CMS confirms that transfer penalty for Medicaid home care applicants starts to run at time of application

Followers of this blog know that when a person applies for Medicaid under the New Jersey MLTSS program or other state programs that pay for nursing homes, assisted living or home health care services, there is a 5-year look-back that is done by the agency to determine if a transfer penalty should be imposed for gifts made during the 5 years preceding the application. The penalty is a period of time in which the State won’t pay for the care. The greater the amount that was gifted, the longer the penalty period.

There has been a problem for years that was inadvertently created when the Medicaid law was amended by the Deficit Reduction Act of 2005 (“the DRA”). The problem was caused by an interpretive guidance memo called State Medicaid Director Letter (SMDL #06-018) published on July 27, 2006 by CMS. The DRA itself specified that the start date of the penalty was to be “the later of (1) the month during or after which a transfer is made or (2) the date on which the individual is eligible for medical assistance under the State plan and would otherwise be receiving institutional level care services.” See Secn. 1917(c)(1)(D) of the Act. However, the 2006 explanatory SMDL stated that the start date was “…the date on which the individual is eligible for Medicaid and is receiving institutional level of care services.” (emphasis added). The problem was obvious — it created a catch-22 in which the penalty wouldn’t start to run until the individual was receiving services, yet no services could be provided until a penalty period had ended! Also, the memo was at odds with prior positions that applied resource rules and transfer penalty rules uniformly to people applying for Medicaid in different settings.

Well it only took 12 years, but the good news is that CMS has just published SMD # 18-004 which clarifies the point once and for all: the start date for applicants for home and community services is the date on which they’d be receiving services were it not for the penalty period. Here it is: CMS SMD # 18-004

Asset protection is feasible even when a person is right on the verge of applying for Medicaid. Houses and other assets can be protected with proper senior care planning. Call us first, to advise you and prepare your Medicaid application…. 732-382-6070

There’s no “income cap” anymore for Medicaid long term benefits

When I first started filing Medicaid applications for my clients back in 1995, a person who needed long-term care services in the home or assisted living but had run out of money could not even apply for Medicaid if their gross monthly income was higher than the “income cap.” Of course, the income cap was well below the amount that was needed to pay for care, which meant that a lot of people couldn’t receive necessary services. Basically it meant that many people who would have done well in a community environment with a home health aide and other support ended up moving into a nursing home, because that was the only setting where Medicaid would pay for them. Or they had to do without care or cobble together a plan in which family members took care of them.

Finally, in 2014 when the State’s Comprehensive Medicaid Waiver went into effect, the income cap was eliminated as a bar to receipt of community & assisted living services. There is a special procedure that the applicant has to use, because the income has to be funneled through a structure called a Qualified Income Trust (QIT), but at least the person can now apply for Medicaid benefits. You can read more about QIT’s in our earlier blogs.

We continue to meet people who haven’t heard this good news. If your family is struggling with how to arrange and pay for long term care, call us for legal advice regarding Medicaid eligibility that fits your specific situation.

For personalized advice about a Medicaid plan call … 732-382-6070

Medicaid annuity planning is alive and well in NJ

When a person applies for Medicaid under the NJ MLTSS program after having made gift transfers during the most recent 5 years, there will likely be a penalty period in which Medicaid will not pay for the care that this person needs (unless the transfers were exempt, such as transfers to a spouse or disabled child). This transfer penalty is mandated by federal law, and the greater the amount that was transferred, the longer the transfer penalty will be. If an applicant addresses this issue before the end of his spend-down period, there may be opportunities to protect the applicant by using some of the spend-down funds to purchase an annuity contract that can provide the income needed to pay for care during the penalty period.

