I. Long Term Care Medicaid in Florida

I. Long Term Care Medicaid in Florida After the Deficit Reduction Act of 2005

II. DRA 2005 • Legislative History • Major changes to eligibility for LTC • NAELA analysis of federal law is excellent • Florida implemented DRA effective 11/1/07 • Areas addressed by DRA • Look Back extended to 5 years for transfers before February 8, 2006 (federal) or 11/1/07 (state)

II. DRA 2005 • Purchase of an annuity is a transfer unless annuity meets certain criteria (irrevocable, non-assignable, payout of P & I over life expectancy) and State is named as primary beneficiary • If spouse, minor or disabled child then State must be in second position • Promissory notes, mortgages are transfers unless pay out in equal installments and prohibit cancellation at death • Purchase of life estate in a home is transfer unless buyer lives in home for at least one year after purchase

II. DRA 2005 • Equity in home exceeding $500,000 defeats long term care eligibility (States may raise to $750,000); individual may receive other types of Medicaid • Income first is mandatory before allowing an increase in the CSRA • Continuing Care Retirement Communities (CCRC) – deposit can be asset and CCRC can require spend down as condition for entrance

II. DRA 2005 • CMS issued guidelines on July 27, 2006 • Litigation is still pending in several venues

III. The Medicaid ProgramBackground • Federal/State program • Basic concept is “Coverage Group” • Generally means tested: limited income/assets • Poverty alone is NOT sufficient • Initial coverage groups: SSI & AFDC • Mandatory vs. Optional Groups

III. The Medicaid ProgramBackground • Eligibility Formula • (Coverage group) + (Financial Test) = Eligibility • For example • Pregnant Women + income less than 185% of PLIS = benefits • Institutionalized individual + financial criteria = long term care benefits

IV. The Medicaid ProgramMandatory Coverage Groups • Mandatory Coverage Groups • State must provide Medicaid to SSI Recipients w/ one major exception. • SSI is a means tested cash assistance program for the aged, blind and disabled with limited income and assets. • Income less than maximum Federal Benefit Rate • Assets limited to $2000 plus exempt assets • Exempt assets include home, car, burial.

IV. The Medicaid ProgramMandatory Coverage Groups • Exception to mandatory Medicaid coverage for SSI recipients • So called 209(b) states may use income, resource and disability standards no more restrictive than those in place on January 1, 1972 this altering the mandatory Medicaid – SSI equation • 209(b) States: Connecticut, Illinois, Hawaii, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma & Virginia

IV. The Medicaid ProgramMandatory Coverage Groups • Medicare Savings Groups • Qualified Medicare Beneficiaries (QMB) • Income at 100% FBR/ Assets $5,000/$6,000. • Pays Medicare premiums, deductibles coinsurance • Does not pay long term care, drugs, acute care • Specified Low Income Medicare Beneficiaries (SLMB) • Eligibility criteria same as QMB but income between 100%FBR and 120 % FBR • Pays only Medicare Part B premium • Qualified Disabled and Working Individuals (QDWI) • Disabled individuals who lose Medicare because return to work, but continue to be disabled • Income 200% of FBR/Assets below 200% of SSI rate

IV. The Medicaid ProgramMandatory Coverage Groups • Qualifying Individuals (QI-1) • Income between 120% and 135% of FBR • Pays monthly Medicare part B until allotment depleted.

V. Medicaid ProgramOptional Coverage Groups • Disabled elderly with incomes below 100% FBR • Nursing home residents • Medically Needy • Working disabled

VI. Medicaid ProgramWaivers • What is a Waiver? Permits deviation from Federal mandates • Three types of waivers • Home and Community Based Services (HCBS) • Freedom of choice Waiver • Pilot Project Waiver • See generally www.cms.gov/medicaid/waivers

VI. Medicaid ProgramWaivers • Florida Waivers • Channeling • Project Aids • Aged/Disabled Adult • Developmental Services (DS or DD Waiver) • Assisted Living • Long Term Care Community Diversion (Diversion) • Cystic Fibrosis • Program for all Inclusive Care for Elderly (PACE)

