VA and Medicaid: THE RIGHT BENEFIT AT THE RIGHT TIME
VA vs. Medicaid VA Benefits and Medicaid are two of the most common ways to pay for long term care But What do they pay for? When is a client eligible? How do I help a client get eligible? When is each benefit appropriate? When can I charge fees? Who do I represent?
We will cover VA Benefits (not so) Basics Service, medical, income and asset requirements Veteran vs. dependent qualification Medicaid Benefits (not so) Basics Medical, income and asset requirements Single vs. Spousal qualification Techniques for Qualification Fees
Veteran's Administration Benefits The Veteran's Administration has several programs that can benefit clients Fall into two major categories Compensation programs for those with a service-connected disability Pension programs for those with extremely low income, or meet certain requirements Low Income Aid & Attendance Housebound Today we will cover pension programs only
Aid & Attendance/Housebound Basics Tests for Qualification Service Requirements Medical Needs Yearly income under $20,447 for single veteran, $24,239 with one dependent Countable Assets under a certain amount
Service Requirements Dates of Service Veteran must have served ninety days active duty, with 1 day during a period of War as defined by VA WWII: December 7, 1941 December 31, 1946 Korea: June 27, 1950 January 31, 1955 Vietnam: February 28, 1961 May 7, 1975 Gulf War: August 2, 1990 -?? Not yet set Did not have to serve in combat zone to qualify Must have been discharged under other than dishonorable conditions
A&A: Medical Needs Aid & Attendance provides benefits for veterans, dependents and surviving spouses who: Require assistance in two of ADLs: eating, bathing, dressing or taking care of needs of nature OR Are bedridden OR Are in a nursing home due to a mental or physical disability OR Are blind
Housebound: Medical Needs Housebound program provides benefits for veterans and surviving spouses who: Housebound means permanently housebound by reason of disability Must be substantially confined to dwelling and immediate premises Must be reasonably certain disability and confinement will continue throughout lifetime
Medical Needs Can be eligible for pension solely on the basis of low income Must be age 65 or older, or Permanently and totally disabled, not due to your own willful misconduct Technically, A&A is an allowance added to the low income pension Can be important with respect to Medicaid qualification
VA Benefits: Income Income limit depends on program applying for and if veteran had dependents Program Aid & Attendance Housebound Veteran (yearly) Veteran (monthly) Veteran and Dependent (yearly) Veteran and Dependent (monthly) Surviving Spouse (yearly) Surviving Spouse (monthly) $20,447 $1,704 $24,239 $2,020 $13,138 $1,094 $14,978 $1,248 $18,773 $1,564 $10,046 $837 Pension $12,256 $1,021 $16,051 $1,337 $8,219 $685
VA Benefits: Income One of the greatest advantages of the VA Benefits: allowable deductions Can back out unreimbursed, recurring medical expenses Some income, such as public benefits, may not be counted Example: if Veteran s only source of income is SSI, income for VA purposes is $0.
VA Benefits: Income In order to receive the countable income reduction, medical expenses must exceed five percent of the qualifying yearly income Monthly Medicare premium is $99.90, or $1,198.80 Five percent of the yearly allowable income for a single veteran is $1,022.35 A single veteran meets this requirement simply by paying the Medicare premium!
VA Benefits: Assets Countable Assets must be below a certain amount Does not include home, vehicle, prepaid burial plan No lookback period for VA asset transfers However, be careful here: there may come a time when you need to move on to Medicaid, and transfers will count against you there
VA Benefits: Assets So, how much can I have? Moving target VA uses a formula involving your age, level of disability, and the assets you have to pay for your care There is no $80,000 limit, and there is no safe amount
VA Benefits: Assets VA weighs expenses vs. resources to determine eligibility Determine life expectancy according to VA tables Determine monthly unreimbursed medical expenses, then multiply by 12, then by life expectancy Multiply monthly income by 12, then by life expectancy Add countable resources When projected expenses outweigh projected income and resources, applicant is qualified
VA Benefits: Assets VA Asset Eligibility Calculation: Monthly Unreimbursed Medical Expenses x 12 x Life Expectancy Monthly > Income x 12 x Life + Expectancy Countable Resources
VA Benefits: Summary Eligibility Requirements Income Test Asset Test Medical Eligibility Service Eligibility Income Deduction Allowed? Look Back Period? VA Benefits Yes; paid on sliding scale Yes; expenses must exceed resources Yes; ADLs, blind, housebound Yes; 90 days active, one day of war Yes; unlimited No Maximum Amount Available $1,704(single); $2,020 (married) $1,094(widow) How is benefit paid? Directly to recipient
Medicare vs. Medicaid Medicare is federally established health insurance for those over age 65 and select others An entitlement if you pay into the system Cannot be taken away Medicaid is federally funded, state administered healthcare assistance for those who meet certain need-based tests Must qualify according to strict guidelines Only pays in certain situations or for certain persons
Medicaid Basics 3 Tests for Qualification Medical Necessity Income under $2022/mo (gross) Countable assets under $2000
Medical Necessity A person must be recognized as requiring 24-hour care to receive Medicaid Certified by the doctor or a facility Usually not an issue, but can be problematic with mental illness patients
Income $2,094/month or less gross This number is indexed to the poverty level Changes every year (except this year!) Keep an eye out every January for problems Watch your nets and grosses Application will be denied if the gross is over $2,094
Countable Assets Must be under $2,000 total countable assets Non-countable: Home up to $500,000 in value One vehicle Prepaid burial Life insurance policies with face value under $1500 total
Medicaid Basics Solutions Over income: client needs a Miller Trust Over resource Pay off debt, repair property, purchase pre-need funeral plan, etc. For a single person: Return-of-transfer gifting Spend down For a married couple: Determine if Protected Resource Amount can be expanded for at home spouse Determine if annuity is appropriate Spend down
Case Study Single Person Irene recently had a stroke. Her husband died in 2002. She owns a home worth $150,000 and one car. She makes $1,854 per month from Social Security, but $310 is deducted from her check for an insurance premium. She has $1,500 in the bank and no other assets. Will she qualify?
