Are You Facing the High Cost of Nursing Home Care? Don t Go Broke in a Nursing Home A Consumer s Guide to Paying for Nursing Home Care

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1 Are You Facing the High Cost of Nursing Home Care? Don t Go Broke in a Nursing Home A Consumer s Guide to Paying for Nursing Home Care Geisler Patterson Law By Martha Patterson, Certified Elder Law Attorney by the National Elder Law Foundation Call (888)

2 Don t Throw Away Thousands of Dollars Without Knowing All the FACTS. Many people have worked their whole lives saving and preparing for retirement. They aren t rich, but have accumulated a nice little nest egg hoping to provide security for both themselves and their spouse. One of their most heart-felt concerns is never to be a burden on anyone; not to their spouse, family, or friends... Then the unthinkable happens, a disabling health problem. Without help, adding the extra cost associated with caring for such a disabling illness is far beyond the income stream of most retirees. As a result, income producing assets needed for paying bills are depleted. Before long neither income nor assets are left, leaving the remaining spouse or recovering patient destitute. It is hard enough dealing with one s emotions because of long-term health problems, but to compound it with financial worries makes the situation doubly cruel. Qualifying for Medi-Cal for Nursing Home Care can help preserve those needed assets and income. Medi-Cal is California s version of the Medicaid Program and is funded jointly by the state and federal governments. Although Medi-Cal recipients often receive Medicare, the Medi-Cal program is not the same as Medicare insurance benefits. Medi-Cal provides financial assistance in meeting the expenses related to: Doctor bills Hospital bills Skilled nursing facilities Medi-Cal for Long-Term Care was designed to help those who are in need of skilled nursing care from becoming impoverished. An individual who is age 65

3 or older, blind, or disabled will be eligible for Medi-Cal (Medicaid) in a skilled nursing facility or intermediate care facility if he or she meets the Asset and Income Limitations as described on the following pages. Qualify for Help MYTHS ABOUT MEDI-CAL But I Heard There is NO Way To 1. There is a 5 year look back (or penalty) on any gift or transfer California has not implemented the 5 year look back which is part of the Deficit Reduction Act of 2005 (DRA 05), and can only look back for 30 months. The rules in California allow for transfers and gifts if done correctly to be ignored for the purposes of qualifying for benefits. 2. You must be poor to qualify for Medi-Cal Poverty is required for many programs, however the Long Term Care Program was designed specifically to provide care for middle class families. The program is designed to prevent the impoverishment of spouses. Spouses now include all married couples including same gender couples. 3. I must spend down to qualify. Spending down your assets is not required. There are many options available to preserve assets and qualify a person for Medi-Cal. For Elder Law Attorneys like Certified Elder Law Attorney Martha Patterson the reward for preserving assets for clients especially when the at home spouse is able to thrive due to the planning done is priceless. 4. I have too much income to qualify.

4 Income determines the Share of Cost, but will not disqualify someone in California from qualifying for Long Term Care Medi-Cal and in many circumstances an Elder Law Attorney like Martha Patterson can obtain a Court Order which will allow the income of the Spouse in a Facility to be transferred to the at home spouse. 5. There is no way we can qualify we have way too many assets. It is rare that someone has so many assets that they cannot qualify. There are many strategies that can be used to preserve assets while qualifying a person for Medi-Cal. Don t Assume You Won t Qualify. If you call Martha Patterson, you may be like most people who call surprised to hear that Martha Patterson can help you qualify for Medi-Cal to pay for your stay in a Skilled Nursing Facility. Who Pays for Long Term Care? One of the things that concerns people most about nursing home care is how to pay for that care. There are basically four ways that you can pay the cost of a nursing home: 1. Long Term Care Insurance - If you are fortunate enough to have this type of coverage, it may go a long way toward paying the cost of the nursing home. Unfortunately, long term care insurance has only started to become popular in the last few years and most people facing a nursing home stay do not have this coverage. 2. Pay with Your Own Funds - This is the method many people are required to use at first. Quite simply, it means paying for the cost of a nursing home out of your own pocket. Unfortunately, with nursing home bills averaging between $7,500 to

