George has started to notice that Betty has some serious lapses of memory.  She always brushes these off with a laugh “Oh, there I go again! Forgetful Betty!”  Some of these are nothing at all like forgetting where she put her purse.  Others are troubling.  When down in Florida every now and then she could not find their condo. Other times she would go right to it.  Lately it seemed that whenever she would go to the store she always came back with bread, even though she just bought it two days ago. He looked in the cupboards and noticed that they had multiple cans of tuna and green beans and then noticed that every time she came back from the store she brought tuna and green beans too.  Then there is her cooking.  Betty always prided herself on being a good cook but lately she has been having problems.  It seems that she does not handle the more complicated processes. She doesn’t do her complicated recipes much and makes simpler meals.  Yet she still might forget a step.  It might be forgetting the vegetables or forgetting to saute the meat.  This is not the normal Betty.

George began reading on Alzheimer’s disease and learned that a person has it for years before it gets so bad it can be officially diagnosed.  He is afraid Betty is in the very early stages of Alzheimer’s and that before 10 years she will be in a nursing home.

George began looking into long term care insurance. He found, just as he feared, that at their age it was prohibitively expensive.   Was there anything he could do to afford the cost of caring for her?  Anything to “insure” their home and savings from total depletion?  The answer is “yes” but let’s look at the problem a bit further.

Currently the state average cost of a nursing home in Michigan is just over $7,000 a month. It has been increasing at the rate of about 4% per year for the past 10 years. For example in 2002 the average cost was $4,700 a month.  That means in 10 years George could expect the monthly cost to be over $10,000 per month.

Could George consider long term care insurance?  We might use the federal employees plan as a point of comparison.   Let’s consider a plan that pays most, but not all of the cost for three years – $200 per day.   For a 75 year old applicant a policy with a 4% inflation rider, would cost $5,660.88 per year. Let’s double that for two.  That would make it $11,321.76 per year.  After 10 years that would be $113,217.60.  That could still be a good investment, if they could get it. Reports say that about 44% of applicants between ages 70 and 79 are denied.  Of the two of them Betty may not be able to get it.

If Betty cannot get long term care insurance, then are there any other options?  Yes.  They can consider five year Medicaid planning. It acts as insurance against loss of life-savings by accessing the Medicaid program to pay for long term care.  For the cost of less than one year insurance bill they can shelter their assets in the contemplation that Betty likely will need a nursing home.  To do that they will have to execute an estate plan that transfers assets to George who then sets aside a substantial portion of their savings in an irrevocable trust.

There are many questions to be answered when contemplating five year Medicaid pre-planning.  I will here offer a very brief overview.  I have covered the subject in more depth in other articles.

One of the first questions to be answered is “How great is the risk of long term care?” If a person has serious heart disease and related conditions Alzheimer’s Disease may not be a terminal condition to plan for.

What is your long term care plan?  Will you rely on family members or commercial providers?  A person rich in human resources will not need to save funds for commercial providers and has an incentive to be sure the wealth stays in the family.

How does Medicaid fit into your plan?  If it only provides payment for the nursing home, are you willing to give away assets to gain that?  If you are adamant about avoiding the nursing home, then Medicaid may be of little benefit to you and you should plan on  self pay for your care.

Do you have enough to ‘give away’ and still provide for yourself?  Commercial dementia care is expensive.  Even adult day programs can cost hundreds of dollars a week.  The cost of assisted living for dementia care can range from $3,000 to $6,000 per month.

Who is the ideal candidate for five year Medicaid pre-planning?  A person who is already in an assisted living / long term care facility that provides a continuum of care with Medicaid being part of the service plan.  With that information you can then plot a care continuum and budget for the expenses.  If you find you have enough to cover at least five years of progress of the disease then the remainder of the wealth is suitable for asset sheltering.

In closing we can see that George and Betty may or may not be interested in five year Medicaid pre-planning.  They would have to consult with an elder law attorney and review all options. Then they would have a clearer idea of what course of action to take.

When I write on Medicaid I always point out that a wife has the right to save all property and money if her husband is in long term care in a nursing home.   Today’s case shows that while that is her right she can give it away through bad decisions. Note that this case involves a wife but it could just as well be a son or daughter.
The Plybon case comes with two morals:
1.    Medicaid Application – do it yourself and your bank account is at risk.
2.    Get sued. Ignore it and it will only get worse.

