Kansas & Missouri Estate Planning

Medicare and Medicaid Dodge The Budget Bullet (For Now)

Have you heard the news? It seems the grand experiment failed. The Congressional Super Committee, charged with doing what the Congress at large could not do, has run out of time.

And, by running out of time, failed in its mission to come up with budget cuts.

So, what does that mean for Medicare and Medicaid beneficiaries?

As Reuters reports, in the event the Super Committee should fail, as it has, then automatic and sweeping cuts go into effect. For Medicare, that means a two percent cut across the board, or about $123 billion over the next decade.

Not exactly chump-change.

However, it might have been $500 billion to $700 billion in cuts, if various supercommittee arguments had prevailed.

Nevertheless, as it stands, there definitely will be a little pain, but not quite as much for individual beneficiaries. No, likely it will hit hospitals and doctors the hardest. Why? In the aggregate, that's where the money tends to end up.

Of course, we're not yet out of the woods just yet. As it became clear last summer that we'd have to wait until the winter for some kind of budget solution from Congress, it now seems that we'll have to wait for the upcoming election season. In turn, expect things to intensify even further and for budget discussions to become all the more drastic.

Ah, isn't it good to live in interesting times?

Reference: Reuters (November 22, 2011) "U.S. healthcare cuts minimal, more pain looms"

More Medicaid Asset Transfer Travails

Oftentimes, Medicaid and Medicare can be entirely necessary programs. They also can be pretty tricky to navigate, especially if you, or a loved one, fall just above the income limits.

That said, Medicare and Medicaid don’t like it when they feel you are "gaming" the system. Elder Law Answers highlights yet another case in which an elderly person was denied benefits because of improper planning.

The case in question is Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011). Lucille Hedlund was a Medicaid applicant who was denied benefits because she also was a beneficiary to an irrevocable trust that qualifies as an available asset, bringing her above the income threshold. It didn’t matter that the trust has been set up 17 years ago, especially because of the circumstances.

Mrs. Hedlund transferred all of her assets to her children in June 1991, with the exception of a checking account. And, on the very same day, her children put those very same assets into an irrevocable trust and named her as beneficiary. While this was pretty sneaky, it was not enough to give Medicaid the slip.

Medicaid ruled that there was reason to infer that Mrs. Hedlund had directed her children to create and fund the irrevocable trust because the plan was effected on the same day. Note: It didn’t even matter that the assets weren’t hers at the time the trust was created, since they were still "available assets" in the eyes of the court… some 17 years later when Mrs. Hedlund entered a nursing home in 2008.

Applications for Medicare and Medicaid are important and should not be taken lightly. If you, or a loved one, need to make plans for long-term care, then you need to seek competent legal counsel before you apply.

I always recommend planning for long-term care in advance. For more information on this essential subject visit the Long-Term Care Learning Center on our website.

Reference: Elder Law Answers (October 14, 2011) "Irrevocable Trust Set Up by Medicaid Applicant’s Children is Available Asset"

No “CLASS” Today (Or Tomorrow)

As you know, I am a big believer in private long-term care insurance. To me, it is a matter of personal responsibility. That's why Gretchen and I took out our own policies some three years ago. In life, we all make choices and we all set priorities with our finances.

For those who won't (or can't) legitimately provide for personal care in their elder years, then the government (read: Medicaid) is the insurer of last resort. And the attempt to create long-term care insurance as part of Obamacare is DOA. The numbers didn't work.

After much speculation, the Department of Health and Human Services (HHS) has pulled the plug on the CLASS part of the health law. As a recent Reuters article points out, this brings to the fore the question of long-term care insurance, both as it impacts the United States in general and each of us in particular, as potential patients in need of such care.

The CLASS act was the first attempt at establishing a public (read: government) option for long-term care insurance and that put it between the proverbial rock and a hard place. The late Senator Kennedy championed the cause. Politics aside, what torpedoed the CLASS act? Money.