The type of annuities that fit the bill are highly restricted and are not designed to maximize the rate of return the way conventional annuities might be. The reason that the technique works is because under federal and state Medicaid law, a distinction is made between “income” and “resources.” Resources must be reduced to a certain level before the person can even apply for benefits. Income, on the other hand, is usually received on a monthly basis and is turned over to the facility as a contribution towards the cost of care (with certain deductions). For the annuity plan to work, the contract cannot be countable as a “resource” as defined by Medicaid law. We had successfully litigated an IRA annuity case with the NJ Division of Medical Assistance and Health Services (DMAHS) in 2009-10 (the P.K. case) PK FAD  A few years later, after several cases were decided in out of state venues,Lopes 2nd Cir ; Carlini we successfully litigated a non-IRA annuity case against DMAHS in 2013 (the M.W. case; M.W. FAD 1-28-140001 M.W. Initial ALJ decision ) leading to confirmation that if properly structured, an annuity effectively transforms countable resources into an irrevocable stream of income. If properly done, this technique can provide protection for the Medicaid applicant as well as his/her community spouse, and can also help to assure that there is a way to pay for care during an anticipated Medicaid penalty period.

Seniors who are planning for their care have many tools in their toolbox; the question is always which tools to use and how to get the results that the senior needs.

Call us to discuss a Medicaid spend-down plan that suits your circumstances … 732-382-6070

For Qualified Income Trusts, Not All Bank Accounts Are Created Equal

Medicaid Long Term Services and Supports (MLTSS) in New Jersey pays for nursing home care for people with alzheimers disease, catastrophic disabilities and other serious difficulties with self care. The program requires any applicant with more than $2205 (three times the SSI amount–new for 2017) of gross income to make a Qualified Income Trust.  Our office assists applicants with this process all the time.  After the Trust document is completed, we usually send the trustee to the applicant’s bank to set up a QIT bank account.  But things can get hairy here.  Most people, reasonably, want to open bank accounts that avoid fees and penalties.  However, QIT accounts are not most accounts.  They are for the applicant’s gross regular monthly income ONLY, and the income is supposed to go into the account and leave the account every month.  Medicaid allows up to $20 per month in fees as a deduction from the applicant’s income; trustees should therefore pick the checking account product with reasonable fees but no minimum deposit.  If the account is set up with $0 in it, even if that costs a little money, that’s good; the assigned income will go in and fund the trust account in the month of the application date sought–this is what caseworkers are looking for initially.  Some banks will waive even these costs if you show proof of a regular direct deposit.

Unfortunately, many applicants’ Medicaid eligibility has been tripped up by technical processes related to Qualified Income Trusts since they began in December of 2014.  To do better, we all need to up our game and learn exactly what the caseworkers want before they ask.  Come talk to us about this and your other Medicaid questions.  We’re here to help.

Call us for Medicaid applications and senior care planning … 732-382-6070

Save your receipts and bills for five years, for the look-back

If medical catastrophe strikes and someone in your family needs nursing home care, they may want to apply for Medicaid to pick up those costs.  The regulations are complex, but there are lots of legal strategies that we use to help a person become eligible and to protect the rest of the family at the same time. The process doesn’t stop there, though. The applicant has to prepare and file an application for Medicaid, which we do for people through their local board of social services. And to support this application, we need five complete years of documentation. We can be most effective for you and seniors in your situation if the application is complete.

To best protect your ability to pursue a Medicaid application should it be necessary, save every bit of documentation. Bank statements, cancelled checks, credit card statements, receipts, withdrawal and deposit slips, and tax returns. Photographs of things you bought for cash. Proof that a person who you’ve hired is actually working for you. Are you worried about Mom or Dad? help them create a system to save all this paperwork on a rolling five year basis. The burden of proof is on the applicant within the framework of the published laws, but time and again we see that applications are being denied for failure to produce proofs. It is easier to save these things as you go along than to try to track them down later in the midst of applying for Medicaid.

The 5-year lookback requires the agency to scrutinize all transactions that occurred during the 5 years preceding your application. We have to prove that money which was spent was used to purchase goods and services, and wasn’t used to make gifts. This means a lot of paper verification. So save those bits and scraps, keep things organized, and call when you are ready to apply.

Call us about elder care planning for seniors and for Medicaid eligibility planning and applications … 732-382-6070