As usual when things go wrong,  mistake piles on top of mistake. Here is how it started. Mr. Plybon entered a Kentucky nursing home by the name of Woodland in December 2009.  Mrs. Plybon signed the admission agreement which said she was the “responsible party” and that she agreed to apply for Medicaid.  Four months later in April 2010 she applied for Medicaid for him.  It was denied – date unknown – because she did not submit all the paperwork they wanted.   That does not mean he was not financially eligible, it means she did not get proof into their office quick enough.

Her husband was discharged from Woodland in September 2010. They had not been paid.  The nursing home sued them in December 2010.  She defaulted, which means she did not hire a lawyer to defend the suit.  She effectively ignored it.  Woodland got a judgment in $47,692.02 February 2011 and then she filed for bankruptcy in March 2011.  The court denied her bankruptcy discharge of the $47,000 debt.

This case should not have turned out that way.  Here are a number of things she could have done differently.
1.    Hire an elder law attorney to do the Medicaid application. I had to get the obvious out of the way.
2.    Ask the nursing home for help with the Medicaid application. Under federal regulations they must assist in applying for benefits if asked. At least she would not spend more than she had. Remember bankruptcy means you owe more than you have.
3.    Appeal and re-file the Medicaid application on denial.
4.    Hire an elder law attorney to complete 3.  Most of the time appeals of paperwork denials can be won or the re-application corrects the mistake, IF it is handled properly.
5.    When sued, hire an attorney and defend on the basis that
a.  she was misinformed of what the contract was about and that her signing it was not voluntary;
b.  she had no duty to guarantee payment by Medicaid;
c.  the nursing home had the duty to assist her;
d.  that as “responsible party” she should not be personally responsible for the debt since “third party guarantees” illegal;
e.  that the nursing home had the duty to mitigate damages and, at least, assist in the application.

She did not have to make all these mistakes.  Remember the old rule: if you do it yourself and make a mistake – it is your mistake.  Hire an attorney and he makes a mistake – it is his mistake.   Medicaid is a process in which mistakes are very, very expensive. Don’t do it yourself.  Get help – there won’t be mistakes and if there are, the mistakes are not yours!

Patients can disenroll from their Medicare Advantage plan and enroll in traditional Medicare or another Advantage plan that has open enrollment for “institutionalized individuals.”  That way patients can get their post-hospital rehab in the nursing facility near their home.  After the institutionalization ends the person has 60 days to return to their original Advantage plan or enroll in another Medicare Advantage plan if they wish, provided the plans have open enrollment for “institutionalized individuals.”

Here are the necessary details.

A person who qualifies as a an “institutionalized individual” can enroll in Medicare during any month. Their enrollment is effective the next month.   This eligibility is what Medicare calls “Open Enrollment Period for Institutionalized Individuals” which is abbreviated as OEPI.

The OEPI ends two months after the month the individual moves out of the institution.

Here is the word straight from the source – the CMS Medicare Managed Care Manual Item 30.3:
“The OEPI is continuous for eligible individuals. For purposes of enrollment under the
OEPI election period, an institutionalized individual is defined as an individual who
moves into, resides in, or moves out of an institution, as defined in §10. The OEPI ends
two months after the month the individual moves out of the institution.

An MA (Medicare) eligible institutionalized individual can make an unlimited number of MA enrollment requests during the OEPI. An MA organization is not required to accept
requests to enroll into its plan during the OEPI, but if it is open for these enrollment
requests, it must accept all OEPI requests to enroll into the plan.

Since the OEPI is continuous for eligible individuals, Original Medicare is also open
continuously. Therefore, MA organizations must accept requests for disenrollment from
their MA plans during the OEPI whether or not the MA plan is open to accept
enrollment.”

Thanks to our friends at Center for Medicare Advocacy we have a quick definition of what an “institutionalized individual”is.  (Ever try to cut through those Medicare regulations?  Complex!)  That is a person who is in a long-term care facility (skilled nursing facility), an intermediate care facility for the mentally retarded (ICF-MR), a psychiatric, a rehabilitation hospital or unit, or a long term care hospital, or a “swing-bed” hospital.

So a person may disenroll from their Medicare Advantage plan and enroll in traditional Medicare or another Medicare Advantage plan that allows OEPI enrollment.  Here are the points:
1.    Must be an institutionalized individual to trigger the open enrollment period -OEPI
2.    OEPI open enrollment continues as long as they are in an institution and ends two months after the person is out.
3.    During OEPI the person can enroll in Medicare or any other plan that is open to institutionalized individuals.
4.    A Medicare Advantage plan has no choice but to allow disenrollment during the OEPI.
5.    If the original Medicare Advantage plan is not open to OEPI the person will need to continue with traditional Medicare, or find another Advantage Plan that is open to OEPI, until open enrollment period of the original plan.