According to HHS, the program would prove too costly to achieve its goal. Why? Too few healthy people would elect to pay the required premiums. But what now?

The Center for Retirement Research at Boston College notes that about one-third of the Americans turning 65 this year will need at least three months of nursing home care sometime during their lives. Presumably, however, many of these same Americans will need such care even longer (and future generations can't be expected to fare much better).

So, how we deal with long-term care as a country is yet to be seen. Regardless, since you or a loved one will likely need long-term care, the question remains: How will you pay for it?

Good news: An increasing number of people are turning to private long-term care insurance.

Is private long-term care insurance right for you or a loved one?

For many who wait too long pondering this question, their default option is the more complicated question of Medicare and Medicaid. Undoubtedly, Medicaid (the means-tested shared federal-state program) is the largest source of long-term care financing. However, last time I checked, the federal government was not exactly flush with cash and many states are operating in the red.

In the end, whatever you decide to do when it comes to paying for long-term care, the best time to make plans is yesterday. Whatever you do, be sure to seek appropriate legal counsel.

Reference: Reuters (October 17, 2011) "What’s next for long-term care after CLASS act folds?"

Government Medical Care (And Senior “Double-Dippers”)

Like old Mother Hubbard and her empty cupboards, the U.S. Government coffers are bare. So what does that mean for Medicare and Medicaid, especially for folks who dip into both programs? Government health benefits for some 9 million of the sickest and poorest U.S. citizens will come under scrutiny from the congressional "super committee" seeking to cut the nation's debt.

Are you or an elderly loved one receiving benefits from Medicare or Medicaid? If yes, then likely you already appreciate the funding problems facing Congress and its appointed "super committee" regarding the future of these programs. However, for many of today's elderly, certain changes to these programs may be both real and immediate. Consequently, careful attention must be paid to the associated political developments. One area of specific focus is "dual-eligibles."

Seniors receiving aid from both Medicare and Medicaid are so-called "dual-eligibles" (read: "double-dippers") and, as such, their benefits are under scrutiny from the super committee. In fact, changes may be in the wings, according to Reuters.

Medicare and Medicaid spend about $300 billion a year for "dual-eligibles," making them a prime target. Here's what that means in real terms: Roughly 39 percent of the Medicaid program costs and 27 percent of Medicare costs are going to 15% and 16% of program enrollees respectively - and at the same time. Of course, these patients also tend to be the ones in the greatest need, with half of them under treatment for five or more chronic conditions.

What's going to happen? As usual, that's far from clear. Many states and insurers are pushing for managed care options to handle all aspects of care. This would help reduce the present bureaucratic overlap and, hopefully, cut costs. On the other hand, there are the detractors.

The reality of dual-eligibles is likely to continue to rise in budget and debt discussions, along with a host of other little issues. What can you do? Keep a close eye (and open ear) on the decision-making process (and the decision-makers), especially if those changes may impact your health care. It probably wouldn't hurt to contact your representatives in Congress.

Reference: Reuters (September 28, 2011) "Debt panel eyes dual Medicare/Medicaid patients"

Adult Children With Special Needs? Plan Wisely!

Deciding how to leave your assets to your kids is tricky enough. But when your adult child has special needs, the task is much more complicated and the stakes are even higher.

Estate planning is never easy. For one thing, it necessitates thinking about protecting your loved ones when you're no longer around. It's tough enough making plans to protect self-sufficient heirs who take care of themselves and an inheritance. However, it can be a real challenge when planning for heirs with special needs, for a variety of personal and legal reasons. Unfortunately, as The Wall Street Journal Online recently pointed out, with the economy and politics as they are, there are new concerns to bear in mind as you plan.

Both state and federal budgets are strapped for cash. No surprise there. To make up some of the deficiencies in government coffers, more of the burden is falling on Medicare and Medicaid. It's up to the Congressional Special Committee to consider the future of Medicare now, but many Medicaid programs already are feeling the squeeze with tighter income restrictions for benefits and services.