Case Study Single Person Answer: no. Irene is over the income limit. $1,854 + 310 = $2,164
Solution for Over Income Clients Irene needs a Miller Trust Also called a Qualified Income Trust Not a traditional trust Sole purpose is to channel funds from client trust care facility Does not hold title to assets
Why does a Miller Trust work? Created to address those who make more than the maximum allowed, but less than they need to pay for their own care Trust serves the purpose of removing funds from the client's hands and ensuring they go to the facility Medicaid considers this as meeting the income test
Case Study Single Person Bill makes only $1,250 per month gross. However, he has $20,000 in a CD at Wells Fargo, and $6,000 left in his bank account. Bill owns a $150,000 home and one car, worth $15,000. Will he qualify? What are his countable resources?
Case Study Single Person Answer: no. Bill is over the resource limit. Countable resources: $20,000 CD + $6,000 checking = $26,000 countable resources Excluded: Home, car
Solutions for Over Resource Clients Not as easy as over income clients Families are mostly concerned about extra expenses the $2,000 makes them nervous What if Medicare, Medicaid and the supplement don't cover everything? How do we keep up the house? How do we buy Dad necessities?
Converting Countable Assets Problem: too much cash Solution: convert cash into an asset that does not count towards $2,000 limit Pay off mortgage, health costs or credit card debt Purchase a pre-need burial plan Repair home We are spending cash, but retaining value
Converting Countable Assets Some assets may have to be sold Example: motor home worth $10,000 This asset by itself disqualifies client Has to be sold, and the cash converted into a non-countable asset
Spend Money on Care Many people want to use their money for their care, but also want to leave something behind This is a personal decision our jobs are to simply educate families of the options, and allow them to decide
Gifting Must be done with extreme care and caution Basic plan: Client gifts all money away Recipient returns the difference between income level and cost of care each month Penalty period and gift amount meet in the middle Recipient can usually keep 40-60% of funds transferred
Transfer Example Date Days in Month Amount of Transfer Days of Penalty Assessed Days of Penalty Served Room and Board Additional Expenses 3/1/12 31 $25,000 174.92 0 $2,150 $1,739 4/1/12 30 $21,111 147.71 31 $2,000 $0 5/1/12 31 $19,111 133.72 61 $2,150 $410 6/1/12 30 $16,561 115.87 92 $2,000 $105 7/1/12 Applicant Qualifies 31 $14,456 Amount Retained 101.15 122 $2,150 Paid by Medicaid Can be paid out of additional funds When days of penalty served are greater than days of penalty served, Applicant qualifies. Here, Applicant retains $14,456, and spent $10,544 over five months to qualify. Divisor: $142.92.
Gifting Numbers are approximates and will change with monthly care fees Use extreme caution with this plan Very easy to do incorrectly Can easily get into liability issues with family if not everyone is on the same page I would highly recommend referring a family to an attorney familiar with issue
Qualification for Married Persons A few significant differences Spouse does not have to be impoverished for client to receive benefits Spouse at home can keep more income Spouse at home can keep more assets
Married Persons - Income Spouse at home can keep all of his or her income Name on the check rule If spouse's income is under $2,841, spouse can keep the difference between spouse's income and client's income up to this amount
Married Persons Income Clancy is in a skilled nursing facility. He and Irene own a $150,000 home, one car, and have prepaid burial policies. Clancy's income is $2,135 per month (gross). Irene receives a social security check for $850. What happens when Clancy applies for Medicaid?
