Medicaid can be very complicated and confusing, but it is a critical benefit for persons in need of long-term care. I prepared this presentation for a recent educational seminar for professionals and caregivers. Feel free to download or read online to learn more about applying for institutional Medicaid.
All long-term care costs rose sharply in 2020, but assisted living facility costs increased the most, according to Genworth’s latest annual Cost of Care Survey. The across-the-board rises were due in part to increased costs brought on by the coronavirus pandemic.
In the past year, assisted living facility rates grew 6.15 percent for a median cost of $51,600 per year or $4,300 per month. Genworth also reports that the median annual cost of home health aides rose 4.35 percent to $54,912, while the median cost of a private nursing home room rose 3.57 percent to $105,850 and the median cost of a semi-private room in a nursing home is now $93,075, up 3.24 percent from 2019. The national median annual rate for the services of a homemaker also climbed 4.44 percent to $53,768.
In response to this year’s price increases, Genworth conducted a follow-up study to understand how COVID-19 is impacting the cost of care. Genworth found that labor shortages, personal protective equipment costs, regulatory changes, employee recruitment and retention, wage pressure, and supply and demand were contributing to rate rises.
The only care setting where costs did not increase was adult day care, which provides support services in a protective setting during part of the day. Costs for adult day care actually fell from $75 to $74 a day, a 1.33 percent decrease, perhaps because many adult day care sites have been forced to close due to the pandemic.
Monthly care costs for Alabama in 2020 were:
Homemaker services, $3432; homemaker health aide, $3432; adult day health care, $655; assisted living private one bedroom, $3150; nursing home semi-private room, $6540; and nursing home private room, $6911.
Alaska continues to be the costliest state for nursing home care by far, with the median annual cost of a private nursing home room totaling $436,540 per year (yes, that is not a typo – it really is that expensive). Missouri was the most affordable state, with a median annual cost of a private room of $68,985 per year.
The 2020 survey, conducted by CareScout for the seventeenth straight year, was based on responses from 14,326 nursing homes, assisted living facilities, adult day health facilities and home care providers. Survey respondents were contacted by phone during July and August 2020.
As the survey indicates, long-term care is growing ever more expensive making planning for long-term care essential.
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.
You don’t really have to spend down all your resources to qualify for nursing home Medicaid. There are multiple ways to preserve funds. One of those ways is through the use of what I call the Medicaid Spend Down Special Needs Trust.
Usually persons who need nursing home care end up needing Medicaid to pay for that care. Why? Because it is so expensive. Nursing home care can cost between $6000 and $8000 depending on the specific market area in Alabama. At $7000 per month, the average nursing home resident will spend $84,000 in a year. Under these circumstances, most persons will exhaust their resources at a rapid rate rendering them unable to pay for the care they need without the assistance of Medicaid.
There are some funds a married couple can preserve for the spouse who remains at home, but there is still an amount that has to be spent down if a couple has countable assets over $25,000. A single person has to spend all of his or her resources down to $2000 before he or she can qualify for Medicaid. Using up the assets a person saved over a lifetime is known as the dreaded Medicaid “spend down.”
But what many people do not know is that there is a way to qualify for Medicaid to pay for nursing home care in Alabama without the resident having to go through a complete “spend down.” That is through the use of a pooled Special Needs Trust.
There are many types of Special Needs Trusts (SNTs), including trusts for disabled younger persons, disabled children whose parents and grandparents want to provide for their future needs, persons on public benefits who recover money from personal injury lawsuits or who inherit money when a relative dies. Each type of SNT has highly specific requirements. But what they all have in common is the goal of protecting funds for a disabled person without those funds resulting in the loss of public benefits.
With the Medicaid Spend Down SNT, instead of spending down the money required to be spent by Medicaid on nursing home care before eligibility can be established, the money is paid into a SNT and can then be used to pay for special needs not otherwise paid for by Medicaid for the disabled person once he or she becomes eligible. Medicaid eligibility can be immediately established while these funds remain available to pay for special needs for the nursing home resident.
The drawback to this type of trust is the requirement that, on the death of the person for whom the trust was established, Medicaid must be reimbursed from funds remaining in the trust up to the amount Medicaid has paid for the nursing home resident’s care. Still, creating a pool of money to meet the special needs of the nursing home resident after being awarded Medicaid is far better than simply spending down those funds before qualifying for Medicaid and leaving the resident with no resources to pay for special needs. Since Medicaid allows a nursing home resident to keep only $30 of his or her income each month to pay for personal needs, you can see how that is not enough to have needs met without families pitching in to help pay for necessary items.
An example of what the SNT funds can pay for is a private room in a nursing home since Medicaid will only cover a semi-private room. Other special needs might be items and services that can improve the quality of life for the nursing home resident such as hair salon charges, manicures, telephone, newspaper subscriptions, audiobooks, movies, recreation, medical and dental expenses not otherwise covered, special equipment like wheelchairs or specially-equipped vans; therapy or rehabilitation services; training and education, travel, electronic equipment including computers and mobile devices.