Of course, much of the disabled population (12% of the overall population) relies on state and federal services for those services that they couldn't afford in the private market. To plan for an heir with special needs, then, means planning to provide for them without risking their main sources of care. Now, more than ever, that means a "special needs trust," tailored to provide the inheritance as a "safety net" without endangering the continuation of benefits. [Sidebar: Sometimes an older parent can make this move and kill two birds with one stone. How? They create the trust now for themselves and a loved one with special needs so that both qualify for government benefits, once the "look back" period has past for eligibility disqualification. Caveat: As budgets get tighter, expect greater governmental scrutiny regarding such moves.]

The other major issue, and a related one, is housing. Many Americans with special needs live in group housing programs. These programs are, in turn, subsidized by government agencies, but are increasingly unable to meet demand and are cash-strapped. The same political/economic pressure is keeping those agencies from expanding.

At the same time, there simply are more prospective residents due to lengthening life expectancies. In fact, the US would have had to expand its residential-services capacity by 28% to meet the demand as of two years ago. Clearly, housing has been an issue and it will only get worse.

Amidst all of this uncertainty, you still need to plan where your loved one will live. This might mean another form of trust. For example, a "Qualified Personal Residence Trust" (QPRT) could provide that you live in your home until your death, but that your family member with special needs would continute to live there (without disqualifying ownership). Great care is required in the preparation and execution of such an arrangement. Also, it may be possible to provide a home to shelter several persons with special needs. For example, several families could pool resources and maybe donate a home to a non-profit that, in turn, can convert the home into a new group home. The options are limited by your creativity, but careful to avoid elibility diqualifying mistakes.

Ultimately, the best plan will depend on your own unique family circumstances, as well as the current state and federal laws governing benefits and services. Unfortunately, according to a recent study by Arc, an advocacy group, only one-third of affected families actually have plans to control what happens when the caregiver grows old and evem after they are gone.

Bottom line: Remember to engage qualified legal counsel to help you navigate the regulatory minefields.

Reference: The Wall Street Journal Online (September 3, 2011) "Taking Care of Disabled Heirs"

Medicaid Disqualifying Promissory Notes

Attorneys and the clients they represent can be pretty creative when it comes to moving assets around to qualify for nursing home medicaid. Sometimes they are successful... and sometimes they are just the canary in the mine for other attorneys and their client.

As some of you may know, the guidelines surrounding eligibility for Medicare or Medicaid can be fairly rigid. They exist to ensure people aren't "gaming" the program, but sometimes even those who aren't gaming the program (and have legitimate need) can unintentionally run afoul of the rules. For another example of what not to do, ElderLawAnswers recently analyzed the case of Jackson v. Director of Office of Medicaid (Mass. App. Ct., No. 10P706, July 19, 2011).

When Raymond Duclos was entering a nursing home, his wife was busy making transfers to their children: $176,000 to their daughter, Susan; $11,787.83 to their son, Raymond, Jr.; and $3,000 to their other son, Michael. Teaching point: No good story about Medicare/Medicaid eligibility begins with the word, "transfer." Why? Because of the look-back period for determining eligibility.

In the case of the Duclos family, these direct transfers were not made without any value exchanged in return. In fact, the transfers were made in exchange for promissory notes. The largest note was an immediate annuity. Nevertheless, in the end, this was considered a distinction without a difference.

The state (Massachusetts) denied the claim and the appeals court upheld the state's decision. The court's basis: Those promissory notes weren't "actuarially sound." For one thing, there was no proof of Mrs. Duclos life expectancy at the time she transferred the assets and the smaller promissory notes from the sons did not prohibit cancellation at the death of the lender. This "cancellation" made the transaction appear as if there was little intention of actually fulfilling the notes. Furthermore, the larger note from the daughter was turned into an annuity, but it did not name the state as a "remainder" beneficiary. Accordingly, each transfer, then, was a disqualifying one.

