Medicaid Estate Recovery Minimizing State Recovery of Long Term Care - - PowerPoint PPT Presentation

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Medicaid Estate Recovery

Minimizing State Recovery of Long‐Term Care and Medical Assistance Payments

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUESDAY, NOVEMBER 29, 2011

Today’s faculty features: Philip A. Di Giorgio, Esq., Pierro Law Group L.L.C., Albany, N.Y . Louis W. Pierro, Esq., Pierro Law Group L.L.C., Albany, N.Y .

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November 29, 2011

Medicaid Estate Recovery Medicaid Estate Recovery Medicaid Estate Recovery Medicaid Estate Recovery

By: Philip A Di Giorgio Esq & By: Philip A. Di Giorgio, Esq. & Louis W. Pierro, Esq.

43 British American Blvd., Albany, NY 12110 100 Park Ave., 20th Floor, New York, NY 10017 Toll Free: 866-951-PLAN

Long-Term Care Crisis

• 78 million Baby Boomers begin turning 65 in
• 78 million Baby Boomers begin turning 65 in

2010

• Two in Five reaching age 65 will need some
• Two in Five reaching age 65 will need some

type of Long-Term Care in their lifetime

• By 2020 12 million older Americans will
• By 2020, 12 million older Americans will

need Long-Term Care

• People are living longer (people living past
• People are living longer (people living past

age 85 have increased 80%)

• Increase in dementia and Alzheimer’s

6

• Increase in dementia and Alzheimer s

Disease

Long-Term Care Costs

New York New York

• Institutional Costs - $90,000 – 180,000
• Home Care Costs - $0 – 200,000

(Informal Care vs. 24-hour Formal Care)

7

Medicaid

• Medicaid is the only government program that pays for LTC

Medicaid is the only government program that pays for LTC

• Medicaid is viewed as the “payor of last resort” for medical

care, nursing homes and in some states home health care T thi d f M di id f d f 55 ld

• Two-thirds of Medicaid funds are for persons over 55yrs old
• Under current law, spending on Medicaid is expected to

substantially outpace the rate of growth in the U.S. economy

• ver the next decade (grow at an annual average rate of

7.9% over the next 10 years, reaching $674 billion by 2017)

• States report they are struggling to meet their share of

States report they are struggling to meet their share of expanding Medicaid costs (35-50%)

• Medicaid is under attack by federal, state and local

governments

8

governments

Medicaid Recovery History

• Twelve states report having had an estate
• Twelve states report having had an estate

recovery program in effect before 1990 that was based on the original 1965 Medicaid law was based on the original 1965 Medicaid law

• 1982 Tax Equity and Fiscal Responsibility

A t (TEFRA) Act (TEFRA)

– First federal estate recovery law – Not mandatory – Some states refused to implement

9

OBRA 93

• Mandatory Recovery concept based off results in
• Mandatory Recovery concept based off results in

Oregon in 1940s

– estate recovery was implemented as part of a estate recovery was implemented as part of a comprehensive program to help senior citizens keep enough money to meet their own needs and protect their assets from unscrupulous uses by others assets from unscrupulous uses by others

• OBRA 93 Required states to implement a Medicaid

estate recovery program estate recovery program

• States who failed to implement an estate recovery

program were to lose federal funds (Upheld in West

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program were to lose federal funds (Upheld in West Virginia v. United States)

Medicaid Recovery

• All States now have a Medicaid Recovery Program

All States now have a Medicaid Recovery Program

• At a minimum, states must recover from assets that

pass through probate (which is governed by state p g p ( g y law).

• At a maximum, states may recover any assets in

hi h th d d i i t h d i t t i t which the deceased recipient had an interest in at time of death.

• One-third of recipients of Medicaid qualify for estate

One third of recipients of Medicaid qualify for estate recovery

• Much-vaunted savings have not become a reality

11

g y

Estates Subject to Recovery

• Deceased recipients who were 55 or older
• Deceased recipients who were 55 or older

when they received Medicaid benefits or who regardless of age were permanently who, regardless of age, were permanently institutionalized. M i li t f M di id

• May impose liens on property of Medicaid

recipients of any age if they are permanent id t f i h th di l residents of a nursing home or other medical institution, and if they are expected to pay a h f th t f i tit ti l

12

share of the cost of institutional care.

