Monday, October 7, 2013

Policy Experts Agree: The U.S. System for Financing Long-Term Care is Crumbling

According to  "America’s system for financing long-term care is failing, and the window for creating a payment system that works is rapidly closing. That was the conclusion of a morning-long expert session sponsored last week by the SCAN Foundation.
While the participants differed on specific solutions, most agreed on four key issues:
  • The existing system for funding paid long-term supports and services is built on a wobbly three-legged stool: low private savings, an underfunded Medicaid program, and a hobbled private long-term care insurance market.
  • The solution must include an affordable way for Americans to prefund their long-term care costs. This could include tapping financial assets or home equity, or buying insurance (either government, private, or some combination of both). Low-income people would require some form of safety net protection.
  • Any future system should finance high-quality long-term supports and services that are well-integrated with medical care. This is especially important since recipients of care services suffer from chronic disease or injury that often requires complex medical interventions.
  • There is currently no political consensus on how to do any of this."

The "three-legged stool" analogy mentioned above ignores a forth option:  Asset Protection Planning.

If you do not have enough money to pay for long term care, and if you cannot afford or qualify for long term care insurance, then protecting the assets you do have from long term care expenses may be your best plan.

You can learn more about Asset Protection Planning at my website

Friday, July 12, 2013

Bankruptcy Trustee Is Entitled to Funds Transferred in Order to Qualify for Medicaid

The following article serves as a warning about do-it-yourself estate planning.  An effective technique of protecting assets from nursing homes and long term care expenses is to transfer those assets to an adult child. However, the assets can be lost to that child's own creditors.

I always recommend that my clients transfer assets to a trust instead of a child so that the money is protected from both the parent's and child's creditors.

The following article is courtesy of

A woman who transferred funds to her daughter to qualify for Medicaid cannot claim that she retained ownership of the funds when her daughter declares bankruptcy, according to a U.S. bankruptcy court. In Re Woodworth (Bankr. E.D. Va., No. 11-11051-BFK, Feb. 6, 2013).

In 2002, Dorothy Stutesman transferred $142,742 to her daughter, Holly Woodworth, so that she would not have assets in her name if she ever needed Medicaid. In April 2010, Ms. Woodworth transferred the money to a trust designed to protect the assets from creditors. The entire corpus of the trust was used to purchase an annuity to benefit Ms. Woodworth. In February 2011, Ms. Woodworth filed for bankruptcy.
The bankruptcy trustee sought to void the trust, arguing it was a fraudulent transfer under bankruptcy code. Ms. Woodworth did not dispute that the transfer was fraudulent, but she argued that the property was never part of her estate because she was holding it in trust for her mother.

The U.S. Bankruptcy Court for the Eastern District of Virginia enters judgment for the bankruptcy trustee, holding that Ms. Woodworth clearly had complete ownership of the funds. According to the court, "Ms. Stutesman can't have it both ways—she can't part with title for purposes of Medicaid eligibility, and at the same time claim that she retained an equitable title to the asset. To allow this kind of secret reservation of equitable title would be to sanction Medicaid fraud."

For the full text of this decision, click here.

Thursday, September 27, 2012

How Gifts Can Affect Medicaid Eligibility

We’ve all heard that it’s better to give than to receive, but if you think you might someday want to apply for Medicaid long-term care benefits, you need to be careful because giving away money or property can interfere with your eligibility.

Under federal Medicaid law, if you transfer certain assets within five years before applying for Medicaid, you will be ineligible for a period of time (called a transfer penalty), depending on how much money you transferred. Even small transfers can affect eligibility. While federal law allows individuals to gift up to $13,000 a year without having to pay a gift tax, Medicaid law still treats that gift as a transfer.

Any transfer that you make, however innocent, will come under scrutiny. For example, Medicaid does not have an exception for gifts to charities. If you give money to a charity, it could affect your Medicaid eligibility down the road. Similarly, gifts for holidays, weddings, birthdays, and graduations can all cause a transfer penalty. If you buy something for a friend or relative, this could also result in a transfer penalty.