With a little planning the quality of life for a nursing home resident can be improved, and the burden for a family’s out of pocket expenses decreased.
Do not be confused with an internet search. The rules are different from state to state. Most states allow a person 65 and older to create a pooled SNT but still penalize transfers into that trust. That is not the case in Alabama.
Contact us for more information about establishing a Medicaid Spend Down SNT.
Some benefits paid by Medicaid, including expenses for long-term care after age 55, can be recouped from the recipient’s estate upon death. The federal government makes estate recovery mandatory, and each state has enacted its own rules to comply with that requirement. A new publication is available to help you understand how Alabama Medicaid Estate Recovery works and what property is at risk for being lost upon death and repayment to Medicaid. This document can be read online or downloaded and printed. It will remain available in the Publications at this web site.
Florida and Arizona are the latest states to request a waiver from the requirement that states provide three months of retroactive Medicaid coverage to eligible Medicaid recipients. Whether Alabama plans to follow suite is unknown to the public at this time, but this is a time when shrinking budgets prepare us to anticipate the worse.
Medicaid law allows a Medicaid applicant to be eligible for benefits for up to three months before the month of the application if the applicant met eligibility requirements at the earlier time. This helps people who are unexpectedly admitted to a nursing home and can’t file — or are unaware that they should file — a Medicaid application right away. Preparing an application for Medicaid nursing home coverage may take many weeks; the retroactive coverage gives families a window of opportunity to apply and get coverage dating back to when their loved one first entered the nursing home. “Retroactive coverage is one of the long-standing safeguards built into the program for low-income Medicaid beneficiaries and their healthcare providers,” says the Kaiser Family Foundation.
Now Arizona and Florida are joining a growing list of states that are asking the federal Centers for Medicare and Medicaid Services (CMS) to eliminate the retroactive benefits. CMS has already approved similar requests by Iowa, Kentucky, Indiana, and New Hampshire to waive retroactive coverage. A lawsuit is challenging Kentucky’s waiver, which also imposes work requirements for Medicaid recipients.
Advocates argue that if Medicaid applicants cannot get coverage before the month of application, they may be saddled with uncovered medical bills or fail to receive needed health care because they cannot afford it. According to Justice in Aging, which filed a brief in the Kentucky lawsuit, Medicaid applicants often do not file an application right away because of the complexity of the Medicaid application process or a false belief that Medicare would cover nursing home care.
For more information about the implications of the elimination of retroactive benefits, click here for a Kyser Family Foundation issue paper.
There is one final note of caution when electing to request the retroactive benefits on the Medicaid application. It is important to use care if gifts were made in the prior five years. An applicant may get outside the five year look-back, click the box requesting three months of retroactive benefits and find himself back inside the five year lookback triggering a penalty.
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.
Medicaid benefits seem more like loans than benefits these days. This is because there are laws that require states to recoup what it spent on care from estates after the Medicaid recipient dies.
This federal recoupment effort carried out by each state is known as Medicaid Estate Recovery. For this reason it is important for a person who is considering application for any type of Medicaid to get solid advice on this topic prior to applying for Medicaid. It is also important for any person probating a will or administering an estate to consider the possibility of Medicaid being an estate creditor to put the agency on notice before disbursing the proceeds of an estate or else risk personal liability against the personal representative (aka executor).
To grasp Medicaid Estate Recovery, it is important to understand that there are many different categories of Medicaid, but they are all part of a joint federal/state program. Estate recovery applies to some categories of Medicaid and not to others.
Also understand that there are certain types of liens on property that individuals can give to Medicaid to allow them to qualify for Medicaid. These are pre-death liens referred to as TEFRA (Tax Equity and Fiscal Responsibility Act) liens. An example might be a single person of any age who cannot qualify for nursing home Medicaid because he owns his home, thus resulting in resources that exceed the $2000 resource limit. He might give a lien and place the property on the market to sell and qualify for nursing home Medicaid under the “bona fide effort to sale” property exclusion. Medicaid will hopefully recoup funds from the sale of the property up to the amount it paid for the care of the individual who gave the lien, but often the property does not sell during the lifetime of the Medicaid recipient. Medicaid will continue to hold that lien and right to recover funds from the sale after the Medicaid recipient dies.
But what is referred to as Medicaid Estate Recovery goes a step further. Even without a specific TEFRA lien being given by the property owner, Medicaid can recoup funds from the probate estate of the Medicaid recipient after his death provided there are funds from which to recoup. In other words, this is a statutory lien that applies to estates of deceased Medicaid recipients for whom certain types of Medicaid benefits were paid.