We might compare two common Medicare Advantage plans around Detroit: HAP Senior Plus and Blue Care Network BCN Advantage.  HAP has a limited number of skilled nursing facilities – nursing homes – in its plan list.  A person can disenroll from HAP to receive the skilled care coverage from Medicare or another Advantage plan.  But since HAP Senior Plus does not have OEPI enrollment the person would have to wait for open enrollment period to return.   The BCN Advantage plan offers OEPI enrollment, but the person will need to know if a proposed skilled care center participates with BCN Advantage.  You can check with a skilled nursing home to see if they accept the plan you wish to use.   If all else fails you can always rely on traditional Medicare.

Final note: the above also applies to Medicare Part D prescription plans.  It does not come up as often but we can see that a person may need to change plans to better cover their prescription needs while they are in an institution.  Again, the plan must allow OEPI enrollment.

You can leave a Medicare Advantage plan and re-enroll in traditional Medicare effective the first day of the next month in one of three ways. You can:

• call the plan you wish to leave and ask for a disenrollment form; or
• call 1-800-MEDICARE (1-800-633-4227) to request that your disenrollment be processed over the phone; or
• call the Social Security Administration or visit your Social Security Office to file your disenrollment request;
• choose traditional Medicare or another Medicare Advantage plan that has OEPI;
• after the confinement/institutionalization ends decide and enroll within 60 days if you wish to leave Medicare or the chosen Medicare Advantage Plan and enroll in one that want and is open open to you.

All the best,

Jim

Hats off to reporter Robin Erb for an excellent, excellent job.

The link is http://www.freep.com/article/20111211/FEATURES08/111207034/Trust-neglect-Special-report-nursing-homes-Michigan?odyssey=tab|topnews|text|FRONTPAGE

Give me a call at 248-356-3500 if you want to know more,

Jim

As a lawyer in the geriatric field I see many questions relating to family feuds brought on by the conflicts arising out of caregiving and estate planning. At the core of the dynamic reside two conflicting propositions: 1) a parent wants to treat all children equally; 2) a caregiver who is available 24 hours around the clock for years should receive some recognition, especially when the “burden” is not shared by other children.  The typical estate plan is represented by a Will, which usually provides all children inherit equally.

When we add Medicaid planning to the mix things get explosive. It approaches “estate planning” from a different direction.  The goal is to save money and property to the applicant and family.  It is “asset protection.”   In theory the estate plan would distribute the money saved, but it doesn’t always work out that way.

Here’s the hypothetical:
Mom has advanced Alzheimer’s disease.  Dad was her caregiver and he has now died.  Mom cannot live in the house alone. The three children investigate in-home, 24 hour care and find it cost prohibitive.  They find a “dementia care” assisted living that will charge $4,500 per month.  They decide mom will live with oldest daughter.  It is clear to everybody that oldest daughter is providing a financially valuable service and that mom will likely need a nursing home down the road. Mom will ultimately need Medicaid to pay the bill.

One year later Mom’s savings is down $50,000. What is going on?  Is it financial elder abuse? Is what Medicaid will call “divestment of assets”?   Here are some situations  that, if they consulted an experienced elder law attorney, would not be either.
1.    Mom can pay daughter the fair market value of rent and services the same as if she were living in a commercial assisted living facility.  The need would be documented, the payments would be made according to a full lease identifying all services provided.  Daughter would show the payments as income on her tax return as rental income.
2.    Some of the funds may be used for necessary “improvements” so that mom could safely live on the premises.
3.    Mom could pay to become a joint owner of the property and would be responsible for her share of maintenance. If the home has a mortgage then that would have to be addressed at the outset.
4.    Mom could enter into a caregiver contract with daughter and family and pay for services received at a commercial rate.  The contract would have to meet Medicaid requirements.

The money saved when mom enters the nursing home and Medicaid begins to pay will be distributed by her “estate plan.”  If we look at each of the options we will question how much has been saved for estate planning purposes.  For example, how much value does the daughter receive for improvements to her home?  Suppose they put in $15,000 and the increase in value of the home is $5,000.  How much has daughter received?  How should the savings be distributed?  Should it be by equal distribution to all?  Should the caregiver daughter receive financial recognition for the commercially valuable service she performed?

Unless these issues are agreed at the outset by the entire family we can predict that a family feud will end up in probate court with all the savings going to lawyers fees.

The standard advice that we receive from investment professionals is to keep funds in an IRA as long as possible.  That way the money you would have sent to Uncle Sam in taxes you can invest tax free for more growth.