VII. Medicaid ProgramAdministrative Process • Applications • Online and paper • Designated Representative • Interview • Time limits • Documents required

VII. Medicaid ProgramAdministrative Process • Notice of Case Action • Triggers appeal rights • Should state basis for action taken • Hearings • Chapter 120 hearings before agency Hearing Officer • De Novo proceeding

VII. Medicaid ProgramAdministrative Process • Appeals • To applicable District Court of Appeal • Change of Circumstance • Report within 10 days • Responsibility of Designated Representative

VIII. Eligibility for Long Term Care • Categorical/Technical Criteria • Aged (65 or older), blind OR disabled • US citizen, legal alien etc. • Florida resident • Medical Criteria • Institutional residence for 30 continuous days • CARES evaluation of LOC

VIII. Eligibility for Long Term Care • Financial Criteria • Income • Applicant • Income Cap • QIT • Retroactive eligibility • Termination of QIT • Community Spouse

VIII. Eligibility for Long Term Care • Post Eligibility Treatment of Income • Personal Needs Allowance • Spousal Diversion • MMNA • Excess Shelter Costs

VIII. Eligibility for Long Term Care • Assets • Applicant can own countable assets totaling $2,000.00 • Community Spouse can own countable assets totaling $104,400 (2008) • Countable assets do NOT include exempt, unavailable or certain income producing assets

VIII. Eligibility for Long Term Care • Exempt Assets • Homestead up to $500,000 in equity – DRA • Be sure to distinguish from constitutional protection • Vehicles • Personal Property • Life Insurance • Burial Plan • Burial Fund • Life estates - DRA

VIII. Eligibility for Long Term Care • Lookback, Transfers & Penalty Periods • Lookback • Pre DRA • Post DRA • Transfer • Generally FMV of asset transferred • Presumption • Rebuttal • Hardship

VIII. Eligibility for Long Term Care • Penalty Period • Not a fine • Divisor • Example • Pre/Post DRA • Exempt Transfers • Transfers for value • For purposes other than Medicaid • Hardship • Life Estate

VIII. Eligibility for Long Term Care • Exempt Transfers • To a spouse or to a third party for sole benefit of spouse • To blind or disabled child or to a trust for the benefit of such child • To trust for benefit of disabled individual under age 65 • NOTE: Transfers of exempt assets are not automatically exempt transfers!

VIII. Eligibility for Long Term Care • Trusts assets generally considered available and income is counted as income in determining patient responsibility • Transfers to irrevocable trusts may trigger transfer penalty • Revocable living trusts DO NOT protect assets for eligibility purposes

VIII. Eligibility for Long Term Care • Exempt Trusts • Self Settled “d4A” trusts • Pooled trusts • QITs • Payback trusts

IX. Planning • General Concepts • Goal is to protect the elder, NOT the money • It is OK to use money for elder’s care – that is the point. • It is OK to pay the state back • It is NOT OK to let Medicaid tail wag the dog

IX. Planning • Spousal Impoverishment • MCCA • MMNA • Increasing CSRA • Income First Rule - DRA • Court ordered support • Right of refusal

IX. Planning • Spend Down • Best use of funds concept • Don’t spend for the sake of spending • Does not involve uncompensated transfers • Examples • Purchase or improve exempt assets • Prepay burial • Purchase Burial CD

IX. Planning • Transfer Issues – Post DRA • Typically between spouses or for benefit of disabled children • Beware adverse consequences such as loss of control, security and tax implications • Ethics • Transactional Capacity • Self dealing • Underlying document authorizing transfer • POA, Trust, etc.