Through Medicaid Estate Recovery the federal government requires states to seek recovery of funds spent on care from the estates of persons who received certain benefits, particularly benefits paid after the age of fifty-five years and incorrect payments. This includes:
- benefits that were not paid correctly to a person of any age (resulting in what is known as an overpayment);
- benefits paid after age 55 for nursing home Medicaid;
- benefits paid after age 55 for waiver services (at home care provided to avoid institutional care);
- benefits paid for hospital and drugs for persons who received those benefits in connection with nursing home or waiver Medicaid after the age if 55.
Federal law gives the states the option to seek recovery of funds for all Medicaid expenditures for services received after age 55 unless otherwise exempted (more on this later). This would include money spent for SSI eligible persons who qualify for Medicaid in the community. Alabama has opted to exercise this recovery.
To further complicate matters, the Alabama Medicaid Administrative Code includes language indicating that the agency will seek recovery for benefits paid for a person of any age who permanently resides in a nursing facility, intermediate care facility for the intellectually disabled or other medical institution. There are attorneys in Alabama who believe that this application of estate recovery for institutional benefits for persons under the age of 55 violates the federal statute. If Medicaid does seek recovery of such funds a recovery in this category will likely be challenged in years to come.
Medicaid Estate Recovery does not apply to the Medicare Savings Programs (QMB, SLMB and QI), but Alabama is collecting on benefits paid for these programs prior to 2010. These are programs that help low income persons eligible for Medicare pay for healthcare costs through Medicaid. Due to the Medicare Improvements for Patients and Providers Act (MIPPA) these categories of Medicaid benefits are not subject to estate recovery. Note that as of 2016 the award letters to these recipients incorrectly indicated that estate recovery would apply. An exception to this exclusion is Medicare Savings Program benefits paid on behalf of beneficiaries of first party special needs trust.
At this time Medicaid Estate Recovery only applies to property in the probate estate in Alabama. That means that property that passes directly to someone outside of the probate estate cannot be reached by Medicaid. Examples include property titled as survivorship property (in a deed where the owners hold property as joint tenants with right of survivorship); property in which the deceased had already transferred it to another retaining only a life estate (through a life estate and remainder deed); proceeds of life insurance, IRAs, or brokerage accounts with a beneficiary named to take the proceeds at death; joint bank accounts with a co-owner or set up as payable on death to a named beneficiary.
Estate recovery/lien enforcement can be delayed or waived in certain circumstances.
Delay may occur:
- until after the death of any surviving spouse (no lien was taken);
- related to the home, until the property is no longer occupied by a surviving child under the age of 21 years of age; a surviving child who is blind or disabled (no lien was taken);
- related to the home, until the property is no longer occupied by a sibling with an equity interest who had resided in the home for at least one year preceding the Medicaid recipient’s admission to the facility where benefits were paid (no lien was taken);
- related to the home, until the property is no longer occupied a son or daughter who provided two years or more of care immediately before the admission to the facility where benefits were paid and that care was of such a level that it allowed the Medicaid recipient to reside in the home and avoid institutional care (a lien may exist, and note that the property could have been transferred to the child without penalty).
- related to the home, until the property is no longer occupied by a sibling who is lawfully living in the home and was lawfully residing continuously in the home for at least one year immediately prior to the Medicaid recipient being admitted to the facility where benefits were paid (a lien may exist).
Waiver may occur:
- for an amount of money equal to sums paid under a qualified long-term care insurance policy;
- upon proving undue hardship which is: the existence of a situation, established by convincing evidence, that the estate subject to recovery is an asset such as a family farm or family business which produces “limited income” (defined as equal to or less than the income limit established in Rule 560-X-25-.14 [at or below 141% of the poverty level]) and is the sole income-producing asset of one or more heirs to the estate. The limit of 141% of the poverty level is $1426.45 for a one person household, $1934.05 for a two person household (for larger households, add 507.60 for each additional person). Note that the Medicaid regulations state that undue hardship does not apply for recipients with long term care insurance policies who became Medicaid eligible by virtue of disregarding assets because of payments made by a long term care insurance policy or because of entitlement to receive benefits under a long term care insurance policy OR if the Medicaid agency determines the hardship was created by the recipient by resorting to estate planning methods under which the recipient illegally divested assets in order to avoid estate recovery.
To request an undue hardship waiver a request for a waiver application must be made to Alabama Medicaid within 30 days of receiving the agency notice against the estate or upon the sale, transfer or conveyance of real property subject to a TEFRA lien.
A bill was filed in the Alabama Senate in the 2017 legislative session and again in the current 2018 session that would give the Alabama Medicaid broad statutory powers to impose liens against the real property of any Medicaid beneficiary. Astonishingly it would require every estate administered in Alabama to notify the agency as a creditor even if the deceased person never applied for Medicaid. That pending legislation can be read here.
Our January 2018 Newsletter, Bookmarks, has been published , and you can view it online at the link provided. Several articles are included covering Medicare, Medicaid, nursing home resident dumping, and the new tax law. Let us know if you want to be added to the email list.
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.