The Truth About Medicaid Planning Presented by Lee A. Rosenthal, P.A. Why People Don’t Plan… Lack of Knowledge Assumptions • Goals cannot be achieved • Nothing can be done • No one can help Medicare vs. Medicaid • Medicare is health insurance provided by the federal government. -Everyone is eligible to receive Medicare. • Medicaid is catastrophic illness insurance. -Not everyone qualifies for Medicaid coverage. Some Words to the Wise • Most information from social workers and friends will be well-intentioned, but only partly true. Get good legal counsel from an elder law specialist. • Whatever you do, DO NOT apply for guardianship or conservatorship without advice from an elder law specialist. “The Three Big Myths” (Actually there are EIGHT!) MYTH # 1: “If my spouse or I go into a nursing home, the state will take my home away.” THE TRUTH: Your home is an exempt asset if owned by you or you and your spouse. MYTH # 2: “If I give assets away, I have to wait 36 months to qualify for Medicaid.” THE TRUTH: “Medicaid” will soon be looking back 60 months for divestments (gifts). If you have made a gift you will incur a “penalty period” which may be longer or shorter than 36 months. (Soon to be 60 months.) MYTH # 3: “If I go into a nursing home the state will take my assets away.” THE TRUTH: The state takes nothing. Medicaid simply won’t pay anything until you spend all available assets. MYTH # 4: “If I am already in a nursing home, it is too late to shelter any assets.” THE TRUTH: You can shelter almost all assets (thousands of dollars) in most cases no matter how long you have been in a nursing home. MYTH # 5: “I can give away $11,000 a year per person without penalty.” THE TRUTH: That is a Federal Gift Tax limitation and has nothing to do with Medicaid eligibility. Medicaid gifting rules are completely different. MYTH # 6: “My daily cost at the nursing home is the approximate cost of care.” THE TRUTH: Nursing home charges for “additional supplies” and services such as latex gloves, catheters, needles, etc. can double the monthly cost. MYTH # 7: “There is a small chance I will end up in a nursing home anyway.” THE TRUTH: 43% of 65 year old persons will spend at least 2 years in a nursing home. MYTH # 8: “If I am receiving Medicaid, my quality of care will be lower.” THE TRUTH: The nursing home does not care if you are “private pay” or if you are receiving government benefits. Medicaid Planning • Develop a Comprehensive Plan • Proper Will, Trust & Power of Attorney Planning • Proper Financial and Asset Planning • Long Term Care Insurance • Maximize Medicaid Exemptions Planning Options Plan for the Best • Hope the worst doesn’t happen Plan for the Worst • Hope the best happens Our Definition of Estate Planning: • I want to control my property while I am alive and well; • I want to plan for myself and my loved ones if I become disabled; and, • I want to give what I have to whom I want, when I want, the way I want. Do I need an Estate Plan? The Disaster Scenario • How detailed are the instructions you leave for your fiduciary? • The KEY Question: How can I ensure that my assets are used in the way that I want by whom I want? Fiduciaries: Who? • The following have “fiduciary responsibility:” Trustees Attorneys in Fact Guardians • If a trustee, guardian, or attorney in fact improperly converts the principal’s assets for their own use, they may be guilty of exploitation. • Exploitation is a crime that is more often committed by family members, friends, and trusted business associates than by strangers. PREVENTION 1) Exploitation by trustees and attorneys in fact can often be prevented by drafting language requiring auditing of a person’s assets by an independent party, such as a qualified accountant or attorney. 2) Escrow agreement for a Power of Attorney. 3) Before agreeing to any investment that one does not understand, it would be helpful to have a disinterested professional, such as an attorney or investment advisor, offer an opinion about the prospective investment. Medicaid Introduction • Medicaid is a joint federal-state program that provides health insurance coverage to low-income children, seniors, and people with disabilities. • In addition, it covers care in a nursing home for those who qualify. Medicaid is the default nursing home insurance of the middle- class. Medicaid in Florida: • The agency called the Department of Children and Family Services (DCAF), formerly known as (HRS), promulgates specific rules, regulations, and policies in Florida. • DCAF policies were not always