5 $9,000 per month in our area (Los Angeles county); few people can afford a long term stay in a nursing home. 3. Medicare - This is the national health insurance program primarily for people 65 years of age and older, certain younger disabled people, and people with kidney failure. Medicare provides short term assistance with nursing home costs, but only if you meet the strict qualification rules. 4. Medi-Cal - This is a federal and state funded and state administered medical benefit program which can pay for the cost of the nursing home if certain asset and income tests are met. Since the first two methods of private pay (i.e. using your own funds) and long term care insurance are self-explanatory, our discussion will concentrate on Medicare and Medi-Cal. What is Medicare? There is a great deal of confusion about Medicare and Medicaid or Medi-Cal. Medicare is the federally funded and state administered health insurance program primarily designed for older individuals (i.e. those over age 65). There are some limited long term care benefits that can be available under Medicare. In general, if you are enrolled in the traditional Medicare plan, and you ve had a hospital stay of at least three days, and then you are admitted into a skilled nursing facility (often for rehabilitation or skilled nursing care), Medicare may pay for a while. (If you are a Medicare Managed Care Plan beneficiary, a three day hospital stay may not be required to qualify.) If you qualify, traditional Medicare may pay the full cost of the nursing home stay for the first 20 days and can continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that s nearly $150. per day. Some

6 Medicare supplement insurance policies will pay the cost of that deductible. For Medicare Managed Care Plan enrollees, there is no deductible for days 21 through 100, as long as the strict qualifying rules continue to be met. So, in the best case scenario, the traditional Medicare or the Medicare Managed Care Plan may pay up to 100 days for each spell of illness. In order to qualify for these 100 days of coverage, however, the nursing home resident must be receiving daily skilled care and generally must continue to improve. (Note: Once the Medicare and Managed Care beneficiary has not received a Medicare covered level of care for 60 consecutive days, the beneficiary may again be eligible for the 100 days of skilled nursing coverage for the next spell of illness). While it is never possible to predict at the outset how long Medicare will cover the rehabilitation, from our experience it usually falls far short of the 100 day maximum. Even if Medicare does cover the 100 day period, what then? What happens after the 100 days of coverage have been used? At that point, in either case you re back to one of the other alternatives: Long term care insurance, paying the bills with your own assets, or qualifying for Medicaid. What is Medi-Cal? Medicaid (Medi-Cal in California) is a benefits program primarily funded by the federal government and state administered. The rules do vary from state to state. One primary benefit of Medicaid is that, unlike Medicare (which only pays for skilled nursing), it will pay for long term care in a nursing home once you ve qualified. In our lifetime, Medi-Cal has become the long term care insurance of the middle class. But the eligibility to receive Medi-Cal benefits requires that you pass certain tests on the amount of income and assets that you have. The reason for Medi-Cal planning is simple. First, you need to provide enough assets for the security of your loved ones -- they too may have a similar crisis. Second, the rules

7 are extremely complicated and confusing. The result is that without planning and advice, many people spend more than they should and their family security is jeopardized. Medicare does not pay for treatment for all diseases or conditions. For example, a long term stay in a nursing home may be caused by Alzheimer s or Parkinson s disease, and even though the patient receives medical care, the treatment will not be paid for by Medicare. These stays are called custodial nursing stays for which Medicare does not pay, thus you ll either have to pay privately (your own funds or long term care insurance, or you ll have to qualify for Medi-Cal). Medi-Cal has a special benefit to cover the cost of Skilled Nursing Home Care. These special programs for home care and for care in a few select assisted living facilities. There is optimism that these programs that will keep people in the community and out of the nursing home, but for most people Medi-Cal is used to pay for the very expensive stay in skilled nursing care. Medi-Cal Assets that Won t Disqualify You from The following property is generally exempt and therefore not counted in determining Long Term Care Medi-Cal eligibility: The home: totally excluded, if it is the principal residence. The applicant must state an intent to return to the home. Includes mobile home, houseboat, or an entire multi-unit dwelling as long as any portion serves as the principal residence of the applicant.

