Our law firm is pleased to present this 30 minute Webinar on Medicare, Long Term Care, Medicaid, & Planning.
Below are Slide Show notes from the live presentation
Understanding Medicare, Long Term Care, Medicaid,
& Planning Strategies
Alfonso Gambone, Esq.
- Medicare and its Limitations
- Long Term Care
- Available Assets & Medicaid Eligibility
- Asset Transfers & Medicaid Eligibility
- Planning Strategies
- Estate Recovery
Medicare and its Limitations
- What is Medicare?
- A federal government health insurance program
- Who is eligible for Medicare?
- Age 65 or older
- Under age 65 with certain disabilities
- All ages with End-Stage Renal Disease
- Pays certain but not all, health care costs
- It does not cover the cost of long term care in the home or in a nursing home
- It does cover hospital stays, limited days in a skilled nursing facility, and limited home care and hospice services
- For days 1 to 60 of a hospital stay, Medicare pays in full after a $1,316 deductible. For days 61 to 90, there is a copayment of $329 per day.
- For days 91 and beyond, there is a copayment of $658 per day for an additional 60 days. After day 150, Medicare does not cover the hospital stay
- For days 1 to 20 of a stay in a skilled nursing facility, Medicare pays in full as long as there is a skilled need. For days 21 to 100, Medicare will pay less than a copayment of $164.50 per day as long as the skilled need continues.
Supplemental Medicare policies, or “Medigap” policies, cover the deductibles and other costs, depending on the policy.
Medigap policies sold after January 1, 2006 aren’t allowed to include prescription drug coverage. If you would like prescription drug coverage, you may join a Medicare Prescription Drug Plan (Part D).
- Part B covers doctors’ visits, emergency room treatment, outpatient care, and other medical and preventive services.
- 2 types of services
- Medically necessary services: Services or supplies that are needed to diagnose or treat a medical condition and that meet accepted standards of medical practice.
- Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.
- The standard Part B monthly premium in 2021 is $148.50 for people with annual incomes of $88,000 (single filer) or $176,000 (joint filer) or less.
- The Part B yearly deductible is $203.00 (2021). After this deductible is met, the cost of services to the Medicare recipient is typically 20% of the Medicare-approved amount for most doctor services.
What Medicare Part A & B Will Not Cover
- Long-Term Care
- Most dental care
- Eye exams related to prescribing glasses
- Cosmetic surgery
- Hearing aids and exams for fitting them
- Routine foot care
- Part C is the Medicare Advance Plan health care option, similar to a Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO) plan.
- Enrollees in Medicare Part C are limited to medical providers within the plan, unless in an emergency, subject to approval.
- Will provide all Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. Medicare Advantage Plans may offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D).
- Insurance for patient’s medication needs.
- Patient pays a monthly premium to an insurance carrier for his/her Part D plan.
- Instead of paying full price, patient will pay a copay or percentage of the drug’s cost. The insurance company will pay the remainder
- Each drug plan will separate its medications into tiers. Each tier has a copy amount that the patient will pay.
- Example – A plan might assign a $7 copay for a Tier 1 generic medication and a Tier 3 is a preferred brand name for a $40 copay
- The insurance company tracks the spending by both patient and the insurance company until you have together spent a total of $4,430 in 2022.
- After patient has reached the initial coverage limit for the year, he/she enters the coverage gap (aka donut hole).
- During the gap, patient will pay only 25% of the retail cost of his/her medications.
- Patient gap spending will continue until his/her total out of pocket drug costs have reached $7,050 in 2022.
Long Term Care
- What is considered Long Term Care?
- Medical and non-medical care to people who have a chronic illness or disability to meet health or personal needs.
- Assist people with Activities of Daily Living
- Can be provided at home, in the community, in assisted living or in nursing homes.
Activities of Daily Living (ADLS)
- The average cost of a private room in a nursing home is $100,375.00 a year (2021), or $275.00 a day.
- The average cost of a semi-private room is $89,425.00 a year (2021) or a $245.00 a day.
- The U.S. Department of Health and Human Services estimates that 40% of persons who reach age 65 will enter a nursing home.
- 10 percent of the people who enter a nursing home will stay there five years or more.
- Approximately 50% of all nursing home residents pay nursing home costs out of their own personal assets.
- After these assets are spent, most people are eligible for Medicaid.
Medicaid Available Assets and Eligibility
- What is Medicaid
- A State and Federal program that will pay most nursing home costs for people with limited income and assets.
- Medicaid also pays for some long-term care services at home and in the community
- Eligibility is based on state specific guidelines
- To qualify for Medicaid, the government requires that one’s non-exempt assets are less than $2,400.00.
- Some states like Pennsylvania allows an extra $6,000 exemption, for a total asset limit of $8,000.
- For an applicant to have an asset limit of $8,000, his or her income must be under $2,382 / month (2021).
- Countable assets for the purposes of Medicaid are any assets (resources) that are not otherwise excluded.
- Assets (Resource)
- The assets, income and resources of an individual and his or her spouse as well as income or resources that they would have been entitled to, but did not receive due to the action of others either at their direction or on their behalf
What Counts as an Asset (Resource)?
- Money Market
- Brokerage Account
- Non-Qualified Annuities
- Cash Value of Life Insurance
What DOES NOT Count as an Asset (Resource)?
- Any other qualified retirement account
*Principal is not counted but disbursements are counted as income
What Counts as Income?
