GeriLaw | Robert Fleming, Tucson elder law attorney, and colleagues

Veterans' Benefit for Home and Assisted Living Care

One little-known benefit for veterans and their families is the Aid and Attendance (A&A) benefit.  This benefit can be used for care in an assisted living facility or for care at home.

Title 38 of the U.S. Code contains statutes regulating veterans' benefit programs.  Many of our readers are probably familiar with service-connected Veterans’ Compensation.  This compensation is provided to veterans for disabilities caused or exacerbated by military service, and it is normally expressed as compensation for a certain percentage disability.

Non-service connected benefits (pensions) are available to veterans (and some widows or widowers) who meet certain conditions.  The veterans do not have to be retired from military service, but the program is needs-based.  The veteran must have served 90 days on active duty (the requirement is longer for more recent veterans), with at least one day during wartime, and have received a discharge under conditions other than dishonorable.  The veteran must be “permanently and totally disabled” because of a non-service connected condition, or be over the age of 65 years.  Additionally, for the improved pension program, the veteran's income cannot exceed $931 per month (with no dependents) or $1,220 per month (with one dependent), the current maximum annual pension rate (MAPR). 

The A&A benefit is an increased benefit for veterans who require “care or assistance on a regular basis” to protect them from dangers in their daily living environment.  Veterans living in assisted living facilities are presumed to need this level of assistance, but the veteran should include a letter from the veteran’s personal physician regarding the veteran’s disability.  The need for A&A increases the income limit from $931 per month to $1,554 per month (with no dependents), and from $1,220 per month to $1,842 per month (with one dependent).  The MAPR for the A&A benefit, therefore, is the higher of $1,554 or $1,842 per month.  (Widows or widowers can receive a maximum of $998 per month.)  One significant feature of the pension program is that income is reduced by paid but unreimbursed medical expenses, including insurance premiums, Medicare premiums, prescriptions, dental and vision care, and the costs of an assisted living facility, in-home aid, or adult day care.  In many cases, these costs can easily reduce the applicant's income to a level that would permit the applicant to receive the benefit.  The net worth of the applicant is also considered in the evaluation for A&A; there are no hard and fast rules, but a net worth below $80,000 for a couple, or $50,000 for an individual, has been acceptable.  The VA looks to the net worth at the time of the application; there is no penalty period for the transfer of assets.  If the veteran, however, transferred property that produced a great deal of income on the previous year’s tax return, that previous year’s higher income would be reflected on the application and may affect eligibility.  Further, because the lack of a penalty for transferring asset conflicts with Medicaid requirements, elder law attorneys should advise their clients of this disconnect and plan accordingly.  The A&A benefit payments are made directly to the veteran or eligible surviving spouse, and they are specifically excluded from the definition of income for Medicaid purposes.  The benefit is reduced to $90 per month if the veteran lives in a nursing home.

Andrew Hook
Oast & Hook
www.oasthook.com

Structured Settlements and the Deficit Reduction Act of 2005

I was recently interviewed for an article in The Structured Settlements Report.  The article considered the impact of the Deficit Reduction Act of 2005 (DRA) on structured settlement annuities for persons receiving needs-based benefits such as Medicaid and Supplemental Security Income (SSI).

Structured settlement annuity brokers could cause problems for their clients if the brokers are not careful in writing these annuities because the clients could lose their eligibility for needs-based government benefits.  The structured settlements should be set up with special needs trusts or Medicare set-asides, which, if created properly, are exempt for Medicaid and SSI eligibility purposes.

The DRA requires that the state be named as the primary beneficiary of an annuity unless the applicant has a spouse, or a minor or disabled child.  The Center for Medicare and Medicaid Services (CMS) permits each state to write its own interpretation on how this DRA provision applies to Medicaid eligibility in the state.  As a result, states may vary on their interpretations and applications of the DRA.  What has pretty much come down from CMS is they are not going to get involved with how a state interprets federal laws.  It gives flexibility in the interpretation by rewriting the eligibility.  What we are beginning to see, however, is that the states are going in all different directions.  This is something that could create a lot of problems.  The potential is for states to restrict the eligibility to qualify for Medicaid.  Some states have already done so by lengthening the review period for qualification from three years to five, and by creating a new period of ineligibility for each new annuity.  Structured settlement annuitants who have not listed the state as the primary beneficiary could end up being ineligible for Medicaid.

