Most of our clients are facing a crisis. They are disabled personsof varying age or the frail elderly who need long-term health care. They require home-care services (averaging $100 per day for round-the-clock care); adult-day-care services (averaging $150 per day); or nursing-home services (averaging $250 per day).
It is the rare client who has sufficient means to pay for long-term care without depleting his or her lifetime savings. Other clients have long-term care insurance that will cover some or all of the costs. The overwhelming majority of our clients, however, do not qualify for long-term care insurance and could not afford the premiums even if they did qualify. These clients are realistically concerned that in paying for long-term care they will become destitute and unable to provide for themselves, their spouses or their families.
If individuals are unable to pay privately and do not have long-term care insurance, their options are limited to two insurance programs — Medicare and Medicaid. Medicare is an acute-care health-insurance program providing hospital and medical services to eligible elderly and disabled beneficiaries. It provides very limited long-term health-care coverage and only when skilled-nursing care or rehabilitation is needed. The majority of our clients require custodial but not acute care. They need assistance with the basic activities of daily living feeding, dressing, toileting, walking, bathing etc. Many are suffering from Alzheimer’s Disease, Parkinson’s Disease, arthritis or multiple sclerosis. Others are frail. Medicare does not provide for their custodial needs.
New York, unlike most states, has a Medicaid program that comprehensively addresses the critical need for custodial care. It provides 24-hour home care, nursing-home care, adult-day-care programs, prescription-drug coverage, and other services, substantially without charge, to eligible elderly and disabled. Originally intended to serve only persons of very limited means, Medicaid has evolved into the long-term health-care provider for the middle class as well.
Although they have to be virtually impoverished to be eligible, middle-class applicants in need of Medicaid’s long-term-care services do not have to spend down all of their savings. There are specific provisions under federal and New York law that permit Medicaid applicants to qualify for Medicaid while preserving their savings and their homes and, often, even their incomes. These provisions and the necessary strategies are discussed below.
Eligibility for Non-Institutional Medicaid
To be eligible for Medicaid while living in the community(as opposed to living in a nursing home) a Medicaid applicant in2003 may not have more than $3,850 in resources, and a $1,500 burial account or irrevocable, prepaid, funeral contract of any amount. In New York City, Medicaid permits the funding of the burial account and the purchase of a funeral contract.
An individual may not have more than $662 per month in income. If the individual’s income exceeds $662, he or she is required to contribute the excess income, except health-insurance premiums and out-of-pocket medical charges, to the cost of care. In some instances, all income may be exempt.
There is no penalty period for transferring resources of any amount to receive Medicaid home care, adult-day-care services or prescription-drug coverage. Applicants with resources above $3,850 may become eligible for those Medicaid services on the first day of the month after they transfer their excess resources to a trust or to an individual.
Eligibility for Institutional (Nursing Home) Care
To be eligible for Medicaid in a nursing home, the same resource limits as above apply. However, all of the individual’s income except health-insurance premiums and a $50 per month personal-needs allowance must be paid to Medicaid to help cover the cost of care.
If the applicant is married, the resource and income rules are enhanced to protect the spouse at home. The “community spouse” is permitted to retain in 2003 a maximum of $90,660 in resources. Not included in that figure is the value of the couple’s residence. The community spouse is also permitted a monthly income of $2,267. If that spouse’s monthly income is less than $2,267, he or she may draw upon the income of the nursing-home spouse to reach that limit.
Transferring Assets and Medicaid Nursing-Home Eligibility
Generally, when unmarried applicants for Medicaid transfer resources to trusts or to individuals, they incur penalty periods during which time they are ineligible for Medicaid nursing-home services. There is an exception for applicants who are disabled and under 65 years of age: they may transfer their resources, including inheritances and personal-injury settlements, to supplemental-needs trusts without a penalty period. Married individuals may transfer resources to spouses without a penalty period being imposed. Once impoverished, they become eligible for, and will receive, Medicaid. The assets owned by the community spouse, however, may later be subject to recovery by Medicaid. If assets are transferred to persons other than a spouse or certain specified individuals, a penalty period is incurred during which the applicant is not eligible for Medicaid nursing-home services. It is never too late to transfer assets. An individual who has resources in excess of the Medicaid limits and faces immediate placement in a nursing home or is already a resident there, may protect approximately 50% of his or her resources and still qualify for Medicaid.
Determining the Penalty Period
After a Medicaid application for nursing home is filed, Medicaid reviews all the financial records of the applicant (and, if married, the spouse) for the previous 36 or 60 months, the look-back period. If any assets were transferred to individuals or trusts, a penalty period will be imposed. All transfers are added together, and the total is then divided by the average monthly cost of the nursing home (currently $8,157 in New York City). The result is the number of months the applicant is ineligible for Medicaid in the nursing home.
For example, if Ms. X, a New York City resident, transfers $81,570 to a trust or to a non-exempt individual, she incurs a penalty period of 10 months during which time Medicaid will not cover her nursing-home costs: $81,570 ÷ $8,157 = 10 months.
Transferring the Home: A Vital Issue
An individual’s home — a house, cooperative or condominium apartment — is an ‘exempt’ resource for purposes of determining initial Medicaid eligibility. Ultimately, however, Medicaid may place a lien on the sale proceeds of the home and take back from the sale the amount it spent on behalf of the Medicaid recipient. For this reason, the home must be considered an asset, and appropriate steps must be taken to transfer it. Transfers to a spouse and certain specified individuals will not trigger a penalty period for purposes of Medicaid nursing-home eligibility, but transfers to any other per-sons will. The transfer of a home must be undertaken with caution, and no transfers should be made without advice from an elder-law attorney.
Generally, it is inappropriate to simply transfer ownership of a house or apartment directly to another person when planning for long-term care. Such a transfer may incur a substantial period of ineligibility, and it may trigger a costly capital-gains tax. The more attractive alternative is to transfer the home to a trust with the pro-vision that the occupant or occupants have the right to continue to live there for the remainder of their lives. This provision will eliminate the tax liability and diminish the penalty period for nursing home eligibility. The trust agreement will include instructions about how the home will pass to heirs after the death of the occupants. No probate will be necessary.
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