Spending a lot of cash all at once or over time could prompt the state to request documentation showing how the money was spent. If you don't have documentation showing that you received fair market value in return for a transferred asset, you could be subject to a transfer penalty.

While most transfers are penalized, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:
  • your spouse
  • your child who is blind or permanently disabled
  • a trust for the sole benefit of anyone under age 65 who is permanently disabled
In addition, you may transfer your home to the following individuals (as well as to those listed above):
  • your child who is under age 21
  • your child who has lived in your home for at least two years prior to your moving to a nursing home and who provided you with care that allowed you to stay at home during that time
  • a sibling who already has an equity interest in the house and who lived there for at least a year before you moved to a nursing home
Before giving away assets or property, check with your elder law attorney to ensure that it won't affect your Medicaid eligibility. To find an attorney near you, click here.

For more information on Medicaid’s transfer rules, click here.

For more on the gift tax rules, click here.

Reprinted with the permission of ElderLawAnswers.

Thursday, September 20, 2012

Doctor Not Liable for Dementia Patient's Fatal Crash

A California jury has found that a doctor has no responsibility for a fatal car crash caused by an 85-year-old patient whom he had diagnosed with dementia but not reported to authorities.

Lorraine Sullivan was driving with her longtime partner William Powers, 90, when she suddenly turned left and into the path of an oncoming car.  Sullivan survived but Powers died of his injuries.  As reported in the Los Angeles Times, Powers’ family sued Sullivan’s doctor, Arthur Daigneault, for wrongful death, arguing that he should have taken steps to have Sullivan’s license revoked.

Doctors are generally not required to report patients they believe are unsafe, but California is one of a handful of states that has such a rule. California requires doctors to report to local health officials patients with "disorders characterized by lapses of consciousness," including dementia.  However, doctors may use their own clinical judgment about whether a patient is a danger on the road.

In 2007, Sullivan complained of memory loss to Dr. Daigneault.  After tests showed a slight decline in cognitive functioning over the following year, Dr. Daigneault prescribed an Alzheimer’s drug, and then switched her to a different drug when she said her memory loss was worsening.  Sullivan’s daughter testified that her mother, whom she saw weekly, successfully hid her dementia diagnosis from her. 

After deliberating for half an hour, an Orange County jury found that Dr. Daigneault did not violate standards of care or state law by not reporting Sullivan to authorities.

The Los Angeles Times notes that “the case casts a spotlight on a problem that will grow more common as the population ages and doctors see more dementia and other conditions related to old age, such as slowed reflexes, lack of alertness and diseases that can trigger lapses of consciousness.”  Drivers 80 and older are involved in 5.5 times as many fatal crashes per mile driven as middle-aged drivers, according to Consumer Reports.  Fifty-seven million drivers older than 65 are expected to be driving U.S. roads by 2030, nearly double the 2007 figure.

The potential risks of elderly drivers gained nationwide attention when a an 86-year-old man drove his car into a farmers market in Santa Monica, California, in July 2003, killing 10 people and injuring 63.  Three years later the driver, George Weller, was found guilty of 10 counts of vehicular manslaughter but was sentenced to five years' felony probation due to his advanced age.  Weller died in 2010.

For an article on confronting an unsafe driver, click here.

For a list of state licensing renewal provisions for older drivers, click here.

Reprinted with the permission of ElderLawAnswers.

Friday, September 14, 2012

Specialists Help Seniors Buy or Sell a Home

Seniors who are buying or selling a house often have very different issues than younger buyers and sellers. Seniors may be contemplating downsizing or moving to a more accessible home, or they may be looking for a way to age in place. A Seniors Real Estate Specialist (SRES) can help senior sellers, buyers, or renters navigate these issues.