Married Persons Income Answer: Clancy is denied he is over income and needs a Miller Trust Once a trust is established, every month: $60 goes to Clancy $1,991 goes to Irene ($2,841-$850) $246 goes to care facility, Medicaid pays the rest Irene keeps $2,841, and Clancy is qualified
Married Persons - Assets Spouse can also keep more assets Medicaid sets a ceiling and floor amount Guidelines: spouse can keep one half of assets between $22,798 - $113,640 Consider all assets in either spouse's name Max spouse can keep is $113,640 If under $22,798, spouse can keep all assets
Spouse at Home Assets Same scenario, but Clancy and Irene have $20,000 in checking Answer: Will qualify immediately Under floor, so Irene can keep all assets
Spouse at Home Assets Same scenario, but Clancy and Irene have $50,000 in checking Irene can keep $25,000 Must spend down Clancy's $25,000 to $2,000 Use same techniques as before Convert to countable assets Pay for care Use on services for Irene, if necessary
Spouse at Home Assets Can also purchase an annuity Money is paid to spouse at home and is considered income, rather than an asset Will result in higher payments to care facility during annuity period Seek professional assistance here There are strict regulations surrounding annuities, and implications can be confusing and extensive
Spouse at Home Assets Same scenario, but Clancy and Irene have $150,000 in assets Irene can keep $75,000 Must spend down Clancy's $75,000 to $2,000 Same scenario, but Clancy and Irene have $300,000 in assets Irene can keep $113,640 the maximum Must spend down the other $186,360
Expanded PRA Another option for couples If both spouses' income is low, can protect assets in lieu of income Called expanding the protected resource amount Spouse at home can then keep more assets
Expanded PRA Assume Clancy and Irene have a combined monthly income of $1,941, which is a difference of $900 from the maximum amount allowed of $2841. $900 x 12 = $10,800 per year in unearned income $10,800.02% = $540,000 sheltered $10,800.01% = $1,080,000 sheltered Must consider gross income Must give all income to spouse at home first Divisor is current CD interest rate
Medicaid Benefits Summary Eligibility Requirements Income Test Asset Test Medical Eligibility Service Eligibility Income Deduction Allowed? Look Back Period? Maximum Amount Available How is benefit paid? Medicaid Benefits Yes; paid on sliding scale Yes; must meet strict guidelines Yes; must require skilled nursing care No No Yes; five years, $142.92/day penalty Full cost of nursing care Directly to care facility
VA vs. Medicaid Benefits Eligibility Requirements VA Benefits Medicaid Benefits Income Test Yes; paid on sliding scale Yes; paid on sliding scale Asset Test Yes; expenses must exceed resources Yes; must meet strict guidelines Medical Eligibility Yes; ADLs, blind, housebound Yes; must require skilled nursing care Service Eligibility Income Deduction Allowed? Yes; 90 days active, one day of war Yes; unlimited Look Back Period? No Yes; five years, $142.92/day penalty Maximum Amount Available $1,704(single); $2,020(married) $1,094(widow) No No Full cost of nursing care How is benefit paid? Directly to recipient Directly to care facility
VA vs. Medicaid: Medical Necessity VA Must require assistance in 2 ADLs Will pay you a monthly amount to use for your care Pays for at home care, assisted living, nursing home care Medicaid Must need 24 hour skilled nursing care Will pay the nursing home what you can't afford to pay Only pays for skilled nursing (with a few exceptions)
VA vs. Medicaid: Income Test VA Must have income under a certain amount ($1,704 a month for single vet) Can deduct certain expenses from income for VA purposes Limit on spouse's income Medicaid Must have income under a certain amount ($2,094 for a single person) Firm rule: if you are over income, you need a Miller Trust No limit on spouse's income
VA vs. Medicaid: Asset Test VA No brightline rule on assets; depends on condition, income and available assets No penalty on transferring assets Asset limit applies to spouse with same rules Medicaid For single person, strict $2,000 countable asset limit (not including house, car, burial policy) Giving away assets will result in a penalty Asset limit applies to spouse, but may be able to increase amount of assets kept based on income
So Which Is Appropriate, and When? First, let the client s situation be your guide Is client able to stay at home, or go to assisted living? If so, the VA isn t just your best choice, it s your only choice Medicaid will not pay for in-home care for most clients Medicaid will pay for assisted living sometimes Community Based Assistance Two to three year waiting list Has same eligibility requirements If you qualify for SNF Medicaid, however, and can move to ALF, you go to the top of the list
So Which Is Appropriate, and When? If client is in skilled nursing facility: Take a look at client s income Will the VA benefit be enough to make up the difference between income and cost? Also look at client s medical issues are you sure this is a permanent move? If there is a possibility client might improve, or if client might not meet Medicaid medical eligibility, look at VA benefit
So Which Is Appropriate, and When? For a married client in a skilled nursing facility, You can t beat the Medicaid benefit Low income? Spouse is protected. High spousal income? Spouse is protected. Over resources? Can purchase annuity. Plus, once the incapacitated spouse is qualified, starting at first year s review, is looked at as an individual from then on
So Which Is Appropriate, and When? But, a Planner s Caveat: your client may need both! An example: Irene is 84, and was diagnosed with Alzheimer s about a year ago. She currently lives in her own home, but needs help with some daily activities. Her family has asked her to consider an assisted living facility, but she is hesitant. Two weeks ago, Irene fell and broke her hip. She had surgery, is able to tolerate therapy and is recovering in rehab. She has used 10 of her 20 Medicare days, and her family has come to you for help. Irene has a monthly income of $1,750 (gross), owns a home, a vehicle, and has $250,000 in liquid assets plus $15,000 in whole life insurance.