8 Other real property: may be excluded if it is used in whole or in part as a business or means of self-support (you should see an attorney if you have other real property). Household goods and personal effects: totally exempt. Jewelry: for a single person, wedding, engagement rings and heirlooms, and items of jewelry with a net market value of $100 or less are totally exempt; for spouses; there is no limit on exempt jewelry for determining the institutionalized spouse s eligibility. One car is generally exempt if used for the benefit of the applicant/beneficiary or if needed for medical reasons. Whole life insurance policies with a total face value (also called combined death benefit ) of $1,500 or less. Term life insurance: totally excluded. Burial plots: totally excluded, includes headstone, crypts, etc. Prepaid irrevocable burial plan of any amount and $1,500 in designated burial funds. These designated funds must be kept separate from all other accounts. Cash surrender value or balance of pension funds, IRAs and certain types of annuities (you should see an attorney if you are considering buying an annuity). Up to $2,000 in cash reserve, e.g. in savings, checking, etc., for the Medi-Cal applicant. Community Spouse Resource Allowance (CSRA) for 2014: the spouse at home can keep the first $117, in assets, and may be able to keep more if their income is below the Minimum Monthly Maintenance Needs Allowance (MMMNA). For 2013 the resource amount is $ 2, All other assets are generally non-exempt, and are countable. All money and property, and any item that can be valued and turned into cash, is a

9 countable asset unless it is one of those assets listed above as exempt. If you don t do proper planning, you will spend down assets unnecessarily. Countable assets include: Cash, savings, and checking accounts, credit union share and draft accounts. Certificates of deposit, U.S. Savings Bonds, Individual Retirement Accounts (IRA), Keogh plans (401K, 403B) (Exempt for the community spouse). Nursing home accounts. Prepaid funeral contracts which can be canceled. Trusts (depending on the terms of the trust). Real estate (other than the residence). More than one car. Boats or recreational vehicles. Stocks, bonds, or mutual funds. Land contracts or mortgages held on real estate sold. Please remember the Medi-Cal rules themselves are complicated and tricky. With proper planning, assets can be preserved and protected by the use of Medi-Cal Asset Protection Trusts or other techniques depending on the circumstances. Protecting Your Home The home of a Medi-Cal beneficiary continues to be exempt from consideration as a resource under a wide variety of circumstances. These are spelled out in detail in W&I Code 14006(b). Under these provisions, a home will continue to be considered an exempt principal residence if:

10 During any absence, including nursing home stays, the individual intends to return to the home and states so in writing. If the beneficiary is incapacitated, a family member or someone acting on his/her behalf may so state this intent. The individual's spouse, child under the age of 21, or dependent relative continues to reside in the home. The residence is inhabited by the recipient's sibling, who has an equity interest in the home, or by a son or daughter who has resided there continuously for at least one year prior to the date the recipient entered the nursing home. There are legal obstacles preventing the sale and the applicant/beneficiary provides evidence of attempts to overcome such obstacles. The home is a multiple dwelling unit, one unit of which is occupied by the applicant. Because the home is exempt for eligibility purposes does not mean that the home is immune from an estate claim after the beneficiary dies. If the home is still in the name of the beneficiary when they die, Medi-Cal can recover from the estate. Intent to Return Required The principal residence is exempt based upon a person's subjective intent to return, even though they may never have the ability to return to that residence. If the applicant is unable to complete the application, their representative may indicate that intent. The eligibility worker may not restrict, in any way, the individual or their representative in the process of indicating that intent. As long as the applicant or beneficiary declares an intention to return home on the Medi- Cal application (i.e., checks the "yes" box), the house will be treated as a principal residence exempt from being counted as a resource by Medi-Cal. Unless the applicant is requesting an income deduction to maintain the home for the return within six months pursuant to Title 22, Section 50605, the county may not require any verification of the individual's ability to actually return home. If the applicant or their representative incorrectly states that there is no intent to

