Tag Archive for 'Medicaid'

Avoiding Probate vs Avoiding Taxes vs Medicaid Eligibility

This morning’s post is kind of a follow up to one of yesterday’s posts where I tried to elucidate the differences between planning to avoid probate and planning to “avoid” taxes.  I was inspired this morning to write this brief follow up by Michael J. Keenan of the Connecticut Elder Law Blog and this post of his from this morning where he writes:

Regardless of whatever your neighbor may have told you, if you divest yourself of assets thereby benefiting someone else (with a couple of exceptions) then it’s a gift and it will trigger a period of ineligibility for Medicaid if it falls within the look-back period.  Whether the money goes outright to someone or into a trust for their benefit the State is going to treat it the same way.

He goes on to, he says,  plug himself and I write to congratulate him on both his post and his “plug.”  Not all estate planning attorneys (those who plan for taxes and probate avoidance) are similarly skilled in the area of Medicaid Planning or other aspects of elder law.  This subgroup of specialized planners is also not to be confused with special needs planners (like myself, my dad and our partners Mike and Sam).  If you need some planning and are getting up there in years, I would contact an estate planning attorney first…  Not everyone needs Medicaid planning so don’t seek that first until and unless you’re sure you actually do need it.

The situation Mr. Keenan addressed in this morning’s post is as follows:

They also told me that they wanted the gifting to go into a trust for their kids’ benefit instead of giving the money outright to the kids, and they wanted to do this for two reasons…

First, they were concerned that their kids would waste the money and/or their kids’ creditors would end up getting the money.  They heard that a trust was a great way to handle this situation, correct?  “Absolutely true,” I said.

Second, they didn’t want to worry about Medicaid’s five-year look-back period regarding gifting and they heard that this was a great way to avoid it, correct?  “Absolutely not true,” I said.

Thanks again Mr. Keenan.

Reverse Mortgages, Probate Liquidity and Medicaid Eligability

One of my favorite bloggers, Joel A. Schoenmeyer of the Death & Taxes Blog writes here about “the reverse mortgage probate problem and liquidity.”

A reverse mortgage results from a home owner age 62 or older converting the equity in their home into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. It can be especially useful for the home owner but, as Joel points out, a real headache for their heirs after they pass away. The payments can be used to support a standard of living – which is nice – but I think the most powerful benefit from the reverse mortgage is that the income stream is not necessarily a countable resource for Medicaid eligibility.

Joel writes:

I’ve encountered this situation in the probate context a few times recently: mom dies, reverse mortgage is now due, and guess what? The house can’t be sold because of the bad real estate market.

The bigger problem, of course, is one of estate liquidity. When a person dies, there are bills that have to be paid. Some of those bills are small, and some of them can be avoided. But certain bills can’t be avoided, and are going to cause a real headache for your survivors if you’ve left them with no liquid assets.

Which is all well-observed… Its a cost-benefit analysis really, done with the help of your financial planner and an attorney experienced in probate and Medicaid eligibility that can help determine if its a good fit for your situation. Its risky, but it may be worth it near the end.

Thanks Joel.

Senate Dems Trying to Block Medicaid Regs Proposed By Bush Administration

Sounds like a turf war to me…

The proposed regulations prevent the states from using federal Medicaid funds to help pay for physician training, place new limits on Medicaid reimbursements to hospitals and nursing homes operated by state and local governments and limit coverage of rehabilitation services for individuals with disabilities and mental illnesses. On Wednesday the House voted 349-62 to approve legislation (HR 5613) that would delay the proposed regs from going into effect for one year, or until April 1, 2009. The vote was 75 more than that needed to override the President’s threatened veto. Can anyone say lame duck?

Delaying the implementation of the rules would cost the federal government about $1.7 billion according to this article in the Washington Times.

The Bush administration says the regulations are necessary to stop states from improperly billing Medicaid for services. HHS spokesperson Kevin Schweers said the House vote “is a victory for budget gimmickry at the expense of U.S. taxpayers,” adding, “The legislation invites states to bill federal taxpayers for what are state responsibilities” (Zhang, Wall Street Journal, 4/24). (see also this Kaiser Daily Health Policy Report.)

Thanks to Professor Dayton for pointing this one out to me.

Recent Medicaid News Roundup… Not Looking Good

3 stories from 3 of the best T&E bloggers out there recently caught my eye:

First from Michael J. Keenan and The Connecticut Elder Law Blog comes, Big Problems for Medicare in 11 Years.

It appears that the Medicare program will become unable to pay full benefits starting in 2019, and the same problem will arise for Social Security in 2041 […], according to the trustees of those programs.

He links to this article in the LA Times about the presidential candidates being silent on the impending Medicaid crisis which means that the likelihood of imminent reformation is rather slim.

Next comes Professor Berry from the Wills, Trusts & Estates Prof Blog and his post about the Trustee’s same report. He quotes the following from the Trustee’s press release issued March 26, 2008:

In their annual report, the Medicare Trustees today announced that both the Medicare Hospital Trust Fund and the Supplementary Medical Insurance Trust Fund expenditures are growing faster than the rest of the economy. The Trustees report expenditures were $432 billion in 2007, or 3.2 percent of gross domestic product (GDP), and are projected to increase to nearly 11 percent of GDP in 75 years.

The Trustees report that Medicare’s Hospital Insurance (HI) Trust Fund will become insolvent earlier in 2019 than reported last year. HI expenditure growth is estimated to average 7.4 percent each year over the next 10 years, a higher rate than either Gross Domestic Product (GDP) or Consumer Price Index (CPI) growth. This year the HI Trust Fund will spend more than its income, and from 2009 through 2017, about $342 billion will need to be transferred from the Federal treasury to cover beneficiaries’ hospital insurance costs.***

Yikes

Finally, David Goldman writes in his Florida Estate Planning Lawyer Blog about Medicaid Cuts Threaten Nursing Homes in Florida.

This week both the Senate Health and Human Services Appropriations Committee and the House Healthcare Council introduced their 2008-09 budgets. The Senate reduced nursing home funding $163 million and the House reduced funding $278 million.

Florida legislators approved landmark elder-care facility reform legislation in 2001 that mandated increased minimum staffing requirements, tougher regulation and quality improvement, and risk management programs. Since then, nursing home quality has steadily improved. Now, Medicaid funding cuts threaten this progress and the vulnerable elderly who have nowhere else to go.