I also recommended that structured settlement annuity brokers consult with special needs planning attorneys.  We are trying to work with the structured settlement people to be brought in at an earlier point in the settlement process.  We are experts at what is available. [Special needs plaintiffs] need, typically, a larger reserve fund. [The] issue sometimes comes up after a settlement is entirely structured, and the claimant asks, ‘How am I going to get my house?’  There was no lump sum.  It’s much better to get in early.  You can discuss everything, make plans.  SNA member Bernard Krooks agrees, “It is critical that a structured settlement be placed into a special needs trust or else the claimant could be denied Medicaid.  The personal injury bar is not educated about this.  We are trying to educate personal injury attorneys and structured settlement brokers.” 

Andrew Hook
Oast & Hook
www.oasthook.com

Negative Inheritance

A recent column in Conde Nast’s Portfolio.com addressed the concept of “negative inheritance.”  Economists use this term to describe the situation where any gifts or bequests that children otherwise might receive from their aging parents are outstripped by the costs to the children for caring for their parents.  Negative inheritances can destroy a child’s retirement and financial plans.  For example, if a child had planned to withdraw a small percentage from his or her portfolio each year to support the child’s lifestyle, but now must increase that percentage by fifty percent to take care of aging parents, then the child’s financial plan won’t work.  As a result, financial advisors have developed detailed strategies for dealing with these risks.  These strategies include family dialogue, long-term care insurance, and active management of the parents’ assets.

The most critical element in avoiding negative inheritances is proactive family discussion.  The family dynamics may be difficult, but if the family does not discuss possible scenarios in advance, then the caregiving inevitably falls to one child.  This can cause tension and resentment and can damage the family.  If the children to whom this responsibility will fall are reluctant to bring up the subject with their siblings, then they may want to start by discussing what will happen when the parents can no longer drive.

Financial advisers and elder law attorneys often ask their clients for permission to talk with their aging parents to review the status of their assets, and to determine what plans the parents may have in place for their long-term care.  The financial advisor can then run a series of projections to see if the parents’ assets will be sufficient for their care.  If the funds will not be sufficient, then purchasing long-term care insurance might be an answer, even if the children pay the premiums.  Purchasing a policy that covers half the cost of in-home, assisted living, or nursing home care is better than having no insurance at all.

If the parents cannot qualify for long-term care insurance because of their age or medical conditions, then it is essential to actively manage the parents’ assets.  This may include dealing with the family home; often people are house-rich and cash-poor.  Obviously, selling the family home in order to provide funds for care, or to diversify assets can be stressful for all concerned.  Sometimes, however, it can be the inevitable option.

Studies show that middle-aged caregivers can suffer emotionally and vocationally, as well as financially.  Some baby boomers will work at paying jobs in retirement so they can care for their parents.  The caregiving workload can increase from an average of five hours per week to forty hours per week when the parent suffers from Alzheimer’s disease or severe dementia.  The caregiver has less time to spend with peers and operates on much less sleep.  This emotional toll does not appear on a balance sheet, but it is real.

Andrew Hook
Oast & Hook
www.oasthook.com

Annuities and Long-term Care Planning

A recent Pennsylvania Commonwealth Court case provides some insight on the use of annuities in long-term care planning.  In Ross and Ross v. Department of Public Welfare (No. 137 C.D. 2007), the wife entered a nursing home on February 5, 2003.  On April 8, 2005, her husband transferred $418,026.66 into a single premium immediate annuity.  The annuity contract pays the husband $10,211.83 per month from May 15, 2005 to September 15, 2008.  The husband established the annuity in order to qualify his wife for Medicaid Assistance-Nursing Home Care (MA-NHC) benefits (equivalent to Virginia Medicaid) and to pass assets to his children.  The husband is the sole owner of the annuity, and his three children are the sole beneficiaries.  The wife has no interest in the annuity, and, after the annuity purchase, she had no funds to pay the nursing home.  The payment for the annuity is irrevocable, and the husband cannot terminate the annuity, but he can change the beneficiaries or sell his right to the income stream.

