Wednesday, December 13, 2017

Beginning to Understand Medicaid

Recently we began to address Medicaid eligibility and whether Medicaid is appropriate for a client’s circumstances. We choose to start our discussion of Medicaid from that perspective because the rules that govern Medicaid do not lend themselves to a simple explanation blog and frequently clients realize that coverage under Medicaid is inappropriate to their circumstance and therefore we do not explore the details of qualifying for benefits. For those for whom Medicaid coverage may be important this blog expands on Medicaid and discusses some of the rules that govern eligibility.

When discussing the complexity of qualifying for Medicaid benefits it is helpful to start with a clear definition. Medicaid is a government program implemented to ensure that essential healthcare services are available to those whose income and resources are insufficient to address the costs of the services. Medicaid is funded with a combination of Federal and State funds and subject to Federal Law and Regulation, but administered by the States according to Rules that vary from State to State. The collected rules governing Medicaid have generously been referred to as “convoluted and often incomprehensible” by institutions including a Federal Appellate Court. This complexity includes thousands of pages across multiple documents including legislation, regulations, rules, and policies. Much, but not all of, this complexity can be boiled down into three primary requirements:
  1. A Medical/Functional Eligibility Test,
  2. An Asset Test, and
  3. An Income Test.
The first criterion for qualifying for benefits under Medicaid requires the applicant to demonstrate a medical/functional eligibility. Medicaid determines medical/functional eligibility through a seven factor test and an applicant requiring assistance with any of the seven factors meets the eligibility criteria. Most Medicaid applicants satisfy this test because they require substantial assistance with daily functions including eating, toileting, bathing, dressing, and/or ambulating. While these are the most common factors, an applicant may also qualify for Medicaid because they require assistance due to memory issues, have conditions requiring substantial physician interaction, have complex daily medical treatments, or have mental health conditions.
After an applicant meets the medical/functional eligibility for Medicaid they are then subject to an Asset Test. The Asset Test is the aspect of Medicaid most individuals believe they understand and also the aspect subject to the most misconceptions. A simple summary of the Asset Test is that an unmarried applicant may have no more than $2,000 in countable assets in order to qualify for Medicaid. Since Medicaid is not simple it is important to understand the term "countable assets" exists because Medicaid exempts certain property when determining an applicant’s assets. These exemptions include the applicant's home, one vehicle, assorted household goods and personal items, certain life insurance policies, some funeral plans and expenses, and a small number of other assorted assets. An important note, while the value of these assets is not counted when determining whether an applicant meets the Asset Test, any of these assets which pass through the Probate process following the applicant's death may be claimed at by the state as part of the "estate recovery" process, which is designed to help the states for cover part of the costs of Medicaid care provided.
The application process is further complicated for a married couple, when only one spouse requires Medicaid coverage. The rules regarding asset ownership vary from state to state and therefore it is important to understand the rules in your state. In Michigan, during an initial application, the assets of both spouses are deemed to be assets of the applicant. This means that the non-applicant spouse, or Community Spouse, will likely need to “spend down” a portion of their assets in order for the applicant to qualify for Medicaid. The rules for this spend down are as complex as any other portion of Medicaid, but in short the Community Spouse is allowed to protect one half of the countable assets, but not more than $120,900 (in 2017), unless a different amount is determined pursuant to a court order.
After successfully passing these first two tests, the Income Test is likely much less daunting as it only requires that an applicant's monthly income be no greater than their monthly medical expenses. Unlike with the Asset Test, the Income Test only includes the applicant’s income when considering eligibility. Income of a Community Spouse is not counted, nor is the Community Spouse required to contribute his or her own separate income towards the cost of the applicants nursing home care. Additionally in certain circumstances the Community Spouse is granted a portion of the applicant’s income in order to assist the community spouse in maintaining assets such as the home. While this test may appear inconsequential it is important for potential Medicaid applicants to be aware of, so they do not take steps to meet the Asset Test only to learn they are ineligible because they have too much income.
Navigating all of the rules and regulations that govern Medicaid eligibility can be extremely time-consuming and there are many potential pitfalls which can result in a denial of benefits. The most common issue that causes problems with an application is when an applicant engages in a transaction that Medicaid deems to be a Divestment. A Divestment is defined as any transaction that takes place for less than fair market value in order to assist in qualifying for benefits. This includes the obvious example of giving away assets in order to meet the Asset Test, but also less obvious pitfalls including paying loved ones for assistance prior to applying for Medicaid. When an applicant engages in a prohibited transaction, Medicaid assesses a penalty, making the applicant ineligible to receive coverage despite otherwise qualifying for Medicaid. While it may appear obvious what transactions will be deemed divestments it is again critical to know that each state treats the issue of divestment differently and understanding the rules of your state is essential to avoiding the creation of a substantial problem.
As you can see, even when summarized, the rules for Medicaid eligibility are complex. Before taking any action related to Medicaid we strongly encourage our readers to consult with specialists with substantial experience in the field in order to minimize the chances of making an error that causes significant issues.

Matt and Al

Monday, December 11, 2017

The Question of Medicaid Planning

To expand upon our previous post on Gifting, today we are addressing Medicaid. Often questions regarding gifts are tangential to questions about qualifying for Medicaid. Taking time to educate clients on the benefits, and limits, of Medicaid is the first step to deciding if Medicaid is appropriate for a client's circumstances.

With the rising cost of healthcare, especially as it applies to long-term care for elderly individuals, our clients often inquire about Medicaid and its rules and limitations. While Medicaid is the “best insurance money can’t buy,” qualifying for coverage under Medicaid comes with significant asset and income limits. In addition, the facilities which accept Medicaid as a payment over private pay options are many fewer, and may be of lesser quality. Still, a common concern for clients is that significant medical costs incurred in their later years may wipe out assets they worked for their entire lives, leaving them unable to pass on any inheritance to loved ones. Questions initiated by the client, and sometimes by children worried about an inheritance, often center around protecting assets or about giving money away during lifetime.
It is important to clarify that qualifying for Medicaid is not about keeping the government from taking a person’s money, but reaching specific limits of assets before Medicaid coverage is available. In addition it is important for clients to understand that all health care is not the same and there are significant differences between providers. This is the point in most conversations about Medicaid where we discuss the differences between private-pay facilities and facilities funded primarily by Medicaid. We remind our clients that while a private-pay facility generally has a higher cost, the quality of life in those facilities tends to be markedly better. Whether because the facilities have more staff per patient, better amenities, or even simply nicer rooms, a private-pay facility is going to provide generally better care.
This conversation provides us with a gateway to remind people that the funds they will potentially spend on their care are the funds they worked hard to earn during their life. This leads to more in depth discussions about what is motivating inquiries about Medicaid and what is more important to the client, the quality of their care or passing more wealth on to their loved ones. It also provides us with the opportunity to discuss whether the client has reason to believe that they will need the types of long-term healthcare that Medicaid covers. This is because many people believe that Medicaid is an advanced version of Medicare and covers more costs than it actually covers. Often people begin asking questions about Medicaid long before they actually have need for such care and when they may never have healthcare need that Medicaid would cover.
Medicaid planning is a complex area of law with many potential benefits, but it is not something that everyone should be doing. There are a number of things that can be done to prepare a client for a potential Medicaid need, but it is first and foremost important to make sure that clients have the information they need to determine if Medicaid is appropriate to their circumstance. Even if Medicaid is appropriate, the rules that govern eligibility create many potential pitfalls for the unwary, it is important to avoid taking steps that could actually inhibit qualification for coverage in an effort to speed up coverage. As with so many things we discuss, the advice of an experienced attorney is invaluable.

Matt and Al