Definition of Estate

• 42 USC 1396p(b)
• 42 USC 1396p(b)
• Mandates that the term “estate” contains all

l d l t d ll th real and personal property and all other assets included in the individual’s estate d t t b t l under state probate law.

• The order of payment of debt is established

under state law.

– ability to recover from probate estates depends

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• n Medicaid’s standing vis-à-vis other claimants

Expanded Definition of Estate

• Some States have chosen to define “estate”
• Some States have chosen to define estate

in a broader context, which enables them to recover from some or all property that recover from some or all property that bypasses probate.

S ch propert incl des assets that pass directl – Such property includes assets that pass directly to a survivor, heir or assignee through joint tenancy rights of survivorship life estates living tenancy, rights of survivorship, life estates, living trusts, or annuity remainder payments.

14

How Much is Subject to Recovery

• At a minimum, states must recover amounts spent

At a minimum, states must recover amounts spent by Medicaid for long-term care and related drug and hospital benefits, including Medicaid payments for Medicare cost sharing related to these services for Medicare cost sharing related to these services.

• Option of recovering the costs of all Medicaid

services paid on the recipient’s behalf.

• The majority of states recover spending for more

than the minimum of long-term care and related expenses. p

• May not exceed the amount remaining in the estate

after the claims of other creditors having a higher priority against the estate have been satisfied

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priority against the estate have been satisfied.

Interest

• Some states authorize interest on Medicaid
• Some states authorize interest on Medicaid

Estate Recovery claims accrual of which will begin a certain period of time after death begin a certain period of time after death depending on the state

E g Oregon 9% si months after date of death – E.g. Oregon 9%, six months after date of death

• Interest may also accrue on spousal support

bli ti f d t f M di id i

• bligations from date of Medicaid services

16

Prohibitions

• Medicaid claims may not be asserted:

Medicaid claims may not be asserted:

– During the lifetime of the surviving spouse (no matter where he or she lives) – From a surviving child who is under age 21 or is blind or – From a surviving child who is under age 21, or is blind or permanently disabled (according to the SSI/Medicaid definition of “disability”) – A sibling with an equity interest in the home has lived in A sibling with an equity interest in the home has lived in the home for at least 1 year immediately before the deceased Medicaid recipient was institutionalized and has lawfully resided in the home continuously since the y y date of the recipient's admission. – An adult child has lived in the home for at least 2 years immediately before the deceased Medicaid recipient was i i i li d h li d h i l i h

17

institutionalized, has lived there continuously since that time.

Prohibitions

• Federal policy defers to states regarding how
• Federal policy defers to states regarding how

they track or monitor assets that pass to protected relatives in cases where the State protected relatives in cases where the State retains its right to future recoveries from Medicaid recipients’ survivors Medicaid recipients survivors.

– Defer it

Until death

• Until death
• Until sale or move

Waive their future right to recovery

18

– Waive their future right to recovery – Mix of approaches

Exempt Assets

• Homestead
• Homestead

– Amount of equity in homestead exemption varies state to state (NY $500 000 or $750 000 limit) state to state (NY - $500,000 or $750,000 limit)

• Not less than $2,000 ($2,000 - $13,800)
• Automobile
• Prepaid burial and funeral services
• Life insurance (Some states - face value

must be less than $1,500)

19

must be less than $1,500)

Exempt Assets

• Insurance proceeds to a specified beneficiary
• Insurance proceeds to a specified beneficiary

as long as the decedent was not over resource limit and not payable to decedents resource limit and not payable to decedents estate

• Some states exempt IRAs if in periodic

Some states exempt IRAs if in periodic payment status (NY)

• Although exempt for Medicaid eligibility

Although exempt for Medicaid eligibility purposes, they can be recovered in certain circumstances if the decedent had an

20

interest at time of death

Estate Recovery Enforcement

• States can waive estate recovery when it is
• States can waive estate recovery when it is

not “cost-effective” H t t i t t th F d l id

• How states interpret the Federal guidance

with respect to this issue varies.