The husband filed an MA-NHC application, and the county assistance office determined that the annuity was an available resource with a value of $202,364.00.  The husband filed an appeal on behalf of his wife, and the Administrative Law Judge (ALJ) denied the appeal.  The ALJ determined that: (1) the language of the annuity did not interfere with the husband’s ability to sell his right to the income stream, thereby converting the annuity into immediate cash; (2) the present value of the income stream exceeds the resource limit; and (3) the annuity was purchased not only for the benefit of the husband and wife, but also as a way to pass assets to the children and qualify the wife for MA-NHC benefits. On further appeal, the Department of Public Welfare (DPW) affirmed the ALJ’s decision.  The husband and wife petitioned the court for review, claiming that the DPW erred in concluding that the income stream from the annuity is an available resource for the wife’s eligibility for MA-NHC benefits.  The court agreed and reversed the DPW order.

The court stated that under 42 U.S.C. §1396r-5, income and resources are treated differently, and that “no income of the community spouse shall be deemed available to the institutionalized spouse.”  Therefore, “[t]he community spouse’s income does not affect the determination [of] whether the institutionalized spouse qualifies for Medicaid.”  The court said that if the payment of income is made solely in the name of the community spouse, the income is income only to that spouse.  In this case, the payment of the income from the annuity is made solely in the husband’s name, the income is considered income only to the husband, and none of the income is deemed available to the wife.  The DPW treated the husband’s income as an available resource, but the court cited an opinion by the Superior Court of New Jersey for the proposition that “treating the market value of an income stream paid to a community spouse ‘blurs the distinction between resource allocation and income allocation’ under the federal law.”  The court concluded that DPW “improperly considered [the husband’s] income stream from an irrevocable and non-assignable annuity as an available resource based on the existence of a secondary market for such income streams.”

Andrew H. Hook
Oast & Hook
www.oasthook.com
Offices in Virginia Beach, Virginia and Portsmouth, Virginia

2008 Long-term Care Spousal Standards

The Center for Medicare and Medicaid Services (CMS) has announced changes to the Long-term Care Spousal Standards that apply to a community spouse.  A community spouse is a person who is not an inpatient in a medical institution or a nursing facility, but is married to a person who is an inpatient in a medical institution or a nursing facility (the institutionalized spouse).  The standards that will change in 2008 include, but are not limited to, the Maximum and Minimum Spousal Resource Standards and the Maximum Monthly Maintenance Needs Allowance (MMMNA). 

The Protected Resource Allowance (PRA) is the amount of assets that the community spouse is allowed to retain when the institutionalized spouse is eligible for Medicaid.  The PRA is the greatest of either: 1) the Spousal Share (one-half of the total amount of joint countable assets as of the first day of continuous institutionalization for the institutionalized spouse), or 2) the Maximum Spousal Resource Standard at the time of application, or 3) the amount actually transferred to the community spouse as court-ordered spousal support, or 4) an amount determined at a hearing by the Department of Medical Assistance Services (DMAS).  The PRA can be no more than the Maximum Spousal Resource Standard and no less than the Minimum Spousal Resource Standard.  The Maximum and Minimum Spousal Resource Standards increase each year based on changes in the Consumer Price Index.  On January 1, 2008, the Maximum Spousal Resource Standard will increase by $2,760 to $104,400.  (The maximum for 2007 is $101,640.)  The Minimum Spousal Resource Standard will increase by $552, from $20,328 in 2007 to $20,880 in 2008.

The Spousal Resource Standard is often called the Community Spouse Resource Allowance (CSRA), but technically this is incorrect.  According to the Virginia Medicaid Manual, the CSRA is the amount of assets that can be transferred from the institutionalized spouse to the community spouse in order to bring the community spouse’s protected assets up to the PRA.  For example, if the total joint countable assets are $150,000, (and there is no court-ordered spousal support or DMAS hearing amount), then the Spousal Share (and thus the PRA) is $75,000.  If the community spouse has $50,000 in countable assets, and the institutionalized spouse has $100,000 in countable assets, then the amount that can be transferred from the institutionalized spouse to the community spouse (the CSRA) is $25,000.

