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Harry S. Margolis, Esq. Margolis & Bloom, LLP Boston, Dedham, Framingham & Woburn www.ElderLawAnswers.com. 2010 Medicaid Update CLTC May 26, 2010. State budgets under incredible pressure No comprehensive long-term care policy Mix of Medicare, Medicaid and long-term care insurance

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Harry s margolis esq margolis bloom llp boston dedham framingham woburn www elderlawanswers com

Harry S. Margolis, Esq.

Margolis & Bloom, LLP

Boston, Dedham, Framingham & Woburn


2010 Medicaid UpdateCLTCMay 26, 2010

The big picture

The Big Picture

Basic medicaid rules

  • Limited to $2,000 in “countable” assets

  • “Community” spouse limited to about $110,000

  • House not counted if spouse (or dependent child) is living in it or equity value is under $500,000 ($750,000 in some states)

  • But beware liens and estate recovery

  • Can't give away assets to get under the limits

Basic Medicaid Rules

Transfer rules

  • One month of ineligibility for every $8,120 transferred

    • Different in each state

  • Transfer of $81,000 causes 10 months of ineligibility ($81,000 / $8,120 = 10)

  • DRA changes

    • Penalty period begins when “otherwise eligible” for benefits – spent down to $2,000

    • Five-year lookback period

Transfer Rules



Transfer exceptions

  • To spouse 1, 2009

  • To disabled child

  • To trust for “sole benefit” of disabled individual under age 65

  • House

    • To “caretaker” child

    • To sibling with equity interest

Transfer Exceptions

Home equity

  • House worth $600,000 1, 2009

  • Options

    • Sell and spend down

    • Borrow $100,000 on the house

    • Argue that the valuation is wrong

    • Do deal with nursing home – in effect a loan

Home Equity

Annuities for community spouses

  • Mr. Gates moves to nursing home 1, 2009

  • Mrs. Gates remains at home

  • They have $310,000 in countable assets

  • Since Mrs. Gates can keep $110,000, they have $200,000 in excess assets

  • Mrs. Gates can pay this towards her husband's cost of care at $10,000 a month, or

Annuities for Community Spouses

Protecting the community spouse

  • Purchase an immediate annuity 1, 2009

    • Transforms excess resource to income stream

    • No limit on community spouse's income nor requirement of contribution

    • Annuity must be “actuarially sound”, and

    • Include repayment provision

    • Purchase short-term annuities

Protecting the Community Spouse

Big issues in post dra world

Big Issues in Post-DRA World

The new half a loaf

  • The old half-a-loaf 1, 2009

    • John moves to nursing home with $200,000 in savings

    • He gives half to his children, causing one year of ineligibility starting immediately

    • He uses the remaining $100,000 and his income to pay for his care for that year

  • Doesn't work post-DRA because penalty period won't begin until he uses up the remaining $100,000

The New “Half-a-Loaf”

The new half a loaf1

  • Gift and gift back 1, 2009

    • John gives entire $200,000 to children

    • They “cure” by paying for nursing home care, shortening penalty period with each payment

  • Gift and promissory note

    • John gives $100,000 and loans them $100,000 to be paid back over the year, so John can pay the nursing home

The New “Half-a-Loaf”

The new half a loaf2

  • Gift and annuity 1, 2009

    • Same as promissory note, except payments coming back come from annuity

    • Must be short term and “actuarially sound”

  • Different solutions in different states

    • None works in Massachusetts

The New “Half-a-Loaf”

Penalty period start date

Penalty Period Start Date

Penalty period start date1

  • Marino v. Velez 1, 2009(U.S. Dist. Ct., Dist. N.J., No. 10-911 (JAP), May 4, 2010).

    • Mrs. Marino transferred $192,000 in February 2009

    • Her children returned $89,000, shortening the penalty period

    • New Jersey says that penalty period would not begin until $89,000 was spent down in April 2010

    • Federal District Court agrees

Penalty Period Start Date

Personal care contracts

Personal Care Contracts

Promissory notes

Promissory Notes

Transfers intentions and hardship

  • No penalty is to be applied when 1, 2009

    • Purpose of transfer is exclusively other than to qualify for Medicaid benefits, or

    • Hardship would result

  • Very few successful claims

  • Successful cases are very fact specific

Transfers: Intentions and Hardship

Transfer exceptions1

  • Or not, 1, 2009

  • V.S. v. Division of Medical Assistance and Health Services(N.J. Super. Ct. App. Div., No. A-4735-08T2, April 22, 2010).