11 return and later makes a correction, the county must accept that correction (See ACWDL Nos and 00-11). "Intending to return home" will also keep the home safe if the community spouse dies first, but only for the life of the institutionalized spouse. Applicants/beneficiaries may want to transfer the home entirely to the community spouse in order to avoid an estate claim after the surviving spouse dies. In addition, if the community spouse dies first, the home will likely end up in the probate estate of the institutionalized spouse and be swallowed up in estate recovery claims. Difficult Answers Some Common Questions and California s Medi-Cal applicants and beneficiaries are often confused about their rights regarding Medi-Cal and are particularly concerned that the state will take their homes after they die if they received Medi-Cal benefits. The following Frequently Asked Questions attempts to answer some of these concerns and to provide consumers with the information necessary to make informed choices about their estates when they are applying for Medi-Cal. Q. I ve added my kids names to our bank account. Do they still count? A. Yes. The entire amount is counted unless you can prove some or all of the money was contributed by the other person who is on the account. This rule applies to cash assets such as: Savings and checking accounts Credit union share and draft accounts

12 Certificates of deposit U.S. Savings Bonds Q. Can t I Just Give My Assets Away? A. Many people wonder, can t I give my assets away? The answer is, maybe, but only if it s done just right. The law has severe penalties for people who simply give away their assets to create Medi-Cal eligibility. In California, for example, every $7,500 given away during the three years prior to a Medi-Cal application creates a one month period of ineligibility. Currently in California there are some techniques that an Elder Law attorney can use to stack the gifts. However, legislation enacted on February 8, 2006 by the federal Government will extend the look back period to five years and impose other harsh new penalties for gifts made as soon as California enacts this law. Giving under the new rules may be possible; however, it is critically important that you have the advice of an attorney well versed in these new rules. Though some families do spend virtually all of their savings on nursing home care, Medi-Cal often does not require it. There are a number of strategies which can be used to protect family financial security. Q. Can the State Take my Home If I Go on Medi-Cal? A. The State of California does not take away anyone's home per se. Your home can, however, be subject to an estate claim after your death. For example, your home may be an exempt asset while you are alive and is not counted for Medi-Cal eligibility purposes. However, if the home is still in your name when you die, the State can make a claim against your estate for the amount of the Medi-Cal benefits paid or the value of the estate, whichever is less. Thus, if your home or any part of it is still in your name when you die, it is part of your "estate" and can be subject to an estate claim. Q. Can the State Put a Lien on My Home? A. Consumers often confuse liens and estate claims. Both have been used by the State in attempts to reimburse the Medi-Cal program for payments made to

13 beneficiaries. Liens are placed on living Medi-Cal beneficiaries' estates to "hold" the property until the person dies. Estate claims are claims made against the estate of the Medi-Cal beneficiary after he or she dies. As of January 1, 1996, California is not permitted to impose liens against the homes of nursing home residents or their surviving spouses, except in cases where the home is not exempt (i.e., the nursing home Medi-Cal applicant did not indicate an intention to return home) and the home is being sold. Under current law, these are the only liens that can be placed on the homes of living beneficiaries. Most Medi-Cal applicants' homes are exempt because a spouse, child or sibling lives there or they do indicate an intention to return home on the Medi-Cal application, so even these liens are rare. After the beneficiary has died, the heirs or survivors may sign a "voluntary" lien for Medi-Cal recovery purposes, if they cannot otherwise avoid an estate claim against the property. Q. What Happens After I Die If I Received Medi-Cal? A. After the Medi-Cal beneficiary's death, the State can make a claim against the estate of an individual who was 55 years of age or older at the time he or she received Medi-Cal benefits or who (at any age) received benefits in a nursing home, unless there is a surviving spouse or a minor, blind or disabled child. Thus, if there are any assets left in the estate of the deceased beneficiary, Medi-Cal will seek to be reimbursed for benefits paid. It is important to note that, even if you received Medi-Cal at home, any benefits paid while you were 55 years of age or older will be subject to Medi-Cal recovery. Q. How Much Can the State Recover? A. California's definition of "estate" includes such assets as living trusts, joint tenancies, tenancies in common and life estates, although claims on the remainder interest in life estates are limited to those that were revocable. Many consumers place their property into living trusts, thinking that this will protect it from an estate claim. It does not. The State can still make a claim against property held in a living trust, joint tenancy or tenancies in common, as long as the beneficiary's name is still on the property at the time of death.