SRESs are realtors who have completed a series of courses on how to help seniors and their families with real estate transactions. They specialize in helping people age 50 and older, and they can be used for selling, buying, or renting. An SRES can help seniors look at all the options available, from staying in their home to buying a new home to moving to an assisted living facility.

The first thing to consider is whether you need to sell or whether there might be alternatives that would allow you to remain in the home. If a sale is necessary, then an SRES can help guide you through the process.

Seniors who are selling their homes may need help de-cluttering and staging their houses for sale. SRESs also are familiar with the senior housing options in an area and can help you buy a home. For example, if you are purchasing a home later in life, you may want to make sure you have a property that has a good market value and can be easily sold by your heirs.

Other things to keep in mind when buying a home are transportation access, too many stairs, and a friendly neighborhood.

For more information about SRESs or to find one near you, click here.

Reprinted with the permission of ElderLawAnswers.

Thursday, September 6, 2012

The Other Senior Health Care Program: Romney/Ryan's Vision for Medicaid

How Republican Mitt Romney’s vice presidential pick would change Medicare has been getting a lot of attention, but Rep. Paul Ryan’s (R-WI) proposed cuts to the Medicaid program, which Mr. Romney and the Republican party have now adopted, are bigger and arguably more drastic.

Although most Medicaid recipients are poor children and their families, the program also covers the cost of nursing home and other long-term care for more than 4.4 million Americans, most of them elderly.  In addition, Medicaid helps millions of low-income seniors afford Medicare.

As with his Medicare proposal, Ryan’s plan for changing Medicaid, which has twice passed the Republican-led House, is all about shifting costs away from the federal government and onto others.  Whereas with Medicare Ryan would limit the federal government’s exposure and shift additional costs to seniors, in the case of Medicaid Ryan would shift the risk to the states and ultimately to beneficiaries, including seniors.  But, unlike with Medicare, the change would start right away.

The proposal would turn federal Medicaid funding to states into a "block grant," something proposed by George W. Bush in 2003 and by Newt Gingrich in 1995. Rather than the current system, under which the federal government matches every dollar that states spend on Medicaid, under the Ryan plan starting next year states would receive a fixed amount every year, which would only increase with population growth and the overall cost of living.  The grants would be indexed to grow much more slowly than health care costs and would not take account of economic downturns or natural disasters like Hurricane Katrina, when Medicaid rolls temporarily expand.

The result, according to an analysis by the non-partisan Congressional Budget Office, is that by 2022 federal funding for Medicaid would fall 35 percent below what the government now is projected to provide states, and the shortfall would be 49 percent by 2030.

States are hardly likely to make up for this dramatic funding loss by boosting their own Medicaid spending.  Instead, they will find ways to cut people, including some applicants for long-term care coverage, from Medicaid eligibility.  How many people? According to an Urban Institute analysis, between 14 million and 27 million fewer Americans would be covered by Medicaid in 2021 than under the current system.

Not only would millions more citizens be uninsured or underinsured, but states would reduce benefits and cut already-low payment rates to health care providers, meaning that more doctors, hospitals, and nursing homes would refuse Medicaid patients. It would be easier for states to make these changes than under current law because the Ryan plan would give states additional flexibility in designing their Medicaid programs and eligibility criteria.  Key protections for nursing home residents, such as those protecting residents' spouses from impoverishment and setting limits on when states can place liens on homes, could go by the wayside.

Ryan would also overturn the new health reform law, the Affordable Care Act, thus preventing 11 million people from gaining Medicaid coverage by 2022, according to Congressional Budget Office estimates.  This means that the total number of Americans that the Ryan plan would cut from the Medicaid program could approach 40 million.

Ryan and his supporters point to the savings to the federal budget over the next decade: about $750 billion through the block grants and $642 billion by repealing the Affordable Care Act.  This, they contend, will address Medicaid's growth.  Since June 2007, just before the start of the recession, some 10 million people have been added to Medicaid's rolls.

