Ronald Morton's Elder Law Blog

The Medicaid Penalty

Under Mississippi and Federal law, transfers of assets by an Medicaid applicant within 60 months prior to a Medicaid application will result in a penalty of ineligibility.   Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return. These restrictions, already severe, have been made even harsher by enactment of the DRA.

This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.  In Mississippi, this divisor is $4,600.

Example: For example, in Mississippi, where the average monthly cost of care has been determined to be $4,600, and you give away property worth $46,000, you will be ineligible for benefits for 10 months ($46,000 ÷ $4,600= 10).

Another way to look at the above example is that for every $4,600 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month.

In theory, there is no limit on the number of months a person can be ineligible.  However, for transfers made prior to enactment of the DRA on February 8, 2006, state Medicaid officials will look only at transfers made within the 36 months prior to the Medicaid application (or 60 months if the transfer was made to or from certain kinds of trusts). But for transfers made after passage of the DRA the so-called “lookback” period for all transfers is 60 months.

Drafting Errors Can Be Corrected - Sometimes

A recent case demonstrates the potential for reformation of a Trust where a drafting error otherwise made the trust assets available for purposes of qualifying for Medicaid.  The New York surrogate’s court finds clear proof of mistake in the drafting of an irrevocable inter vivos trust and allows reformation to reflect the grantor’s intent that the trustee be expressly precluded from invading the trust's principal. In the Matter of Scheib  (N.Y. Sur. Ct., No. 343541, Jan. 26, 2007).

The Continuing Need for Life Insurance

In a previous article, we examined the various educational savings vehicles available to clients, including 529 plans, UGMA/UTMAs, Coverdell Education IRAs and life insurance. Using life insurance as an education savings vehicle prompted several questions about other uses for life insurance. Therefore, this as a follow up, this article examines some of these other common uses for life insurance, the only asset class that can ensure the completion of proper funding for a myriad of unique planning needs regardless of the state of the federal estate tax!

   
  

Medicare Nursing Home Coverage is Limited

Medicare is the federal government’s principal health care insurance program for people 65 years of age and over. In addition, the program covers people of any age who are permanently disabled or who have end-stage renal disease (people with kidney ailments that require dialysis or a kidney transplant). The Medicare program insures 39 million Americans and spends $213 billion a year on their care.

For the most part, Medicare pays only for "acute" care -- care that the program's administrators view as reasonable and necessary to diagnose or treat an illness or injury. In other words, the program does not pay for most preventive or chronic health care. Medicare consists of three major programs: Part A, which covers hospital stays; Part B, which covers physician fees; and the recently-added Part C, which permits Medicare beneficiaries to receive their medical care from among a number of delivery options.