IX. Planning • Disclosure • It is imperative to be totally candid and truthful in disclosing all income, assets and transfers during the application process • Failure to disclose is fraud and may subject the applicant or advisor to criminal and/or civil penalties • Benefits may be lost at much later date and benefit recovery instituted

IX. Planning • Tax Issues • Capital Gain • Donor vs donee • Loss of step-up in basis at death • Sale of home • Gift tax • Valuation

IX. Planning • Personal Care Contracts • Payment for services, not gift. • Must be arms length transaction • Cannot be for past services • Should be considered well before need for services in drafting legal documents • Consider using escrow agent for lump sum payments • Tax implications

IX. Planning • Process for implementing PSC • Assessment • Log • Appropriateness of services • Cost in community • Life expectancy • Discount • Calculate • Authority • Written agreement

X. Medicaid Estate Recovery • OBRA ’93 required estate recovery • Definition of “estate” up to states but must include at least probate estate • Expanded estate may include joint property, survivor property, life tenancies, etc. • Exempt categories of property • Home if decedent survived by spouse, minor, blind or disabled child or if sibling lived there for year

X. Medicaid Estate Recovery • Florida • Must notify ACHA upon death of individual 55 or older • State has claim as class three creditor in estate for benefits paid during life of decedent • Claim can only be filed after death and is currently limited to probate estate or if those assets insufficient, revocable trust assets • See generally 409.9101; 733.212(d); 733.707(1)c & 733.707(3) Fla. Stat. (2005)

XI. Special Needs Trusts • Concept simple and based on well thought out public policy. • General rule is that trusts are available and income is counted • Special Needs Trusts are exception to general rule • Revocable Trusts • Invisible to creditors and for public benefits

XI. Special Needs Trusts • Irrevocable Trusts subject to two inquiries: • Could any portion of the trust (income or assets) be used for the individual’s benefit? • Is any portion of the trust available to someone else? • Pre DRA look back was 60 months • This was major exception to three year rule generally applicable to transfers for less than fair market value • DRA does not distinguish between transfers to trusts or otherwise • Beware of trusts bearing annuities post DRA?

XI. Special Needs Trusts • Types of Special Needs Trusts • Third Party Trusts • Funded with assets that do not belong to disabled individual • May be inter vivos or testamentary • Not subject to payback requirement • First Party or Self Settled Trusts • Funded with disabled individual’s own assets

XI. Special Needs Trusts • Self Settled Trusts • “D4A” or “Disability Trusts” (42 USC 1396p(d)4(A) • Established by for benefit of disabled individual under age 65 • May only be established by parent, grandparent, court or guardian • Must be funded with assets of disabled individual • Must provide for payback to state for Medicaid benefits paid during life

XI. Special Needs Trusts • “Pooled Trusts” (42 USC 1396p(d4(C) • Established by non-profit • Maintain separate accounts for each beneficiary • Established for benefit of disabled individual • May be created by individual, parent, grandparent guardian or the Court • Individual’s funds used to create account • At death of beneficiary, any funds not retained must be used to pay the state back for Medicaid benefits paid over life

XI. Special Needs Trusts • Execution, Funding and Administration are critical to success of SNT • Examples of Supplemental Needs • ALF • Medical, dental, mental health • Care and Case management services • Travel • Companionship • Professional (Attorney, guardian, accountant)

XI. Special Needs Trust • Benefits of SNT • Preserve critical public benefits for medical care • Significantly increase quality of beneficiary’s life • May avoid guardianship • Trust assets are restricted but invested and less likely to be misused by beneficiary, family or friends

XI. Special Needs Trusts • Some issues to watch out for with SNTs • Beware of deeming rules when suit is settled for minor or spouse • Selection of Trustee is important • Administration requires specialized knowledge • Be wary of over structured settlement of lawsuit • May end up with insufficient funds to care for beneficiary • Liens must be satisfied before trust is funded • May take time to obtain these documents • Payback provision means assets frozen at beneficiary’s death • Stinking body rule • Be sure to notify applicable agencies of funding, death of beneficiary etc.

XI. Special Needs Trusts • Consider using Trust Protector, Trust Advisor and/or Trust Advisory Committee • Trust Protector may be able to hire and fire trustee, serve as mediator, distribution manager, obtain service providers, or any or all of these • Family often best suited for Trust Advisor • Trust Advisory Committee may be helpful for continuity if parent dies, but may be cumbersome and expensive

XII. Conclusion • Constantly changing statutory, regulatory and public policy environment • Stay in touch with organizations on cutting edge of interpretation and advocacy for the aging and disabled populations • NAELA • AFELA • Elder Law Section of Florida Bar

I. Long Term Care Medicaid in Florida