So Which Is Appropriate, and When? Where do you start? What questions would you ask?
Questions What is Irene s prognosis? Does her family feel she will be able to go home, go to assisted living, or remain in skilled nursing? What is the most likely duration of her stay at her best level? I.e., could she live at home for another year? Will her best level be assisted living? Is she regaining abilities quickly, or more slowly? What can Irene afford, with and without assistance? Income: $2,500 With VA pension: $3,594
Does Irene Qualify? What does she qualify for? VA Benefits: If Irene goes to SNF or ALF, will meet income requirement. If she goes home, how much at home help will she need? How much can she afford? At age 84, her life expectancy is 6.2 years. Our calculation: Monthly Unreimbursed Medical Expenses x 12 x Life Expectancy Monthly > Income x 12 x Life + Expectancy Countable Resources
Qualification Calculation Let s assume: $3500/month rent at ALF $99.90 Medicare premium $200/month health insurance Irene s deceased spouse had qualifying military service Monthly Unreimbursed Medical Expenses x 12 x Life Expectancy Monthly > Income x 12 x Life + Expectancy Countable Resources ($3500+99.90 +200) x 12 x 6.2 > ($1,750 x 12 x 6.2) + $250,000+ $15,000 $282,712 > $395,200
Solutions Irene does not qualify she is over resource. But wait! There is no look back period for VA benefits. Irene can transfer all or part of her estate, and qualify the next month for benefits. But should she? Tax consequences? Where will it go? What if Irene needs to qualify for Medicaid later?
Solutions Let s assume that Irene transfers all of her estate to her daughter, who funds a SNT on her behalf. Tax implications: Are any of the transferred funds qualified? Will result in tax penalty on Irene s behalf. Crosses the reporting threshold for gift tax more than $13,000 per year, per donee Same will be true for Irene s daughter when she funds the Trust No gift tax is due, but was Irene s daughter counting on using her $1M life time exemption for her own estate planning?
Now Medicaid, too? Two years later, Irene needs skilled nursing care. Figure net transfer and report to Medicaid Use return of transfer method to qualify for benefits This is why I generally prefer not to use annuities for VA planning much more difficult to undo if Medicaid is needed later. When Irene qualifies for Medicaid, her VA benefit is cut back to $90.
So, Can I Charge For This? Therein lies the ruse It is against federal law to charge an interested party for preparation of a VA Application Interested parties include claimant, spouse, children, individuals living with claimant, assisted living facilities, nursing homes, home care agencies, and any business or organization that gets paid out of the claimant s benefit money Must be an Accredited VA Attorney to charge You can charge for advice before the claimant becomes an interested party I.e., before they express an intent to file a claim
So, Can I Charge For This? The gist: you can t charge for VA applications You can charge, however, for preparation of accompanying documentation You can also charge after the VA has issued a decision, and a Notice of Disagreement has been filed pro bono There is very little prosecution, if any, of attorneys who do charge some people rely on that I choose not to
So, Can I Charge For This? There are rules surrounding fee agreements 20% of back benefits is considered reasonable; anything over 33% is unreasonable Must submit signed fee agreement to Office of General Counsel More information: www4.va.gov/ogc/accreditation.asp Form 21a Application for Accreditation
So, Can I Charge For This? There are no rules surrounding charging for Medicaid Applications Well, technically, there are But they aren t enforced. http://www.seniorlaw.com/reno.htm
Thank you Monica A. Benson Katten & Benson 4763 Barwick Drive, Ste. 100 Fort Worth, TX 76132 817-263-5190; 817-263-5197 fax mbenson@kattenbenson.com www.kattenbenson.com