easily available to the public. However, they now have an Internet site that posts many of the rules and policies. Basic Medicaid Rules Eligibility: In Florida, eligibility for Medicaid benefits depends on (2) types of criteria: • Level of care • Financial Level of Care Requirement • A Medicaid applicant must be in need of the level of care and placement for which Medicaid benefits are sought. • Determination is made by the Department of Elder Affairs Comprehensive Assessment and Review for Long Term Care Services Team (CARES) consisting of a registered nurse and/or social worker. • The CARES team looks at activities of daily living. Generally, the CARES team considers whether a patient cannot perform three(3) of five(5) Activities of Daily Living (ADL): • Walking and standing (known as “transferring”) • Clothing oneself • Feeding oneself • Bathing oneself • Doing toiletry oneself Asset Test: • Determine Available Assets • Subtract Exempt Assets • Subtract Protected Resources • Balance = Spend Down Amount Calculating the Spend Down: • Determine Available Assets Available Assets: Don’t Forget: • Retirement Plans; • Life Insurance; • Personal Property; and, • Everything else you own! Calculating the Spend Down: • Determine countable resources • Determine Exempt Assets Exempt Assets • A number of assets are categorized as exempt and therefore their value is not included when adding up the number of “countable” assets to see if the applicant or the applicant’s spouse has too many assets for eligibility. Exempt assets include: • HOME: Applicant’s home, of unlimited value, is not included as an asset if the applicant has the intention to return to the home at some future time. • PERSONAL EFFECTS: Clothing, jewelry, furniture, appliance. If there is a community spouse, all personal property is excluded. If there is no community spouse, personal property is excluded if the equity value does not exceed $2000.00 • AUTOMOBILE: One automobile, regardless of the value. (Section 1625.95.40) Exempt Assets Continued • PREPAID BURIAL CONTRACTS: If the contract is irrevocable, the value is not counted. (Section 1625.10.25) • BURIAL FUNDS: Up to $2500.00 per spouse may be set aside for burial expenses. These funds may not be commingled with other funds • BURIAL PLOTS: Includes grave sites, crypt, mausoleum, casket and head stones. (Section 1625.10.40) • LIFE INSURANCE: Life insurance is only counted to the extent of the cash surrender value; and if the face value on all policies have cash surrender value does not exceed $2500.00, the face surrender value is not counted. • INCOME STREAM: The earnings that are distributed from the asset are counted as income. Examples include properly structured annuities, income producing real estate, and income from non-negotiable loans. Medicaid now requires that they be named as beneficiaries of the annuity second only to the spouse. Calculating the Spend Down: • Determine countable resources • Determine Exempt Assets • Determine Protected Resources Protected Resources: SINGLE • $2,000 in Assets Protected Resources: SPOUSE AT HOME • to $101,640 for Spouse at Home. • $2,000 in Assets for Institutionalized Spouse. INCOME TEST: SINGLE • $1,869 per month INCOME TEST: COUPLE - SPOUSE AT HOME • No maximum for well spouse. • $35 per month for institutionalized spouse. Qualifying for Medicaid if you make too much $ • QIT: A qualified income trust (QIT) is a device by which an applicant’s income may be deemed not to exceed the income cap. This is done by placing the excess income over the income cap in a special trust. The trust must be irrevocable. The only reason for the trust is to assist the applicant in qualifying for Medicaid. …If you own too much: • THE TRANSFER PENALTY: The other major rule for Medicaid eligibility is the penalty for transferring assets. If either the Medicaid applicant or spouse transfers assets, there will be an ineligibility period for Medicaid computed by dividing the amount of the transfer for less the value by $5,000.00. The resulting quotient is the number of months of ineligibility. The look back period for transfers is currently 36 months for transfers by individuals and 60 months as to transfer from trusts. In the near future, the look back period will increase to 60 months from the date of application.) What’s Next? • Please complete the feedback form. • If you need our help or would like to discuss estate and Medicaid planning individually, see us to set an appointment to meet with us. • Begin to gather asset and family information.