Here’s another scenario:  suppose you believe that your stocks and mutual funds will grow once the recession is over.  Suppose further you think they will double in value in, say, 5 to 10 years.   In your IRA every dollar of that gain will be taxable as income when you, or your beneficiaries after your death, take it out.   But, if you take investments out now, and pay the tax on it now, and keep the fund invested in those same stocks and mutual funds then your gain – that doubling – will be taxed as capital gain.  In other words you will have the Warren Buffet tax on your gain of 15%.

Here’s a related thought.  If you are feeling particularly mortal then when you die those investments will pass to your beneficiaries without any tax at all – they receive the step-up in basis under current tax law.

Disclaimer: I am not a tax attorney or investment professional.

So there it is.  Talk to your investment advisor and/or your tax attorney and ask should you take stocks and mutual funds out of your IRA during a recession?

Will you lose an exemption if you do not respond to the letter and complete a Hardship Waiver Request?  The answer is not clear, but there is an argument that answers “no.”

First let me observe that this Michigan estate recovery process is new and untested in the courts.  My review of Michigan’s Estate Recovery statute, MCL 400.112g, is based on a plain reading of the statute and my comments based on the general principles of probate law.  This blog is not legal advice or an in-depth review of all legal authorities.  If you are faced with such a letter from the state’s agent HMS do get legal advice.

The first thing to know about Michigan’s Medicaid Estate Recovery program is that Michigan’s claim may only be presented to the personal representative of a decedent’s probate estate.  That means there has to be an open file in the probate court and an estate personal representative appointed.  It may not be presented to family members unless they have opened a probate estate and if one of them is the personal representative. If there is an ongoing probate estate, the personal representative must give notice to the state who then has limited period of time to present its claim.  The letter is not a claim in probate.  Under probate law the personal representative may approve or deny a claim in whole or part.   The personal representative may rely upon the Estate Recovery statute to determine whether to accept a claim.  So the question comes up,  cannot the personal representative deny the claim on the hardship exemptions allowed in the Michigan Estate Recovery Act?  These are:
(1) An exemption a portion of the value of homestead.  This is the amount that is equal to or less than 50% of the average price of a home in the county.
(2) An exemption for the portion of an estate that is the primary income-producing asset of survivors, including farms and businesses.
The letter and Michigan Estate Recovery Questionnaire do not inform recipients of these exemptions!  How would anybody know to ask for them?  It only makes sense that the personal representative may deny a claim based on these statutory exemptions.

The letter conflicts with Michigan Medicaid policy.  In Department of Human Services Policy Item BEM 400 it recognizes that an estate includes property that pass through probate and it states “the state may decide not to recover” if it creates an undue hardship. That only means the state may elect to not pursue recovery.  It does not mean that the Department or HMS determines if there is hardship.  The Michigan estate recovery law is clear that hardship must be found where the statutory criteria are met. It says the state “shall develop a definition of hardship”  that includes (1) and (2) above.  In other words the state department does not have the power to decide whether or not a family would face hardship.

I might briefly note that the Department correctly followed the statutory mandate in defining hardship in policy item BEM 400.  Its categories of hardship include cases where:
• The estate is the sole source of income for the survivors, such as a family farm or business; or
• The estate is a home of modest value; or
• A survivor would become or remain eligible for Medicaid if recovery occurred.

It is clear that it is not the state that determines whether hardship exists.

Over and above hardship exemptions the personal representative would inform the state, or HMS, that it is prohibited from recovery from the home where any of the following people live:
(a) The medical assistance recipient’s spouse.

(b) The recipient’s child who is under the age of 21 years, or is blind or permanently and totally disabled.

(c) The recipient’s caretaker relative who for two years lived in the Medicaid recipient’s home and provided care that permitted the medical assistance recipient to reside at home rather than a nursing home.

(d) The medical assistance recipient’s sibling who co-owns the home and who was residing in the home for at least one year before the Medicaid recipient began long term care.

Finally there is a question about the whole procedure behind the letter.  The Michigan Estate Recovery act required the Department to inform the applicant of possible estate recovery. The statute says:
“(7) The department of community health shall provide written information to individuals seeking medicaid eligibility for long-term care services describing the provisions of the Michigan medicaid estate recovery program”
If the applicant was never informed, then the state may have no claim at all, not even in probate.

Michigan Medicaid estate recovery is an evolving situation.  If you are contacted by the state or its agent(s) get legal advice immediately.    And as a final comment, we see we have yet another strong reason to avoid probate.

Be well, friends.