Reference: ElderLawAnswers.com (August 1, 2011) "Transfers to Children of Medicaid Applicant in Exchange for Promissory Notes Not Actuarially Sound"

Confusing Cover-Ups: Does Your Loved One Have Dementia Or Alheimer's?

It does not happen overnight. No, dementia and Alheimer's creep into your loved one's behavior and take residence gradually. Being smart, adaptable and self-reliant folk, your loved one is able to cope before you are. In fact, they may cope so well that it becomes a "cover-up" for an uninvited, insidious degenerative process, changing their life (and yours) from that point forward. Here’s what’s important: it doesn’t matter whether you have a diagnosis for your aging parent. It matters how your loved one functions. It matters how you deal with what you see.

Dementia and Alzheimer's are increasingly common, but even if we as we become more and more aware of how to spot the symptoms, it doesn't necessarily make it any easier. Many a reader will be familiar with the terrible uncertainty and concern over their aging loved one's thinking. Fortunately, Carolyn Rosenblatt of Forbes provides more advice in her recent article.

Among the many dangers to keep in mind when an elderly loved one starts "slipping" is that they may begin "hiding" it. For one thing, it is not something any senior looks forward to acknowledging, even if they are aware of some telltale symptoms. It is human nature.

We all compensate or distract when there is something to hide, both from ourselves and from others. But when something like dementia or Alzheimer's is at stake, it can be all the more difficult to get past and even more harmful to hide. Indeed, since there is no actual test for dementia or Alzheimer's, it is possible that even a doctor will be unable to diagnose those conditions.

It is important, therefore, to observe how your loved one functions. Keep a keen eye on them and know what you are seeing, for their own sake. The original article has more advice and anecdotes to offer, but Ms. Rosenblatt sums up the steps in four points.

First, as soon as you begin to worry, you must persuade your loved one to visit a doctor, and a specialist if possible, to detect it early. Second, you must secure their estate planning documents while they have legal capacity to know and understand what they are doing. Third, you must secure proper care for them. Fourth and last, you must discuss the circumstances openly with all family members, so all may be aware of the circumstances and can work together to protect your loved one.

Reference: Forbes (August 11, 2011) "The Danger of Your Aging Parent Covering Up Dementia"

Budget Cuts: To Affect Nursing Home Costs (And Services)?

If you have a loved one in a nursing home now or in the near future, then be ready to pay more and, perhaps, receive fewer services due to tightening Medicare and Medicaid budgets. In fact, you may notice an uptick in your "house bill" as early as this fall.

The last few months have been a wild ride on multiple financial levels. This include wild financial consequences at the micro level (e.g., putting gas in your tank and buying milk) and at the macro level (e.g., future funding of Social Security, Medicare, Medicaid and the very real "debt crisis"). While many more challenges lie ahead in terms of budget cuts, some cuts already have been made... albeit under the radar screen.

Several of the budget cuts you should know about actually go into effect this fall, as reported in a recent SmartMoney article. According to SmartMoney, nursing home residents could face higher costs or reduced care once these cuts kick in. Yikes!

On July 29, The Centers for Medicare and Medicaid Services (CMS) decided and announced that they would be compensating for last year's $4 billion shortfall by cutting reimbursement rates to nursing homes by 11.1%. In real terms, the shortfall will reduce government reimbursements to nursing homes. In 2010, nursing homes across the board increased charges on residents by an average of 5%.

The bad news: These reduced government reimbursements likely will trigger even higher nursing home costs for residents beginning this fall. Alternatively, it might trigger a reduction in services to nursing home residents. Either way, the forecast is not pleasant.