– Some may waive recoveries of very small estates or make case-by-case determinations. A t hi i li t d l ll – Asset ownership is complicated or legally ambiguous, or the asset is hard to reach for some other reason

21

some other reason.

Undue Hardship

• 42 USC 1396(b)(3)
• 42 USC 1396(b)(3)
• Federally required to give an opportunity to

l i ti b d h d hi claim an exemption based on hardship

• Federal guidelines suggest two specific kinds
• f property for the hardship

– Homesteads of very modest value – Farm or family business that are essential to the support of surviving family members

22

• “Innocent” Transfers

Undue Hardship

• May waive eligibility requirements if:
• May waive eligibility requirements if:

– Applicant meets all other eligibility requirements; A li t bl t t t f d t b k – Applicant unable to get transferred asset back, despite best efforts; and Applicant cannot get appropriate care during – Applicant cannot get appropriate care during penalty period that would deprive the applicant of food clothes shelter or other necessities of life food, clothes, shelter or other necessities of life.

• Hardship is difficult to prove

R ti l j t d b St t C t

23

• Routinely rejected by State Courts

Personal Injury Actions

• Arkansas Department of Human Services v

Arkansas Department of Human Services v. Ahlborn, 547 U.S. 268 (2006)

• During lifetime Medicaid can recover from

g settlement proceeds for only those costs expended that were directly related to the injury E d d t t If M di id i i t

• Expanded estate recovery - If Medicaid recipient

dies before settlement, up to the full amount of Medicaid expenditures are recoverable p

• Suit filed after death – Up to the full amount of

Medicaid expenditures are recoverable

24

– Can usually be negotiated

Long-Term Care Insurance

• Partnership for Long-Term Care Exceptions to

Partnership for Long Term Care Exceptions to Medicaid Recovery

• 5 States - California, Connecticut, Indiana, Iowa,

and New York

• Policy holders who apply for Medicaid after

h ti th i i h t i exhausting their insurance coverage have certain

• f their assets disregarded during their Medicaid

eligibility determination g y

• These assets are also exempt from Medicaid

claims against their estates after death

25

• Income must still be spent down

Long-Term Care Insurance

• Additional states wishing to participate in the

Additional states wishing to participate in the Partnership program are required to adopt the broader definition of “estate” for purposes of M di id t t d t t Medicaid estate recovery and may not exempt assets of long-term care insurance buyers from Medicaid estate recovery Medicaid estate recovery

• Twelve states have reportedly passed state

enabling legislation for the Partnership program

– Have not implemented their programs because they regard the Medicaid estate recovery asset exemptions as critical to the success of the program

26

p g

Irrevocable Trusts

• In the absence of a showing of fraud or collusion,

In the absence of a showing of fraud or collusion, generally protected from Medicaid recovery as long as:

Appropriate look back and penalty period have expired – Appropriate look back and penalty period have expired – Trustee has no power to make distributions of principal to Grantor Grantor has no retained interest in principal – Grantor has no retained interest in principal

• Any retained interest in income by Grantor must be

spent down

• Grantor who only retains a limited or special power
• f appointment does not equate to a retained

interest in principal (Spetz v NYS DOH ; Verdow v

27

interest in principal (Spetz v. NYS DOH ; Verdow v. Sutkowy)

Federal Legislation

• 42 USC §1396p(d)(3)(B)
• 42 USC §1396p(d)(3)(B)

– Codified by OBRA 1993 “if th i t d hi h – “if there are any circumstances under which payment from the trust could be made to or for the benefit of the individual the portion of the the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to the individual could be , p y made shall be considered resources available to the individual . . .”