The Michigan policy went into effect July 1, 2011. It provides for recovery against assets going through probate only.  If assets avoid probate, they avoid estate recovery.  Michigan’s estate recovery claim will only be presented in a probate estate of any person over age 55 who received long term care services after September 30, 2007.  The services include  nursing facility care, MI Choice waiver, Home Health and Home Help.   The state may grant a hardship waiver if a qualified person lives in the home.  These include a spouse, a minor, blind or disabled child, and a caregiver who lived in the home for two years and kept the applicant out of a nursing home.

When a probate estate is opened the personal representative must send out a notice to creditors.  The state of Michigan is a creditor.  When the state is notified of the probate estate it will send a notice that it will file a claim unless a hardship waivers is applied for within 60 days.  The policy stops there.  It does not cover the estate recovery law or the probate process.

The 2007 Michigan Medicaid Estate recovery law provides that a personal representative may reject the claim if the Medicaid beneficiary’s homestead that is equal to or less than 50% of the average value of a home in the county in which the homestead is located..  The state’s claim may not be applied to primary income producing assets of survivors, including family farms and businesses.  The personal representative need only pay the claim out of money left after expenses of administration, funeral costs and the homestead, family and exempt property allowances.  Probate will be more complicated now that the state of Michigan will be looking over every transaction and every asset.

The Michigan Medicaid estate recovery law is found at MCL 400.112g.  The policy is found at BEM 400.

It is clear that anybody contemplating application for Medicaid see an experienced elder law.  There is now much more to lose than a life-savings, you could lose your home and everything.

Bill  404 2(c) allows the department of community health or an outside agent to demand accelerated settlements of estate recovery claims against the spouse or heirs of medical assistance recipients subject to estate recovery if the medical assistance recipient is unlikely to return to his or her home.

The bills do not exempt dependents who children under the age of 21 years, or blind or permanently and totally disabled from the government grab of property.

The bills would give the government a double dip against assets divested for less than fair market value before the recipient applied for benefits.  Those would have caused a penalty period during which Medicaid did not pay the bills, causing the nursing home resident to incur the bills.  The government would now claim against those same assets for which it refused to pay the nursing home bills.

The bills reduce the incentive to commence probate since the personal representative would mail a properly completed Michigan medicaid estate recovery program reporting form within 30 days of appointment.  The form would list all property for the government to come and get.  Bill 404 even proposes that people who would hold tangible personal property, e.g. furniture, to deliver it to the government department.

Property would languish with no incentive to maintain or pay taxes on it.

Advocates of seniors and outraged citizens should immediately contact their state representatives and senators and demand defeat of these Big Government proposals.

The bills may be found at http://www.legislature.mi.gov/%28S%28xdzcpkmugazrj1yh2plnzv45%29%29/mileg.aspx?page=getobject&objectname=2011-SB-0404

On June 1, 2011 The Michigan Department of Community Health announced in a policy proposal effective July 1, 2011, implementation of  Medicaid Estate Recovery. Medicaid beneficiaries who receive nursing facility care, MI Choice waiver services, home health, home help, and hospital or prescription drug services on or after July 1, 2010, and after will be subject to recovery upon their death or the death of a spouse.

I have a copy of the policy bulletin. Please call me at (248-356-3500 )or email (Jim@JimSchuster.com) if you want a copy.

You may submit your comment to the State of Michigan in writing to:
Eligibility Policy
Michigan Department of Community Health
Medical Services Administration
P.O. Box 30479
Lansing, Michigan 48909-7979
Or
E-mail: eligibilitypolicy@michigan.gov

This proposed policy means Michigan will finally start going after homes of nursing home residents. This is called estate recovery. First, a little background. In 2007 Michigan was the last state without a Medicaid estate recovery law.  That changed on September 30, 2007 when Governor Granholm signed the law passed by the legislature.  The law authorized the state to make a reimbursement claim in probate after a recipient died.  It could have been worse. During the summer of 2007, elder advocates, including yours truly, got the legislature to pass a limited estate recovery program.  It would only allow the claim in probate.  Avoid probate and avoid estate recovery.

Who is at risk to lose their home to the government?  Those who receive Medicaid after July 1, 2010.  What about those who received Medicaid after the law was passed but before the policy becomes effective?  It is not clear. At this time it appears the state is not going after those recipients.  We need to see what the state proposes to do.

As of right now the following points are clear.  Under the 2007 law the state will not make a claim if a spouse lives in the home. What about on the death of the spouse?  In general, homes that avoid probate avoid the state’s grab. What if the spouse sells the home? Again if the spouse’s estate goes through probate then any asset, including cash in bank accounts  will be subject to the claim.  There are other exemptions and exceptions.  Give us a call if you need immediate assistance and “stay tuned” for further developments.