us that they scrimped and saved their entire lives ... for what?

Don't let this happen to you. This guide is your start. Read it and then contact our office for an appointment to review your family needs.

This publication is copyrighted by Zacharia & Brown, P.C. (c) 2011. All materials contained in this publication are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written of Zacharia & Brown, P.C.

? 2011 Zacharia & Brown P.C.

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Table of Contents

Introduction ................................................................................................................................... 2 Elder Law Services ........................................................................................................................ 4 How to Pay for the Nursing Home without going broke............................................................... 5 What About Medicare?.................................................................................................................. 5 What is Medicaid? ......................................................................................................................... 6 Why Plan for Medicaid?................................................................................................................ 6 Exempt Assets and Countable Assets: .......................................................................................... 6 Special Asset Rules for Married Couples ..................................................................................... 7 Rules Regarding Income ............................................................................................................... 8 Estate Recovery ............................................................................................................................. 9 Medicaid Planning for Single People .......................................................................................... 10 The Case for Planning Ahead...................................................................................................... 11 Medicaid Planning for Married Couples ..................................................................................... 12 What About Gift Taxes?..............................................................................................................13 Can'tl Just Give My Assets Away? ............................................................................................. 13 Can Financial gifts to Children Protect your Assets? ................................................................. 14 Essential Legal Documents ......................................................................................................... 16 Additional Legal Strategies ......................................................................................................... 17 What to do Next?......................................................................................................................... 20 Reference Sections ...................................................................................................................... 21 Housing Options .......................................................................................................................... 22 Area Agency on Aging Directory ............................................................................................... 23 Assisted Living Facility Directory .............................................................................................. 26 Nursing Homes Directory............................................................................................................30 Information on Area Nursing Homes .......................................................................................... 33 Community Life Program ...........................................................................................................36 PDA Waiver ................................................................................................................................ 37 Why People Use the Services of Zacharia and Brown................................................................ 41 Questions to Ask The Attorneys ................................................................................................. 42

? 2011 Zacharia & Brown P.C.

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Zacharia & Brown

Elder Law Services

Elder Care Planning As one progresses into the golden years it becomes readily apparent that golden has more to do with costs and expenses than it does anything else. The exorbitant cost coupled with a maze of rules, regulations, forms, procedures, and other requirements before you can be frustrating, stressful and expensive.

Medicaid Planning In Pennsylvania the average cost of nursing home care is over $7,500 per month or $90,000 per year. It isn't long before most families will go through a lifetime of savings. Things are particularly precarious for a married couple when one is in a nursing home paying these large amounts and the other is at home worried about becoming destitute. We help families become eligible for Medicaid without going broke. The rules and regulations in this area are fraught with peril. They are also filled with opportunities for savings unknown to most people. Medicaid has become an insurance policy to cover long term care for the middle class. We have the knowledge and expertise to assist you and your family in assuring that you maximize all that the law affords you. We help make certain that your estate is preserved to its maximum and that you become eligible for Medicaid as quickly as possible.

Estate Administration The cost associated with one's death does not have to be as high as it often is or believed to be. There are many reasons for this not the least of which is a lack of understanding of the process involved and how to best effectuate the numerous laws to your best advantage. We assist clients in administering estates with particular attention to helping maximize assets for beneficiaries. Even after death, steps can be taken to reduce taxes, facilitate distribution and finalize the affairs of the deceased individual. We offer probate and estate administration services for estates in both Pennsylvania and Florida

Estate Planning Estate planning means more than simply preparing a Last Will and Testament. In its broad sense, the term "estate planning" entails more than providing for the disposition of your assets upon your death with a minimum amount of taxation. Comprehensive estate planning, of course, provides for that. But, such planning must also provide for administration and protection of assets during a lifetime and for decision making in the event of unforeseen incidents and disabling illness.

An estate plan should contain a Last Will and Testament, a durable health care power of attorney naming an agent (and an alternate) responsible for medical decision-making, a durable financial power of attorney naming an agent (and an alternate) responsible for asset management, bill paying and other financial activities if one is unable to do such things for oneself. In some cases a revocable living trust may be appropriate as well.

Estate planning is not limited to these types of documents. Some estate plans include life estate deeds to real property, specialized trusts for disability and specialized trusts for Medicaid eligibility.

We provide Estate Planning and Administration for both Pennsylvania and Florida Residents.

? 2011 Zacharia & Brown P.C.

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MEDICAID PLANNING AND DIVISION OF ASSETS

How to Pay for the Nursing Home Without Going Broke

One of the things that concerns people most about nursing home care is how to pay for that care.

There are basically three ways that you can pay the cost of a nursing home: 1. Medicare - Coverage by Medicare is very limited. In order to get Medicare coverage, the person must

have been in a hospital for 3 days or more and then discharged within 30 days to a skilled nursing facility where the person receives skilled care. Even then, the maximum is 100 days; there is a copay for days 21-100, and if the individual stops receiving skilled care, Medicare stops.

2. Pay with Your Own Funds - This is the method many people choose at first. Quite simply, it means paying for the cost of a nursing home out of your own pocket. Unfortunately with nursing home bills averaging around $8,000 per month in our area, few people can afford a long term stay in a nursing home. If you are fortunate enough to have Long Term Care Insurance, it may go a long way toward paying the cost of the nursing home. Unfortunately, long term care insurance has only started to become popular in the last couple of years and most people facing a nursing home stay do not have this coverage. For those that do have such coverage, it is often not enough to cover all the costs.