Perhaps I am wrong. Perhaps nursing home residents won't see increases in costs or decreases in services. After all, the CMS actually justifies the 11.1% cut by pointing out that it is simply a more accurate reimbursement amount based on a government report indicating that Medicare has been overpaying. In fact, as a spokesperson for the CMS maintains, "We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients. However, we intend to carefully monitor changes in utilization and staffing patterns to ensure that patients continue to receive high quality care."

Still, the nursing home industry appears to be monitoring the situation with caution. Bottom line: If you have a loved one in a nursing home, then you, too, should take notice.

Reference: SmartMoney (August 18, 2011) "Medicare Cuts Could Up Nursing Home Costs"

Long-Term Care - Insuring The Risk

Gretchen and I secured our Long-Term Care insurance polices several years ago. Why? We see the need for such asset protection on a daily basis in our conference room. Unfortunately, most folks wait until they are uninsurable before considering Long-Term Care insurance. As a result, oftentimes the last resort for those who tarry is "Medicaid Planning" (i.e., "welfare") to pay for their nursing home expenses... and the taxpayer dollars to fund Medicaid already are in short supply.

Fact: Healthcare costs are steadily rising and will only continue to rise in the foreseeable future. Accordingly, healthcare inflation must be considered when planning to protect your health, your family, and your financial well-being. One of the greatest threats is long-term care, especially as we age. For many, Long-Term Care insurance remains the best protection against long-term care poverty. Thankfully, as reported in a recent Reuters article, the Long-Term Care insurance market is growing to accommodate the growing need and several new options are becoming available.

Granted, we don't like thinking about growing old and frail, perhaps with dementia or Alzheimer’s to boot. And, look, I know it's easy to procrastinate. Besides, who wants to pay policy premiums? As a result, people who will need Long-Term Care insurance protection later, may not have purchased policy protection now.

Matthew Sharpe of Genworth Financial notes that "Long-term care (insurance) is definitely under-penetrated, there's no doubt about it. About 4 percent of the population that is eligible actually has a policy." Because of this disturbing statistic, Genworth and other companies are developing newer and easier tools for consumers to use, and that just might translate into newer and better policies for you to consider.

Whether any policy option is the right option for you depends on your unique circumstances. As pointed out in the original article, the strongest reason to secure a policy may be the possibility of dementia or Alzheimer's. While there are many ideas presented in the Reuters article for your consideration, nothing can replace the advice and counsel of an experienced Long-Term Care insurance agent to help you navigate your options.

Looking for more information, visit the Long-Term Care Planning education page on our website.

Reference: Reuters (August 16, 2011) "Long-Term Care Insurance Gets a Makeover"

Beware: Medicaid Disqualifying "Life Insurance"

Not all life insurance is the same, and that's not just an old sales trick to up-sell a client. In the eyes of Medicare and Medicaid, not all life insurance is truly "life insurance" – and that can be a reason to deny benefits.

Consider the case of Lind v. Maxwell-Jolly (Cal. Ct. App., No. C061912, July 28, 2012) (unpublished), as discussed here on ElderLawAnswers.com, where an endowment life insurance contract became an impediment to Medicaid benefits.

Mary Lind, a nursing home resident, applied for Medicaid benefits and then purchased a "Single Premium Pure Endowment Life Insurance Contract" for $92,000. Here's how the contract works: If she were still alive at the contract maturity date five years hence, then Ms. Lind would be repaid her premiums plus dividends. Of course, the state and two appeals courts weren't buying it.

Since the contract specifies that it will repay Ms. Lind in her lifetime, it is not life insurance. Further, the contact didn't even specify the amounts to be paid out to beneficiaries upon her death. Accordingly, the court held that the contract is more akin to a legal trust and, therefore, the funds invested in it are available funds precluding her from Medicaid.

Teaching point: Not all "life insurance" is life insurance. As in all things financial, and legal, look before you leap.

Reference: ElderLawAnswers.com (August 1, 2011) "Endowment Life Insurance Contract Is Available Asset for Medicaid Availability Purposes"