28

Disclaimers

• In many states a person may disclaim or
• In many states a person may disclaim or

renounce an inheritance to defeat creditor claims claims

• The disclaimed property would pass as if the

di l i i t d d th d d t disclaiming party predeceased the decedent

• However, use of a disclaimer is considered a

transfer and therefore creates a penalty period for Medicaid ineligibility

29

Spousal Elective Share

• Many states prevent a spouse from being
• Many states prevent a spouse from being

disinherited involuntarily

• If a spouse is disinherited he/she may claim
• If a spouse is disinherited, he/she may claim

a right of election against the estate

• Failure to claim the elective share may
• Failure to claim the elective share may

create a period of ineligibility

• If already receiving benefits may wish to
• If already receiving benefits, may wish to

exercise right of election to preserve a portion of the elective share

30

po t o

• t e e ect e s a e

Recoveries from Community Spouse

• Generally a spouse has support obligations
• Generally, a spouse has support obligations

to the Medicaid recipient spouse C it i d t d

• Community spouse is supposed to spend

down excess assets before recipient spouse i li ibl f M di id is eligible for Medicaid

• Some states deem an “Implied Contract” with

community spouse

31

Community Spouse Resource Allowance

• Minimum = $21 912
• Minimum = $21,912
• Maximum = $109,560
• States may allow the minimum, the

maximum, or anything in between.

• 13 states allow the maximum ($109,560) as

the minimum

• South Carolina = $66,480

32

Spousal Income

• Minimum Monthly Maintenance Needs
• Minimum Monthly Maintenance Needs

Allowance (MMMNA) – available to a “community spouse” community spouse

• Range: $1750 - $2739 nationally
• Some states allow the minimum only, other

states allow the maximum as the minimum

• NY = Maximum of $2,739/ month
• Income First Rule – Mandatory under DRA

33

Income First Rule Mandatory under DRA 05

MMMNA

• The actual amount of income that the
• The actual amount of income that the

community spouse is allowed to keep is calculated as the larger of: calculated as the larger of:

– MMMNA set by the state of residence. ($2,739);

• r
• r

– All income received in the community spouse’s name; but name; but – New York – 25% voluntary contribution of excess income from community spouse

34

income from community spouse.

Spousal Refusal

• Used as a crisis tool for eligibility as well as
• Used as a crisis tool for eligibility, as well as

a tool for increasing MMMNA or CSRA. F d l l ll l f l f

• Federal rules allow spousal refusal for

nursing home care.

• Medicaid applicant cannot be denied solely
• n spouse’s refusal to pay
• Began with the MCCA in 1988, and is

codified at 42 USC §1396r-5(c)(3).

35

§ ( )( )

Spousal Refusal

• Available in every separate property state
• Available in every separate property state

under federal law, but some states still try to resist it by banning its use resist it by banning its use.

• Connecticut banned its use until ordered to

i l t thi i i i M Wil implement this provision in Morenz v. Wilson- Coker, 415 F.3d 230 (2d Cir. 2005).

• Exception: community property states or

states where no support rights exist.

36

Recoveries from Community Spouse

• Community spouse can be sued for the
• Community spouse can be sued for the

lesser of the amount of Medicaid benefits expended or amount of excess resources expended or amount of excess resources

• Burden of proving the community spouse

had sufficient means to pay at the time of had sufficient means to pay at the time of benefits were paid is on the State

• Matter of Steele considered certain transfers

Matter of Steele considered certain transfers as “fraudulent conveyances”.

– Court has enhanced the ability of the county and

37

y y state to collect against a community spouse

Right of Recovery

• The State has a right to recover excess resources:
• The State has a right to recover excess resources:

– An implied contract with a Community Spouse is created when the Community Spouse refuses to make income y p and/or resources available for the Institutionalized Spouse’s support. Law suits against refusing spouses are now common in – Law suits against refusing spouses are now common in some areas, but settlements are still favorable.

• Recoveries against the estate of the community

Recoveries against the estate of the community spouse under implied contract theory are common

• Disinherit?

38

• Divorce?

Life Estates

• Was a common technique used to transfer
• Was a common technique used to transfer

property

• Under expanded definition of estate now can
• Under expanded definition of estate now can

be recovered

• Can recover the actuarial value of the
• Can recover the actuarial value of the

retained interest in the life estate just prior to death death

• Apply retroactively? Constitutionality?
• Title issues

39

• Title issues

Jointly Held Assets

• Expanded estate definition now can recover
• Expanded estate definition now can recover

jointly held property

40

Revocable Trusts

• Could place exempt assets in trust
• Could place exempt assets in trust
• Now subject to expanded estate recovery

41

Supplemental Needs Trusts

• Third Party SNT are not recoverable through
• Third Party SNT are not recoverable through

estate recovery.