The MMMNA has a minimum allowance amount and a maximum allowance amount.  The MMMNA for 2007 is $1,711.25, and this amount will remain as the minimum allowance for the first half of 2008.  The maximum maintenance needs allowance for 2008 will increase by $69.00, from $2,541.00 in 2007 to $2,610.00 in 2008.  The community spouse excess Shelter Standard for 2007 is $513.38, and this amount will remain the same for the first half of 2008.

Andrew H. Hook
Oast & Hook
www.oasthook.com
Offices in Virginia Beach, Virginia and Portsmouth, Virginia 

Long-term care insurance industry needs to change

Long-term care insurance remains a bit player in the financing of
nursing home and home care. Why? That's the question addressed by a
recent study from the Center for Retirement Research at Boston College.

The study suggests several problems the long-term care insurance
industry will need to address before it can increase it significance in
paying for skilled care. Among the problems:

    1. The cost of long-term care insurance can be high, especially for
buyers who delay purchasing the policies until later in life. For
example, using standards of affordability established by the National
Association of Insurance Commissioners, the study
finds that less than 40% of those aged 60-64 can afford the coverage.
Less than half that many can afford policies at age 70.

    2. Buyers do not perceive value. This is complicated by the fact
that many prospective policy holders believe that they can qualify for
most of the same benefits through the Medicaid program if they choose
not to buy insurance. Of course, insurance coverage may mean the quality
of care is more controllable--and at least placement and services will
be more under the direct supervision of the patient or family members.
Those benefits are not, apparently, compelling to people who are
considering the purchase of insurance.

What should be done to increase long-term care insurance's effect? The
study argues that recent trends toward improved benefits must be
continued, and that the pool of buyers---especially younger
buyers---needs to be increased. Without major structural changes in
long-term care insurance, reports the study, "is is not likely that this
insurance will ever play more than a niche role in financing long-term
care."

Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com
www.specialneedsalliance.com

Medicare Rates for 2008

The Centers for Medicare and Medicaid Services recently announced that Medicare Part A costs will increase in 2008. Medicare Part A pays for inpatient hospital care and some nursing home care, and home healthcare. The Medicare Part A deductible amount for a benefit period will rise from $992 to $1,024 in 2008. Medicare Part A co-payments will increase from $248 to $256 per day for days 61 through 90, and from $496 to $512 per day for days 91 through 150 (lifetime reserve days) per benefit period. Co-payments for skilled nursing facilities will increase from $124 to $128 for the 21st through the 100th day per benefit period. Approximately 99% of Medicare beneficiaries do not pay a premium for Medicare Part A because they have at least 40 quarters of coverage. Some seniors and persons with disabilities younger than age 65 who have fewer than 30 quarters of coverage may obtain Medicare Part A coverage by paying a premium. The premium will increase from $410 per month in 2006 to $423 per month in 2008. For seniors with 30 to 39 quarters of coverage and certain disabled persons with 30 or more quarters of coverage, the Medicare Part A premium will increase from $226 per month in 2007 to $233 in 2008.

Medicare Part B monthly premiums are set according to a sliding scale based on income. The standard premium will rise from $93.50 per month to $96.40 per month in 2008, and it will apply to beneficiaries who file an individual income tax return with income less than $82,000, or joint return filers with income less than or equal to $164,000. For beneficiaries with individual income of $82,000, but less than or equal to $102,000, and joint filers with incomes greater than $164,000, but less than or equal to $204,000, the premium will be $122.20. Beneficiaries with individual income greater than $102,000, but less than or equal to $153,000, and joint filers with income above $204,000, but less than or equal to $306,000, will pay a $160.90 per month premium. Beneficiaries with individual income greater than $153,000, but less than or equal to $205,000, and joint filers with income greater than $306,000, but less than or equal to $410,000, will pay a $199.70 per month premium. Beneficiaries with individual income greater than $205,000, and joint filers with income greater than $410,000, will pay a $238.40 per month premium. There is a separate rate chart for married beneficiaries who file separate tax returns, and who live with the spouse at some time during the taxable year. Medicare Part B pays for visits to physicians, other outpatient care, durable medical equipment, home care, certain outpatient therapies, and drugs that cannot be administered by patients at home and are thus administered by physicians in their offices. The Medicare Part B annual deductible will increase in 2008 from $131 to $135.

