Guest Blog Post By David A. Cutner, Esq.
Last January, New York Governor Andrew Cuomo appointed a Medicaid Redesign Team and tasked it with reversing a decades-long crisis of overspending and waste in our Medicaid system. The Redesign Team made a variety of proposals, a couple of which would have been devastating to the elderly and their spouses, and to disabled children and their parents.
Fortunately, two of the most problematical proposals were not included in the State budget that was approved on March 30th, but there are some changes in the law that are significant for Medicaid planning.
Probably the most controversial proposal from the Redesign Team was to use the 5-year penalty period in connection with applications for community-based benefits, including Medicaid home care. Since February 2006, as required by Federal law, New York has applied the 5-year look back to Medicaid nursing home applications, and has penalized uncompensated transfers.
The purpose of the 5-year look back is to determine whether the Medicaid applicant has transferred assets that could have been used to pay for care. The penalty calculation involves dividing the amount or value of the transferred assets by the monthly regional rate of nursing home care, yielding a period of time in months during which the applicant is ineligible to receive benefits. For example, a $100,000 transfer divided by the current New York City regional rate of $10,579 yields a 9.5 month Medicaid penalty.
While superficially it might seem logical to apply the look back and penalty to community-based Medicaid, any attempt to do so would be extremely difficult to implement, and very detrimental to patient care in many cases. This is because home care patients have widely-varying needs, and Medicaid does not cover any living expenses. Happily, the Redesign Team’s proposal was omitted from the budget.
Many people are unaware that, in New York, there is no look back or penalty for transferring assets when applying for Medicaid home care. This remains the law.
The other highly controversial proposal from the Redesign Team was the elimination of spousal refusal and parental refusal. By eliminating spousal refusal, many applicants would have been ineligible for Medicaid benefits until the couple had spent down virtually all of their savings (including the individual assets of the well spouse) and had contributed a substantial share of both spouses income. Similarly, parents would have been required to spend down all of their savings before their disabled child became eligible for benefits.
Fortunately, this proposal was not accepted either. Spouses and parents need not be forced into poverty in order to secure care for their loved ones. (However, they remain subject to claims by Medicaid for contribution if their resources or income exceed certain limits).
One of the Redesign Team’s proposals that was enacted is a revised and expanded definition of an individual’s estate for Medicaid purposes. The expanded definition is obviously aimed at giving Medicaid the ability to recover greater amounts from the estates of Medicaid recipients. The expanded definition includes interests that have traditionally never been a part of the probate estate of a deceased person. These include retained life estates, jointly held property, and interests in trusts.
The expanded definition is problematical in certain respects, and at odds with legal precedent. For example, a life estate is extinguished upon death, and the holder of the remainder interest automatically becomes the 100% owner. Similarly, if property is jointly owned with right of survivorship, the survivor automatically becomes the 100% owner. It will be interesting to see how the courts decide Medicaid’s estate recovery claims when they collide with these long-established rules.
Until the courts provide clarity regarding the application of Medicaid’s expanded definition of estate, Elder Law practitioners will want to carefully consider their use and choice of trusts in Medicaid planning. While grantor, income only, trusts have been extensively used in the past, it may be prudent to consider substituting a family trust where the grantor retains no rights in the trust whatsoever.
Budgetary constraints at the Federal and State levels are going to put continuing pressures on Medicaid benefits, making it increasingly important for seniors and their families to seek advice from an Elder Law attorney and plan ahead. Understand the costs for senior care and plan for your care before you need it.
Contributed by New York Elder Law Attorney, David A. Cutner. www.lamson-cutner.com
Remember, Medicaid rules and benefits change by state. Learn about your particular state services.
