Chicago Volunteer Legal Services

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Chicago Volunteer Legal Services Estate
Planning for Medicaid
Janna Dutton Associates, P.C. One N. LaSalle
Street, Suite 1700 Chicago, IL 60602 (T)
312-899-0950 (F) 312-899-0959 www.duttonelderlaw.
com
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Planning for Long Term Care Costs

• The cost of long term care - meaning either in
  home care or nursing home care for individuals
  requiring assistance with activities of daily
  living- is largely an uninsured health care cost
  for most individuals. Planning for possible
  exposure to these costs is necessary for
  effective retirement planning.

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Medicare Coverage of Long Term Care 1.Covers
100 days of skilled nursing care provided in a
Medicare certified nursing facility following a
hospitalization per spell of illness. Medicare
pays the full cost of the first 20 days. There is
a coinsurance payment of 133.50 per day for days
21 through 100 which most Medicare supplemental
policies cover. 2.Medicare provides home care
to those individuals needing intermittent skilled
care, usually post hospitalization only, although
long term part time skilled home care services
are covered. Skilled care does not include
custodial care, which is the type of long term
care most individuals impaired by dementia require
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Funding Long Term Care Costs

• Long Term Care Insurance
• Long Term Care Insurance is the only insurance
  which pays for ongoing nursing home, assisted
  living, or custodial home care.
• Illinois Medical Assistance
• The Medicaid program in Illinois is a needs
  based program and covers custodial long term care
  expenses for the aged and disabled - covers
  nursing home, some assisted living (Supportive
  Living Facilities) and some home care Community
  Care Program, In Home Services.

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Exempt Property

• 2000 Asset Disregard
• Homestead Property
• Personal Effects and Household goods
• Automobile worth 4500 or less (unless needed for
  Medical Transportation, modified, or for
  employment)
• Burial Plot and Tangible Burial Merchandise
• Exempt Prepaid Burial Arrangements
• Revocable Burial Trust - 1500
• Irrevocable Burial Trust - 5,210
• Life Insurance Irrevocably Assigned to Funeral
  Home

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Income Eligibility Spend Down

• Illinois is an income spend down State if an
  applicants countable income is 1 less than the
  private pay cost of care, the applicant is income
  eligible.
• Countable income is the income left after certain
  deductions
• Personal Needs Allowance - 30
• Amounts need for Health Insurance premiums
• Community Spouse Maintenance Needs Allowance
• Amounts needs for medically necessary items and
  services not covered by Medicaid.

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Community Spouses Income Not Counted

• Income of community spouse does not affect
  eligibility of nursing home spouse
• If community spouses monthly income gt2,739
• Spousal contribution assessed by State
• Paid directly to State (not nursing home)

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Deficit Reduction Act of 2005

• The federal Deficit Reduction Act of 2005, Pub.
  L. No. 109-171 (DRA), signed into law by
  President Bush effective February 8, 2006, made
  substantial, and for the most part punitive,
  changes to the eligibility rules for long-term
  care coverage. Although the State of Illinois
  was required to implement the DRA in 2006, it has
  not done so. However, it is likely (unless DRA
  is amended by Congress) that Illinois will be
  implementing the DRA in the future.

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Transfer of Asset Penalties for Long Term Care
Medicaid programs

• Present Illinois Rule look back period 36
  months from month of application for Medicaid,
  except 60 months for transfers to irrevocable
  trusts or from revocable trusts
• If nonallowable transfer occurs during the look
  back period, a penalty period of ineligibility is
  applied calculated by dividing the total
  transfers made in each month by the private pay
  cost of the nursing home, supportive living
  facility, CCP cost.