3. Medicaid - This is a primarily federally-funded and state-administered program which pays for the cost of the nursing home if certain asset and income tests are met.

Since paying with your own funds is self-explanatory, we'll concentrate on Medicaid and Medicare and on the process known as division of assets.

What About Medicare?

There is a great deal of confusion about Medicare and Medicaid.

Medicare is the federally-funded health insurance program primarily designed for older individuals (i.e. those over age 65). There is a limited long term care component to Medicare. In general, if you've had a hospital stay of at least three days, and then you need to go into a skilled nursing facility (often for rehabilitation), then Medicare may pay for a while.

Typically, in that circumstance, Medicare will pay the full cost of the nursing home stay for the first 20 days and will continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that's at or over $ 141.50 (in 2011) per day. Often times your Medicare supplement will pay the cost of that deductible. So in the best case scenario, Medicare may pay up to 100 days. In order to qualify for this 100 days of coverage the nursing home resident will generally undergo therapy and must continue to improve. While it's never possible to predict at the outset how long Medicare will cover the rehabilitation, from our

? 2011 Zacharia & Brown P.C.

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experience, it often falls far short of 100 days. But even if Medicare does cover the 100 day period, what then? What happens after the 100 days of coverage have been used?

At that point, you're back to one of the other alternatives, paying the bills with your own assets (with or without the help of long term care insurance), or Medicaid.

What is Medicaid? Medicaid is a benefits program which is primarily funded by the federal government and administered by each state. So the Medicaid rules may vary from state to state.

One of the primary benefits of Medicaid is that, unlike Medicare, which only pays for skilled nursing, the Medicaid program will pay for long term custodial care in a nursing home.

Custodial care refers to assistance with the activities of daily living (i.e., activities like dressing, bathing, toileting, preparing meals and so on). The inability of some older persons to manage these activities on their own often results in moving into a nursing home.

Why Plan for Medicaid? As life expectancy and long term care costs continue to rise, the challenge quickly becomes how to pay for these services. Many people cannot afford to pay $8,000 per month or more for the cost of a nursing home, and those who can pay for a while may find their life savings wiped out in a matter of months, rather than years.

Fortunately, the Medicaid Program is there to help. In fact, in our lifetime, Medicaid has become the long term care insurance of the middle class. But the eligibility to receive Medicaid benefits requires that you pass certain tests on the amount of income and assets that you have. The reason for Medicaid planning is simple...you plan so that if you need it, you will be eligible to receive Medicaid benefits.

Exempt Assets and Countable Assets:

What Can You Keep and What is at Risk? To qualify for Medicaid, you must pass some fairly strict tests on the amount of assets you can keep. To understand how Medicaid works, we first need to review what are known as exempt and non-exempt (or countable) assets.

Exempt assets are those which Medicaid will not take into account (at least for the time being). While the laws in the states all differ, in Pennsylvania, the following are the primary exempt assets:

The Home, provided its equity value is less than $500,000. The home must be the principal place of residence. The nursing home resident may be required to show some "Intent to return home" even if this never actually takes place. The house may be subject to estate recovery if not properly planned for. This means that while your home may be exempt while you are alive, you may lose it to the State upon passing away. See Estate Recovery.

Household and Personal Belongings such as furniture, appliances, jewelry and clothing.

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 One Car, there may be some limitation on value.

A pre-paid funeral, limitation of $ 11,250.00 for Allegheny County but that figure varies by county.

Burial Plot for you and your spouse.

Cash Value of Life Insurance policies as long as the face value of all of policies added together does not exceed $1,500. If it does exceed $1,500 in total face amount, then the cash value in these policies is countable.

Cash (e.g. a small checking or savings account) not to exceed $2,400 for a nursing home, $8,000 for people with income below $2,022 per month.

IRA or 40 IK of the community spouse (spouse who remains at home). If its owned by the spouse in the nursing home it is countable.

All other assets which are not exempt (i.e.. not listed above) are countable. This includes checking accounts, savings accounts, CDs, money markets, stocks, mutual funds. Bonds, IRAs, pensions, 401Ks, 403Bs, second cars and so on. Basically all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt.

While the Medicaid rules themselves are complicated and tricky, for a single person it's safe to say that you will qualify for Medicaid so long as you have only exempt assets plus a small amount of cash (i.e., $2,400).

Does this mean that if you're single and need Medicaid, you'll have to spend nearly all of your assets to qualify? No. Actually there are a number of strategies which can be used to protect at very least a portion of your estate.

Special Asset Rules for Married Couples

What do you do if your spouse enters into a nursing home? This can be an extremely worrisome event. How does anyone pay $8,000+ per month? What happens to me when our money runs out trying to pay the nursing home? Congress enacted special laws to make certain that the spouse at home, call the Community Spouse or CS has enough assets to live. The spouse in the nursing home is called the Institutionalized Spouse or IS.

Here's how it works. On the date the IS enters the nursing home a special form call form 1572 is filled out. The Department of Public Welfare (called DPW) looks at all of the countable assets. They then split these countable assets in half and instruct the CS that he or she can keep one half of these countable assets, not to exceed $109,560 (in 2011). The CS must spend down the rest of the assets before Medicaid will pick up the tab. So, for example, if the couple has $140,000 in countable assets on the date one of them enters into the nursing home, Medicaid will allow the CS to keep $70,000. If they have $250,000, Medicaid will allow the CS to keep only $109,560.

? 2011 Zacharia & Brown P.C.

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