    • Son supports mother for years, including repairs to house

    • Mother executes promissory notes

    • Ultimately transfers house to son

    • Medicaid agency imposes transfer

Transfer Exceptions

Tough court

  • Court agrees with state agency: 1, 2009

  • "the Director's findings of fact are supported by the record . . . that the debt enumerated in the various promissory notes did not match the funds purportedly contributed and expended for V.S.'s support and comfort . . . [and] that the various renovations and upgrades could just as easily been expended to ready the house for sale at an advantageous price as to accommodate the home for V.S.'s disability."

Tough Court

Promissory note

  • Wesner v. Velez 1, 2009(D. N.J., No. 10-308 (JAP), April 19, 2010).

    • Applicant seeks injunction in support of authenticity of promissory note

    • Court refuses, stating that the circumstances of the note combined with the acknowledgement that the note was part of a Medicaid planning technique place the bona fides of the note in question.

Promissory Note

Penalty period begins on application

  • Matter of Baker v. Mahon 1, 2009(N.Y. App. Div. 2d. Dept., No. 2009-03242, April 13, 2010).

  • Mother in nursing home transferred $292,680 to son

  • Son paid $153,122 to nursing home

  • Then applied for Medicaid for mother

  • Medicaid agency determines that that's when 15-month penalty period begins because mother was not “otherwise eligible” until she applied for benefits

  • Court upholds state decision

Penalty Period Begins on Application

But not in new jersey

  • Frugard v. Velez 1, 2009(U.S. Dist. Ct., D. N.J., No. 08-5119 (GEB), April 8, 2010)

  • New Jersey residents transferred assets while in the community and were eligible for community based waiver services, but did not apply

  • Federal Court disagrees:

  • “Defendants' position is plainly an incorrect reading of the statute. Defendants ignore the language 'and would otherwise be' in the statute and incorrectly replace it with the word 'is,' to require the applicant to actually be receiving community-based waiver services before the penalty period can begin. This is an improper and incorrect reading of the plain language of the statute.”

But Not in New Jersey

Spousal annuity protected

  • J.P. v. Missouri State Family Support Div. 1, 2009 (Mo. Ct. App., No. WD 70994, April 20, 2010).

  • State rules that income from spouse's annuity is available to the nursing home resident

  • Court disagrees, finding that that under federal Medicaid law the community spouse's income is not deemed available to the institutionalized spouse and the requirement under the DRA that the state be named a primary beneficiary means only that the annuity could not pay out to another heir in the event of the community spouse's death

Spousal Annuity Protected

Georgia court permits non assigned annuity

  • Harbin v. Meadows 1, 2009(Ga. Sup. Ct., No. 2009-CV-0643-LA, Dec. 1, 2009)

  • 94-year-old woman pays $83,500 for actuarially-sound annuity

  • Georgia Medicaid agency demands that it be named the remainder beneficiary

  • Woman refuses and Georgia court agrees with her interpretation of the DRA

  • If finds that federal law requires it to be actuarially sound for its purchase not to be a transfer of assets; nothing else is required

Georgia Court Permits Non-Assigned Annuity

Lump sum life care contract disallowed

  • E.S. v. Division of Medical Assistance and Health Services 1, 2009(N.J. Super. Ct., App. Div., No. A-2564-08T2, March 26, 2010)

  • Life care contract between nursing home resident and daughter

  • Lump sum for the future provision of personal care services

  • Court determines mom did not receive fair market value because contract is non-assignable and non-enforceable

Lump Sum Life Care Contract Disallowed

Margolis bloom llp

  • Offices in Boston, Dedham, Framingham & Woburn 1, 2009

  • 617-267-9700

  • [email protected]

  • www.margolis.com

  • www.elderlawanswers.com

Margolis & Bloom, LLP