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Example of Penalty Period

• Total gift/private pay cost of nursing home
• Gift of 50,000 in 1/09
• Private pay cost of 6000 (200/day times 30)
• 50,000/6000 8.33 (8 months)
• Penalty period beginning1/09 through 8/09

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Allowable Homestead Transfers

• Medicaid applicants are allowed to transfer their
  homestead property to certain persons
• Community Spouse
• Live -in Caregiver child (2 years)
• Sibling with an equity interest who has lived in
  home for at least 1 year
• Disabled or minor child

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Allowable Transfers

• There are certain allowable transfers that will
  not affect eligibility for Medicaid
• Transfer to or for the benefit of a adult
  disabled child (SSA definitions of disabled)
• Transfers to a trust for the benefit of a
  disabled person
• Transfers made exclusively for reasons other than
  to become eligible for Medicaid
• Transfers for fair market value
• Where the imposition of a penalty period will
  cause a hardship

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Community Spouses

• IL Community Spouse (CS) may refuse to disclose
  her assets
• Will not affect nursing home spouses (NS)
  eligibility
• BUT CS not eligible for Community Spouse Asset
  Allowance
• AND Transfers from NS to CS during look back
  period will cause penalty period

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Community Spouse Income Allowance

• The State of Illinois allows the Community Spouse
  of a Medicaid nursing home resident to receive a
  portion of the income of the nursing home
  resident, which is the Community Spouse
  Maintenance Needs Allowance (CSMNA). The CSMNA is
  calculated by subtracting the nursing home
  spouses income from the standard, which in 2009
  is 2739. The State never directly subsidizes a
  CS.

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Exempt Trusts - OBRA

• OBRA Trusts allow Medicaid recipients to set
  aside their nonexempt funds in an irrevocable
  trust which can be used for their benefit and
  remain eligible for Medicaid
• Medicaid recipient must be disabled
• Trust must be Irrevocable and for the exclusive
  benefit of disabled Medicaid recipient
• Trust must contain a pay back provision to the
  State at the death of the beneficiary

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OBRA Trusts

• Individual OBRA Trusts
• Available to disabled persons under the age of 65
• Pooled OBRA Trust Subaccounts
• Presently available to disabled persons of
  any age
• Must be managed by a non for profit
  organization
• Illinois Pooled Trusts
• Illinois Disability Association Pooled Trust
  (contact Howard Berk at 312 332 4622)
• Options For Living Pooled OBRA Pay Back Trust
  (contact Jeffrey Schmidt at 630-443-2011)
• Life Plan, Inc. Pooled Trust (630 620 2222).

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Rules which may Change

• Pooled OBRA Trust Subaccounts
• State may start penalizing transfers by persons
  over the age of 65 to Pooled OBRA Subaccounts
• Spouse Refusal to Disclose Assets
• State may discontinue practice of allowing
  community spouses to refuse to disclose assets
• Deficit Reduction Act of 2005
• State may implement the DRA 60 month look
  back starting the month of eligibility for
  Medicaid coverage of nursing home care.

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Resources for Information

• Illinois Program Manual
• Detailed policy and procedure relating to
  the Medicaid program is contained in the IDHS
  Combined Policy Manual (PM) and Workers Action
  Guide(WAG). This manual is a necessity for
  anyone processing Medicaid applications and may
  be accessed online at http//163.191.134.21/pmwag/
  intranet.htmlhttp//www.dhs.state.il.us/
  (Illinois Department of Human Services web site -
  search for Cash, Food Stamp and Medicaid Manual).

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Resources for Information, cont.

• www.duttonelderlaw.com
• A detailed explanation of Medicaid coverage
  of long term care in Illinois can be found on the
  website of Janna Dutton Associates. It contains
  citations to the IDHS policy manual which will
  allow you to find the policy sections relevant to
  your issue which is otherwise a time-consuming
  search. You can find this material by clicking
  onto the Speaking Engagements Menu Option, then
  clicking onto the Learn More hyperlink and
  finally downloading the Medicaid Book Chapter
  in the blue box. You can also use the following
  direct link
• www.duttonelderlaw.com/documents/2008_Medicaid_Cha
  p_Draft.pdf