- Social Security
- IRA Distribution
- Interest from a Trust
- Interest from Accounts
- Rental Income
Medicaid – Excluded Assets
- Real Property – Primary Residence
- Home equity is limited to the first $603,000 (applicant must have intent to return) or unless the applicant’s spouse, child under the age of 21, or disabled child is residing in the home
- Business Property (Real and Personal)
- Used in the trade or business , essential to self support, regardless of value
Medicaid – Excluded Assets
- Non Business Property
- Essential to self support such as property used to produce items for home consumption, tools, equipment, uniforms required by the applicant’s employer
- Household Goods and Personal Effects
- Including but limited to clothing, jewelry, items of personal care, recreational equipment, musical instruments, and items required because of a person’s physical condition
- Motor Vehicle
- Only one motor vehicle is excluded. Other motor vehicles are counted at their equity value with the vehicle having the smallest equity value excluded
- Life Insurance Policies
- Owned by the applicant with a total maximum face of $1,500.00
- Term Life Insurance
- Burial Space
- Irrevocable Burial Reserve
- Revocable Burial Reserve – up to $1,500.00
- Community Spouse’s Qualified Retirement Plan and/or IRA
- Community Spouse’s Community Spouse Resource Allowance
Medicaid – Applicant with Spouses
- Institutionalized spouse (requires care)
- Community spouse (healthy spouse)
- Treatment of Resources
- All non-excluded resources owned by the applicant or the applicant’s spouse at the time the applicant enters the nursing facility are considered available to pay for care, less a Community Spouse Resource Allowance (CSRA)
- Standard Community Spouse Resource Allowance (SCSRA)
- Equals one-half of the total available spousal assets owned at the date of admission to the nursing home, up to the maximum of $130,380.00 (2021) and not less than $26,076.00.
- Treatment of Income After Eligibility Determination
- All income of the institutionalized spouse will be considered available to pay for nursing home except for an income contribution to the community spouse
- Income of the Community Spouse
- Not deemed available to institutionalized spouse
- Community spouse is entitled to a minimum monthly income to allow them to remain independent in the community—Community Spouse Needs Allowance (CSNA)
- Community Spouse Needs Allowance (CSNA)
- $3,260.00/month (2021) plus Shelter allowance ($654.00) (2021) = $3,914.00 (max)
- Shelter Allowance – Expenses for rent, mortgage, real estate taxes, insurance, condo/cooperative fees and utilities
Medicaid Asset Transfers and Eligibility
- The eligibility of Medicaid will depend on whether the individual transferred resources for less than fair market value before entering a nursing home and applying for Medicaid
- Transfers between spouses have no effect on eligibility
- In general, if an applicant or an applicant spouse disposes of a resource for less than fair market value, the Department of Welfare will impose a period of ineligibility for Medicaid
- The 5 Year Look Back Period
- There is a 60 month look back period prior to the date when the applicant
- (1) was institutionalized and
- (2) applied for benefits
- State’s Department of Public Welfare
- Divides the fair market value of the resource by the State’s Penalty Divisor ($11,099.04) (2021), a figure based upon the average statewide cost of nursing home care.
- Penalty period begins running when the applicant would be otherwise eligible for benefits (when no personal resources remain for care)
- In 2019, a nursing home resident gives her grandson $50,000.00 for his college education prior to entering a nursing home in June 2020. In June 2021, she exhausts her personal assets
- Resident ‘s Medicaid ineligibility period is 4.50 months ($50,000 / $ 11,099.04)
- Transfers to your spouse
- Transfer of property to an individual under 21 or blind or disabled
- Transfer of property to a sibling who has an equity interest in the home and has resided in the home for at least one year immediately before the date the individual was institutionalized
- Transfer of property to a “care-giver child” who resided in the individual’s home for at least 2 years immediately before the date the individual become institutionalized and who provided care to the individual which kept the individual out of the facility
- Transfer of assets to another for benefit of the Community Spouse
- Transfer of assets to or to a trust solely for, the individual’s blind or disabled child
- Transfer of assets to a trust for an individual, under 65, who is disabled based on SSI criteria
- Transfer of assets made with the intent to dispose of them at fair market value
Medicaid Look Back
- There is a 5-year look back period which the Medicaid applicant must get through.
- Whether the assets are transferred to a child or an irrevocable Trust, the assets will not be protected for Institutional Medicaid purposes until 5 years have passed.
- Fair Market Expenditures
- Repairs to the family home
- Paying down or paying off a mortgage
- Purchase of new car
- Pre-Paid funeral and burial arrangements
- Other Considerations
- Community Spouse’s Community Spouse Resource Allowance (CSRA)
- Community Spouse entry into a continuing care retirement community—one time entrance fee
- Transfer to spouses are excluded from transfer penalty
- Long Term Care Insurance
- Purchase policy that qualifies as a “partnership policy” which provides for the disregard of any assets or resources in an amount equal to the insurance benefit payments that are made to or on behalf of an individuals
- Purchase policy to protect against period ineligibility if you have made a less than fair market transfer
- The Omnibus Budget Reconciliation Act of 1993
- Mandates that States seek recovery from Medicaid recipient’s estate for benefits paid
- States have the option to include other real and personal property in which the recipient had a legal title or interest at death including assets conveyed to a successor, heir, or assign of the decedent through joint tenancy in common, survivorship, life estate, living trust, or other arrangement. 42 U.S.C. §1396p(b)(4)
- Limits recovery to probate estate
- State will pursue recovery for all nursing facility services, home and community based services and related drug services
- Makes the executor or administrator personally liable if they transfer property without satisfying DPW claim.
- Medicare does not cover Long Term Care
- Countable assets for the purposes of Medicaid eligibility are any assets that are not otherwise excluded
- The State will seek recovery from estate for benefits paid
- Proper Planning can preserve your assets
Alfonso Gambone, Esq
123 East Main Street
Moorestown, NJ 08057