Low-income Medicare beneficiaries can receive assistance with the Medicare Part B premium costs, as well as the deductibles and co-payments. These beneficiaries are called “dual eligibles” because they are eligible for Medicare, and they are also eligible for Medicaid due to their low income. For Qualified Medicare Beneficiaries (QMBs), Medicaid will pay the Medicare Part B premium, deductibles, and co-payments. For Specified Low-Income Medicare Beneficiaries (SLMBs), Medicaid will pay the Part B premium. These dual eligible beneficiaries can also receive assistance with the Medicare Part D prescription drug benefit costs.

Useful Web sites:

www.medicareadvocacy.org – Center for Medicare Advocacy Inc.

www.cms.hhs.gov/apps/media/press/factsheet.asp?Counter=2488 – Center for Medicare and Medicaid Services Fact Sheet

Andrew H. Hook, CELA

Oast & Hook, P.C.

Virginia Beach, Virginia

www.oasthook.com

How DRA 2005 Changes Every Middle Class Senior Estate Plan- Florida Version

What Every Middle Class Senior (and her Estate Planner) Must know about Medicaid Changes under The DRA

Charlie Robinson
Florida Board Certified Elder Law Attorney
Clearwater, Florida
Elderlaw@charlie-robinson.com
Copyright 2007

The Deficit Reduction Act of 2005 (DRA) was signed by President Bush on February 8, 2006. The DRA mandates major changes in Medicaid eligibility. The DRA was supposed to be effective on the day it was signed. Some states followed the effective date, others chose a different effective date, and some are still trying to figure out how to implement this new law.

Florida has adopted its DRA Compliance rule effective November 1, 2007.

In future installments on this blog, I will continue this discussion on key changes in the Medicaid rules effecting all middle class seniors.

 

Rose’s Story

In November, 2007, Rose makes an appointment to update her estate planning with attorney Tammy Trustworthy. Rose fills out the attorney’s questionnaire showing Rose rents a condo, has liquid investments of $200,000 as a result of selling her home. Rose relates to Tammy how much she enjoys sharing with her family, church and charity. Rose likes to say that it is “Nice to receive flowers when you can smell them.” Tammy asks Rose about her estate and gifting intentions.

Rose lists the following:

In December 2007 Rose plans to follow her usual habit of making a $5,000 annual gift to her church building fund to help repair some of the hurricane damage not covered by insurance.

Rose plans to give her oldest grandchild $20,000 to help her through graduate school and $20,000 to her daughter to help her purchase a modest condo.

She wants to start a college fund with $10,000 to each of her remaining 6 grandchildren

Rose gives Hospice $500 each year on the anniversary of her husband’s death.

Rose gives each of her 3 adult children and 7 grandchildren $1000 for birthdays, at Christmas, and Easter.

It doesn’t bother Rose to make those gifts because she feels good for her age and has been paying for her three year long term care insurance policy paying $100 per day that she purchased several years ago.

Tammy tells Rose about gift tax and filing returns when gifts to an individual exceed $12,000 per year.

Tammy recommends Section 529 plans to provide funds for grandchild education in the most tax-friendly way. Tammy updates Rose’s will, power of attorney, living will and health care power of attorney.

In May 2008 Rose has a stroke and ends up in a nursing home. After three years in the nursing home Rose is out of money and long term care insurance coverage.

In May 2011 Rose applies for Medicaid to pay the difference between her retirement income and the cost of her care. Rose’s Medicaid application is denied because of the asset transfers (gifts) she made to church, charity and family over 4 years in the past.

Her gifts totaling $112,500 made from December 2007 through April 2008 will disqualify Rose from Medicaid for 21.7 months starting May 2011.

Next installment will start a discussion of how attorney Trustworthy might have handled Rose’s case.