Update: the proposed changes to Medicaid are now part of the Republican party platform.

More resources:
Primer: How Paul Ryan's Plan Would Change Medicaid (PBS NewsHour)
Is Medicaid Doomed? How Ryan's Plan Would Affect America's Very Poorest (The Atlantic)
Paul Ryan’s biggest budget cuts are to Medicaid, not Medicare (The Washington Post)
How the Ryan Budget (and Republican Platform) Would Hurt Current Nursing Home Residents (Center for Medicare Advocacy)

Reprinted with the permission of ElderLawAnswers.

Friday, August 31, 2012

How Would Paul Ryan Change Medicare?

Last year, we reported that House Budget Committee Chairman Paul Ryan (R-WI) proposed a budget that would radically reshape Medicare and shift more costs to seniors and the disabled. At the time, we noted that “the plan may well become the Republican Party's de facto platform in 2012.”

Little did anyone know that the plan’s architect would become Republican candidate Mitt Romney’s choice as his running mate, putting the Ryan plan for Medicare center-stage less than three months before the election.  It is time, then, to review Rep. Ryan’s latest proposal to overhaul the popular Medicare program. 

Ryan would end Medicare as a government-funded program that pays all costs except for deductibles and co-pays.  Instead, Ryan would shift financial risk from the government to Medicare's beneficiaries.  Each beneficiary would receive a fixed amount of money every year (a “voucher”) to buy coverage either from traditional government-administered Medicare or from private health plans that would compete with Medicare while offering the same basic benefits.  The voucher program would begin when those who are currently 54 years of age and younger become eligible for Medicare. 

The amount of the voucher might cover the full cost of Medicare, especially in the early years, but there's no guarantee that it would.  If the voucher can’t cover the cost of the plan beneficiaries choose, they would have to pay the difference themselves (or reap savings if their plan costs less than the voucher amount).

Analyzing an earlier Ryan proposal very similar to the current one, the nonpartisan Congressional Budget Office (CBO) calculated that a decade into the program, the typical 65-year-old Medicare beneficiary would be spending $12,500 a year out-of-pocket in today's dollars, more than double under the current system.

At the same time, Ryan would gradually raise the eligibility age for Medicare from 65 to 67 by 2034.  Because Ryan would also repeal the new health reform law's coverage provisions, many 65- and 66-year-olds would be uninsured.  

The plan also puts a “hard cap” on Medicare spending that could result in significant benefit cuts. Spending would not be allowed to rise more than half a percentage point higher than the growth rate of the economy, or the gross domestic product.  If it rose higher than this, Medicare’s spending would have to be lowered one way or another, including cutting benefits to seniors.
Critics say that turning Medicare into a voucher program would create a two-tiered system and drive up costs for sicker beneficiaries.  The private plans would lure healthier seniors with perks like gym memberships, while the less healthy would stick with traditional Medicare, in part to keep their own doctors.  This would increase premiums for traditional Medicare and prompt doctors to abandon the program as reimbursement rates are cut, something that would affect current beneficiaries.   

Supporters of Ryan’s proposal contend that with "skin in the game," seniors would shop for the cheapest health care plans, which would spur competition among private health plans and push costs down. But “critics argue that elderly sick people aren't likely to be good comparison shoppers and could easily be misled by complicated insurance programs,” says the Los Angeles Times.

In addition, the Ryan plan would do away with one of the most popular parts of the health reform law – the gradual elimination of the so-called "doughnut hole" in the Medicare prescription drug benefit, which forces beneficiaries pay 100 percent of drug costs.  The doughnut hole would continue under the Ryan plan.  

For Kaiser Health News's answers to frequently asked questions about the Ryan plan, click here.

For a more detailed discussion by the Commonwealth Fund of the plan, which is also called "premium support," click here.

For more about Medicare, click here.

Reprinted with the permission of ElderLawAnswers.