To assist caregivers who are making arrangements for long term care a booklet concerning Alabama Medicaid is being made available to provide clarity for some of the issues that may arise and to provide basic information about the application process. The booklet is made available here and will remain available in the Publications section of our website. It can be read online or downloaded and printed.
The Veterans Administration has a federal and state program addressing health care needs of veterans and provides an option for long-term care.
There are four VA nursing facilities in Alabama:
- Bill Nichols State Veterans Home in Alexander City;
- William F. Green State Veterans Home in Bay Minette;
- Floyd E. “Tut” Fann State Veterans Home in Huntsville; and
- Col. Robert L. Howard State Veterans Home in Pell City.
In the VA system State VA and Federal VA contribute toward the charged rate, leaving the veteran responsible for the remainder. Actually this VA system is a highly affordable nursing home care option after the state and federal government provide subsidies.
In 2019 the out of pocket cost for care in the VA facilities in Alexander City, Bay Minette and Huntsville is $355.02 per month, and the out of pocket cost for care in the Pell City facility is $732.
The average wait for a bed is four to five months for Alexander City; six months for Bay Minette; three to four months for Huntsville; and two to three years for Pell City.
In July 2019 The Alabama Department of Veterans Affairs announced plans to build an additional $60 million veteran’s home on 27 acres in one of nine Southeast Alabama Wiregrass counties. The new nursing facility will provide care for 150 – 175 elderly veterans and will be located in either Barbour, Butler, Coffee, Covington, Crenshaw, Dale, Geneva, Houston or Pike County.
The VA is required to provide nursing home care to any veteran who needs that level of care because of a service-connected disability, has a combined disability rating of 70 percent or more or has a disability rating of at least 60 percent and is deemed unemployable or has been rated permanently and totally disabled. Other veterans in need of nursing home care will be provided services if resources are available after the priority groups are served.
Making a long-term care placement is often surprisingly complicated for those who have not previously made a placement. Finding an affordable facility to meet the needs of the person in need of care can be a challenge. Planning is critical to know what to look for and to understand cost of care and payment options for various levels of long-term care.
This e-book will provide information for those persons who will be eventually making a placement, and provide specific information for care in Alabama. It will remain available in Publications at this web site.
The Department of Veterans Affairs (VA) has finalized rules that were originally proposed in 2015 that will make it more difficult to qualify for VA pension benefits known as Aid and Attendance and Housebound Benefits. These new rules will change how much an applicant can own and how much an applicant can give away and qualify for benefits by establishing an asset limit, a look-back period, and asset transfer penalties for claimants applying for VA pension benefits that require a showing of financial need.
The VA offers Aid and Attendance as cash payments to low-income veterans (or their spouses) who are in nursing homes or who need help at home with everyday tasks like dressing or bathing.
Currently, to be eligible for Aid and Attendance, a veteran (or the veteran’s surviving spouse) must meet certain income and asset limits. The asset limits aren’t specified, but $80,000 is the amount an applicant is usually allowed to keep. However, unlike with the Medicaid program, there historically have been no penalties if an applicant gives away assets at any time before applying. That is, before now you could transfer assets over $80,000 before applying for benefits, and the transfers would not affect eligibility.
Not so anymore. The new regulations will resemble, to some extent, the existing Medicaid regulations in that the new VA rules set a net worth limit of $123,600, and applicants will be penalized for giving away property within three years of application. This net worth limit of $123,600 will include both the applicant’s countable (non-excluded) assets and his or her income, and net worth will be indexed to inflation in the same way that Social Security increases.
The net worth limit is calculated after first deducting property that will be excluded. Excluded property includes an applicant’s house (up to a two-acre lot and additional acreage if it is not marketable), and it will not count as an asset even if the applicant is currently living in a nursing home. Other exclusions from net worth include payment for medical care from their income, including the payments to assisted living facilities.
The regulations also establish a three-year look-back provision. Applicants will have to disclose all financial transactions they were involved in for three years before the application (similar to the Medicaid five year look-back). Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period that can last as long as five years. This penalty is a period of time during which the person who transferred assets will not be eligible for VA benefits. There are exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a child who is unable to provide “self-support.”
Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR) for a veteran with one dependent in need of aid and attendance. In 2018 that amount is $2169.67.
For example, assume the net worth limit is $123,600 and an applicant has a net worth of $115,000. The applicant transferred $30,000 to a friend during the look-back period. If the applicant had not transferred the $30,000, his net worth would have been $145,000, which exceeds the net worth limit by $21,400. The penalty period will be calculated based on $21,400, the amount the applicant transferred that put his assets over the net worth limit (145,000-123,600). The transfer subject to penalty would be divided by the 2018 MAPR of $2169.67, resulting in a 9.86 month penalty ($21,400 divided by $2169.67 = 9.86). The penalty begins to run on the first day of the month following the month of transfer.
The new rules go into effect on October 18, 2018. The VA will disregard asset transfers made before that date.
The new regulations may be read at https://www.federalregister.gov/documents/2018/09/18/2018-19895/net-worth-asset-transfers-and-income-exclusions-for-needs-based-benefits
When a person applies for Medicaid to pay for long-term care, either in a nursing home or through the Home and Community Based Waiver (HCBW), Medicaid examines the applicant’s financial transactions for five years preceding the application to determine if any funds were given away or property sold for less than the value assigned by Medicaid. If so, a penalty is calculated by dividing the value of the amount transferred by $6100 (as of 2018) to determine the number of months of ineligibility.