14 However, the amount of recovery is limited to the amount of benefits paid or the value of the beneficiary's estate, whichever is less. For example, if the appraised value of your home is $200,000 and you left it in joint tenancy with your three children, the State can only collect up to $50,000, which is your part of the estate - even if the Medi-Cal benefits paid to you is more than $50,000. The value of the estate is also reduced by any outstanding mortgages or debts on the home. For example, if the home had an outstanding mortgage of $100,000, this reduces the value of the estate to $100,000 (the appraised value of $200,000, minus the mortgage). This, in turn, reduces the amount of the estate claim to $25,000. (The value of the home ($100,000) divided by the four joint tenants.) Deducting the amount of burial costs or estate settlement costs can also reduce the claim. Remember to keep receipts and submit them. When the State files an estate claim, they are also required to send an itemized billing of benefits paid over the deceased's lifetime. It is important to review the billing to see if there are any errors. Payments made for personal care services under the In Home Supportive Services (IHSS) program, the cost of premiums, copayments and deductibles paid on behalf of either Qualified Medicare Beneficiaries or Specified Low-Income Medicare Beneficiaries (QMB/SLMB) are exempt from recovery. Thus, if payments for these services are included in the itemized billing, the collection representative should delete this from the billing. Q. Are There Any Exceptions to an Estate Claim? A. Surviving Spouse: The state is prohibited from recovery while a surviving spouse of a deceased Medi-Cal beneficiary is alive. However, after the surviving spouse dies, recovery may be made against any property received by the spouse through distribution or survival, e.g., property left under a will or community property. However, if the home is transferred out of the nursing home resident's name while he or she is alive, no claim can be placed on the home. Spouses should be careful to "transmute" the property, i.e., through a court order or by having the nursing home spouse sign a declaration relinquishing his/her interest in the property.

15 Minor, Blind or Disabled Child: If a minor child under the age of 21 or a blind or disabled child of any age survives the beneficiary, a claim is prohibited by federal and state laws. The surviving minor child or his/her representative only needs to send proof, such as a birth certificate or adoption papers, that they are the child of the decedent or, in the case of disabled child, documentation of disability or blindness, such as a Social Security or SSI award letter and a birth certificate showing they are the child of the deceased. If the surviving child does not have documentation of disability from the Social Security Administration, he/she can still file for a disability determination with the Department of Health Services. It is important to note that the surviving child does not have to live in the home (or even in the State, for that matter) in order for recovery to be barred. When there is Nothing Left in the Estate: Since most deceased Medi-Cal beneficiaries leave nothing but their homes, it is most important to look at the deed to the property. Whose name was on the property at the date of death? If the beneficiary transferred the property outright prior to death, then send a copy of the deed, along with a letter explaining that the beneficiary left nothing in his/her estate and ask that the case be closed. If the beneficiary transferred the home outright while he or she was alive and reserved a life estate or an occupancy agreement, send a copy of the deed showing the property was transferred before the beneficiary died. Q. What Else Besides My Home Can the State Claim Against? A. Under current law, "estate" is defined as any real or personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including assets conveyed through joint tenancy, tenancy in common, survivorship, life estate, living trust or other arrangement. Anything left in the decedent's bank accounts, for example, can be subject to recovery, after estate and burial expenses or other documented expenses are paid. The State can also recovery from annuities purchased by a beneficiary on or after September 1, 2004, regardless of whether the remainder interest in the annuity is a lump sum or a stream of income. Call Martha Jo