R i i t ill t f di t t d b th – Remaining assets will transfer as dictated by the Trust

First Part SNT m st ha e a pa back

• First Party SNT must have a payback

provision upon death to pay the extent of Medicaid benefits paid out Medicaid benefits paid out

42

Life Insurance

• Life Insurance policies are typically not
• Life Insurance policies are typically not

property of the estate of the decedent B fit bl t d b fi i

• Benefits payable to a named beneficiary are

typically not recoverable

• Proceeds are recoverable if the beneficiary is

the estate, no beneficiaries survive the recipient, or the policy had not been reported to Medicaid while the recipient was living

43

Annuities

• An Annuity is not life insurance
• An Annuity is not life insurance
• Recoverable
• In accordance with DRA 05, Medicaid

agencies are required to have beneficiary designations for annuities irrevocably assigned to Medicaid

44

Retirement Accounts

• IRAs 401Ks Keoghs Pension Funds and
• IRAs, 401Ks, Keoghs, Pension Funds and
• ther retirement plans are subject to its own

set of rules and regulations depending on the set of rules and regulations depending on the state M b bj t t d d t t

• May be subject to expanded estate recovery

depending on the terms of contract and type f i t t

• f investment

45

Burial Funds

• Irrevocable pre need funeral/ burial
• Irrevocable pre-need funeral/ burial

agreement is not a countable resource in determining Medicaid eligibility determining Medicaid eligibility

• Any funds remaining in a funeral trust or

i d ft t f ll insurance proceeds after payment of all funeral expenses are to be paid to the C t DSS County DSS.

46

Expenses

• In most states probate law sets forth the
• In most states, probate law sets forth the
• rder of priority over ordinary claims and the

heirs and beneficiaries heirs and beneficiaries

• Generally

– Court and Administrative Costs Court and Administrative Costs – Attorney Fees – Funeral and Burial Expenses Funeral and Burial Expenses – Federal and State Taxes – Medical and Hospital Expenses

47

p p

Fiduciary Responsibility

• Executors and Trustees may be held liable
• Executors and Trustees may be held liable

for improper distributions of assets to beneficiaries when Medicaid claims are beneficiaries when Medicaid claims are known or should have been known. Li bilit b i d f th t f

• Liability can be imposed for the amount of

Medicaid paid on behalf of the recipient up to th f ll l f th i l t f d the full value of the improperly transferred asset.

48

Future of Estate Recovery

• Legal and Practical Obstacles
• Legal and Practical Obstacles
• Conflicts with Existing Law

Clarity on the Definition of Estate

• Clarity on the Definition of Estate
• Hard to Manage

M h tt – Massachusetts

• Procedure and Timeframe for Asserting

Cl i Claims

• Amount of Recovery versus Expense

49

• Litigation

Long Term Care Planning Long Term Care Planning

Medicaid Asset Protection Trust

• Asset Protection

Self Insure

• Access to Quality Care

g g g g

• Asset Protection
• Flexibility
• Keep Income

f

• Access to Quality Care
• Independence
• Choice of Where, Who

and How Much Care

• Tax Benefits
• 5 Year Lookback
• Wealth Replacement

Option LTC Insurance

• Affordability &

Do Nothing

• Limited Home Care

Insurability

• Guaranteed

Access, Choice & Q lit f C

• No Assisted Living
• Loss of Control &

Access to Funds

50

Quality of Care

• Poverty

Poverty

Th k Y ! Th k Y ! Thank You! Thank You!

43 British American Blvd. Albany, NY 12110 P: 518‐459‐2100 F: 518‐459‐2200 100 Park Ave., 20th Floor, New York, NY 10017 P: 212‐661‐2480 F: 212‐682‐6999 T ll F 1 866 951 PLAN Toll‐Free: 1‐866‐951‐PLAN info@pierrolaw.com