An application for Medicaid benefits cannot be approved before the applicant (and spouse, if any) has completed the spend-down, because benefits are not payable unless the applicant is financially eligible. It is not uncommon for someone to initiate an application for Medicaid without having any idea whether they are eligible or not. The nursing home may start the process; a nonattorney representative may start the process; a hospital social worker may suggest that they apply. They may leave the intake interview with a List of Required Documents, but not be told that they have to spend down to “X” level before the application can be processed. Sometimes, months go by and the hapless applicant is running up nursing home bills without actually being Medicaid eligible because they didn’t “spend down.”
Despite the fact that the regulations of the State Medicaid Manual at N.J.A.C. 10:71-2.2(c) specifically obligate the County Welfare Board to assist the applicant in this process, all government agencies are reticent to provide advisory opinions on what measures will comply with a program’s rules. There may be substantial opportunities to shelter assets for the family, but the CWA cannot be counted on to provide that sort of advice. Also, given the huge volume of cases, there may be many procedural tangles that prevent the applicant from receiving necessary advice through the CWA. Unfortunately, if the applicant sits back and waits for guidance, they may discover that they and their spouse are incurring tremendous financial obligations that they have no good way to pay.
The spend-down may be a combination of expenditures, exempt transfers and replacement of existing assets. The math is precise and until the spend-down is completed, there can be no eligibility. By getting individual legal advice early in the process, an applicant can take advantage of the opportunities that the rules provide to protect his family and achieve eligibility at the soonest possible time.
Call for representation regarding Medicaid eligibility spend down planning …. 732-382-6070
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 1-28-140001M.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