In nursing home Medicaid cases it was always clear that the penalty started to run when the person resided in a nursing facility and would meet all requirements for Medicaid eligibility but for the existence of the penalty for transferring assets. In that situation a person is approved for Medicaid subject to the applicable penalty. He or she is billed privately during the penalty period, often at the peril of relatives who need to come up with funds to pay the bill. When the number of months of penalty assigned runs out, Medicaid will then pay for the resident’s care.
It has not been so clear about how to get the penalty running in HCBW cases. If the penalty cannot run until the person receives HCBW services, but the person cannot receive HCBW because of the transfer of assets, then you can never get past the penalty period. When the application is not taken upon identifying asset transfers, the penalty becomes permanent ineligibility for HCBW services.
On April 17, 2018, the Center for Medicare and Medicaid Services provided revised guidance on how to establish the start date for transfer penalties for HCBW applicants. In that directive CMS indicates that the penalty would begin to run at the point at which a state has: determined that the applicant meets the financial and non-financial requirements for Medicaid eligibility and the level-of-care criteria for the waiver; developed for the individual a person-centered service plan; and identified an available waiver slot for the individual’s placement. The penalty period for that applicant begins no later than the date on which a state has confirmed that all of these requirements are met, and transfers that would be subject to a penalty would be those that were made on or after the 60 months preceding this same date.
It would appear that persons who have transferred assets need to request that the application for HCBW still be taken, a care plan developed and proof provided that a waiver slot is available to establish the date all of these requirements have been met. Hopefully Medicaid will develop procedures to document eligibility for HCBW subject to the penalty so that services can begin when the penalty has run.
The CMS revised guidance can be read here.
Planning for long-term care is an important issue to tackle, and the latest forecast shows that the associated costs of care are reaching well beyond the average person’s means. This makes planning to save an estate an important proposition, and the earlier the planning, the greater the options.
The median cost of a private nursing home room in the United States has increased to $97,455 a year, up 5.5 percent from 2016, according to Genworth’s 2017 Cost of Care Survey. Genworth, an insurer, surveys and publishes long-term care prices across the country annually and provides a benchmark for what caregivers will need to finance long-term care. The company reports that the median cost of a semi-private room in a nursing home is $85,775, up 4.44 percent from 2016.
The price rise was slightly less for assisted living facilities, where the median rate rose 3.36 percent, to $3,750 a month. The national median rate for the services of a home health aide was $22 an hour, up from $20 in 2016, and the cost of adult day care, which provides support services in a protective setting during part of the day, rose from $68 to $70 a day.
For Alabama, the Genworth survey reports that the average semi-private nursing home room in 2017 was $72,996 per year/$6,083 per month (up from $71,172 per year/$5931 per month from 2016), and the average private nursing home room was $77,568 per year /$6,464 per month (up from $75,192 per year/$6,266 per month in 2016). The average assisted living facility was $36,684 per year/$3,057 per month (up from $34,800 per year/$2,900 per month in 2016).
Alaska continues to be the costliest state for nursing home care, with the median annual cost of a private nursing home room totaling $292,000. Oklahoma again was found to be the most affordable state, with a median annual cost of a private room of $63,510.
The 2017 survey was based on responses from more than 15,000 nursing homes, assisted living facilities, adult day health facilities and home care providers. The survey was conducted by phone during May and June of 2017.
The term “life estate” often comes up in discussions of estate and Medicaid planning, but what exactly does it mean? A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, at which time it passes to the other owner, referred to as the person with the remainder interest. Life estates can be used to avoid probate while giving a house to children without losing the ability to live in the home, remaining responsible for property tax – with the benefit of homestead and age related tax exemptions, remaining responsible for homeowner insurance, yet creating ownership in the children at the death of the parent. This type of deed can play an important role in Medicaid planning since Medicaid does not assign any value to a life estate when the parent applies for Medicaid to pay for nursing home care. If the transfer occurred prior to five years before application, there will be no penalty for the transfer.
In a life estate, two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the remainderman — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out, and make improvements to it.
Another example of use of life estates is when a spouse who owns property in only his or her name wants to leave that property to his or her children from a former marriage but wants the later in life spouse to be protected and have a place to live. That person might write a will leaving a life estate to the spouse with the remainder to his or her children on the death of the spouse. This comes up not infrequently when individuals want to protect property passed to them by family and who want to keep that property in their blood line while protecting the spouse as well.
When the life tenant dies, the house will not go through probate, since at the life tenant’s death the ownership will pass automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets, which includes Alabama at the time this is being written.
Although the property will not be included in the probate estate, it will be included in the taxable estate. Depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation. However, the joint federal lifetime estate tax exemption and gift tax exclusion is $5,490,000, so few people are actually subject to estate tax.
The life tenant cannot sell or mortgage the property without the agreement of the remaindermen. If the property is sold, the proceeds are divided up between the life tenant and the remaindermen. The shares are determined based on the life tenant’s age at the time — the older the life tenant, the smaller his or her share and the larger the share of the remaindermen.
Be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if Medicaid application is made within five years of the transfer. Further, purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else’s home, pay an appropriate amount for the property and live in the house for more than a year.
For example, an elderly man who can no longer live in his home might sell the home and use the proceeds to buy a home for himself and his son and daughter-in-law, with the father holding a life estate and the younger couple as the remaindermen. Alternatively, the father could purchase a life estate interest in the children’s existing home. Assuming the father lives in the home for more than a year and he paid a fair amount for the life estate, the purchase of the life estate should not be a disqualifying transfer for Medicaid. Just be aware that there may be some local variations on how this is applied, so get good advice before finalizing arrangements involving a life estate if long term care could be a future concern.