16 Patterson if you have specific questions regarding what assets are subject to recovery. Life Estates: Under the new recovery rules, claims on irrevocable life estates are waived, but the state is placing claims on "revocable" life estates. For example, if you retain a life estate and, "upon death the remainder to the children", this would not be considered a transfer and your home could be subject to recovery. If the gift deed transfers the home outright to the individual(s) and you retain a life estate, this would be considered irrevocable and would be immune from recovery. The State cannot recover from IRAs, work-related pension funds or term life insurance policies, unless they name the state as the beneficiary or they revert to the estate. This is rare, as most people name a beneficiary for pension funds and insurance policies. Q. How Does the State Know When a Medi-Cal Beneficiary Dies? A. Notice of Death: When a Medi-Cal beneficiary dies, the County Medi-Cal office notifies the Department of Health Services in Sacramento and benefits are terminated. However, for recovery purposes, the burden of notifying the State of the death is still on the beneficiary's estate. California law, under Probate Code 215, requires that, when a deceased person has received or may have received health care benefits or was the surviving spouse of a person who received such benefits, the estate attorney, the beneficiary of the estate, the personal representative or the person in possession of the property is required to notify the Director of the Department (at the Sacramento office of DHS) no later than 90 days after the person's death. A copy of the death certificate is required to be sent. Beware of Forms: The Recovery Unit has sent out a number of questionnaires to consumers implying that they are under a legal obligation to complete and return them. The only legal obligation under law is to send a notice of death and a copy of the death certificate when a deceased Medi-Cal beneficiary or the spouse of a deceased beneficiary dies. If the State has sent an estate claim, then the

17 questionnaire is a way for them to find out what property, if any, is left in the deceased beneficiary's estate. If there was no property left in the deceased's name, then completion of the form (or an attached letter) should be an easy matter. Enclose a copy of the deed to show the property was transferred during the life of the beneficiary. If the estate is more complicated, then consumers should seek advice from their attorney, before completing and returning any questionnaires or forms. Why Seek Advice for Medi-Cal? As life expectancies and long term care costs continue to rise, the challenge quickly becomes how to pay for these services. Many people cannot afford to pay $7, per month or more for the cost of a nursing home, and those who can pay for a while may find their life savings wiped out in a matter of months, rather than years. Fortunately, the Medi-Cal Program is there to help. In fact, in our lifetime, Medi-Cal has become the long term care insurance of the middle class. But the eligibility to receive Medi-Cal benefits requires that you pass certain tests on the amount of income and assets that you have. The reason for Medi-Cal planning is simple. First, you need to provide enough assets for the security of your loved ones -- they too may have a similar crisis. Second, the rules are extremely complicated and confusing. The result is that without planning and advice, many people spend more than they should and their family security is jeopardized.

18 About Martha Patterson Attorney Martha Patterson is dedicated to providing comprehensive, highly personalized counsel in all aspects of Elder Law and Estate Planning. Martha is a Certified Elder Law Attorney (CELA) as certified by the National Elder Law Foundation. This designation further distinguishes her as a nationally recognized expert in her practice areas of elder law, estate planning, special needs trusts, disability planning and advocacy, probate, and estate/trust administration. Currently there are less than 40 CELA s in California. Martha understands the unique needs of the Elderly and Disabled, and spends numerous hours educating herself about the best strategies to provide protection and financial security for the unique needs of persons with disabling conditions. She spends time with Nurses, Social Workers, Care Givers, and has personal experience with the challenges of caring for a family member with Dementia and Special Needs children. Her commitment to making sure that everyone can enjoy the benefits of proper planning is shown by her willingness to make a home or hospital call. Martha is a native of California. She grew up in Orange County where her father was City Attorney of Anaheim. She followed in her father s footsteps after graduating from California State University-Fullerton with a Bachelor of Sciences, and graduated from Western State University School of Law in Fullerton in December of She took and passed the Bar exam and was admitted to the Bar in June of She spent nine years as a Deputy City Attorney and as a winning litigator. Martha is a member of Wealth Counsel, The National Academy of Elder Law Attorneys, and a founding member of the Southern California Chapter of the National Academy of Elder Law Attorneys. She is also a member of the San Fernando Valley Bar Association, San Fernando Valley Estate Planning Council, North Valley Regional Chamber of Commerce, and Southern California Council of Elder Law Attorneys. Prior to moving to the Valley, she was active in the Orange County Bar Association, serving on the Board of Directors for the Elder Law Section, and for Orange County Women Lawyers. In Law School she was an Editor and Author for Law Review and was on the first place team in her Moot Court competition. Martha enjoys attending church and school activities with her husband Bob and children Christa and Daniel. 2/15/2014 by Martha Patterson