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CT Medicaid planning

In English, Please. The Ultimate Medicaid Glossary and Term Guide

Anyone who has been thrust into the murky Medicaid maze knows it is a world in itself- complete with its own language. As if the rules and regulations governing eligibility were not complicated enough, there are many unfamiliar terms and phrases bandied about by those in the know, making gathering information that much more complicated.

At Senior Planning Services, we live up to our motto ‘the Medicaid process…simple’, and so, we prepared this glossary explaining many of the confusing and recurring phrases you will come across on the Medicaid journey-in simple English.

 

Application Process

ADLs-Activities of Daily Living- refers to daily self care activities such as dressing, bathing, ambulating, eating, and personal hygiene. An individual’s ability or inability to perform said ADLs is a yardstick used to measure their functional and medical status.

Look Back Period -Refers to the 5 year period prior to applying for Medicaid in which Medicaid reserves the right to scrutinize an applicant’s financial history. Medicaid can ask for 60 months worth of bank statements for every account held in a financial institution. If Medicaid discovers any gifting (see gifting explained below) there will be a penalty of ineligibility imposed.

Medicaid Pending – This is the term used to describe the status of one who already submitted a Medicaid application, but did not yet receive approval or confirmation of coverage. It can be difficult to find a facility that is willing to accept someone who is ‘Medicaid Pending’ which is why it is imperative to submit a properly completed application along with all the supporting documentation, as soon as a nursing home is being considered.

Spend-down – A term you will encounter a lot on the Medicaid journey, and refers to the process of using excess income and assets to meet Medicaid eligibility requirements.

Medicaid evaluates three different aspects of an applicant’s financial situation before determining eligibility. They will look at the income (money coming in on a monthly basis) assets (anything with financial value that the applicant owns or has put away) and last, the financial history for the last 5 years (see look back).

To qualify for Medicaid, an applicant has to meet the state specified requirements in all three areas. In regard to income and assets, if one has a surplus, there are recognized venues and expenses that one can use to ‘spend down’ resources, and become income and asset eligible.

As with most things Medicaid related, what qualifies as a recognized ‘spend down’ expense is specific to every state.

PAS – Pre Admission Screening- refers to the screening that all applicants to a Medicaid certified facility must subject themselves to. This screening is a federal and state requirement designed to ensure that individuals are not inappropriately placed in nursing homes for long term care.

 

Income and Assets

Income- refers to available funds coming in on a monthly basis. This includes social security, pensions, alimony, income from rental properties and the like.

Assets- also known as resources– refers to anything the applicant owns to which a financial value can be assigned. Not all assets are counted when Medicaid is determining eligibility. Assets that are counted include: cash,checking accounts, savings accounts, CDs, IRAs 401(K)s , pension funds (if you have the ability to withdraw lump sums), securities, and the Cash Surrender Values (CSV)  in whole life insurance policies with a “Face Value” greater than $1,500.

Excludable Assets- also referred to as non countable assets or exempt assets –the term for assets that are not counted when Medicaid determines financial eligibility. Such assets include the home-if a spouse or dependent child is residing in it, any vehicle regardless of make or model, prepaid irrevocable funeral trusts, burial plots, promissory notes (until they are due, and they are then regarded as income) . Excludable assets can vary by state, and many states impose an allowed maximum.

Excess income/assets– Also referred to as Surplus Income/assets is the term used to refer to any monthly income/assets that a Medicaid applicant receives/owns above the state specified income/asset threshold.

For example, in the state of NJ one can receive up to $2,199.00 in income and still qualify for Medicaid. If someone were to have a monthly income of $3,000.00, they would have $801.00 of ‘excess income.’

PNA – Personal Needs Allowance- Once on Medicaid, some states require that all income go toward the cost of care. They do however allow the applicant to keep a PNA- a small sum that can be used to purchase personal items at the beneficiary’s discretion

Surplus Income/assets– is another term for excess income/assets. See the definition for excess income/assets above

 

Gifts and Transfers

Gifting – is the term used for transferring or giving away assets that are below fair market value. Simply handing off money or ‘gifting’ assets to meet the cap within the 5 year look back period results in a gift penalty (see below).

Gift Penalty- a penalty is a period of ineligibility for Medicaid coverage that corresponds to the amount of monies that were gifted or transferred below fair market value.

Penalty Divisor Rate- is the rate used to calculate the length of the penalty period, which is the amount that was gifted divided by the average cost of nursing home care in the area.

For example, if an applicant gave away $50,000.00 within 60 months of applying to Medicaid, and the average cost of a skilled nursing facility was $10,000.00 the applicant would be Medicaid ineligible for 5 months.

It is important to remember that the penalty only goes into effect once the applicant applies for Medicaid, and is otherwise eligible. In the example above, even if the money was given 4 ½ years prior to the application, and many increments of 5 months already passed, the penalty would still only go into effect when the applicant applies for Medicaid, and no longer has any resources.

 

Trusts

Trust – refers to a fund that is established by a grantor (the person funding the trust), is managed by a trustee, and is for the benefit of a specified individual, organization, or purpose (otherwise known as the beneficiary). Essentially it is a three way partnership where one individual sets aside assets, a second individual manages said assets according to the specifications set by the grantor, and a third individual is the actual recipient of the assets,generally at a designated time. Once the grantor assigns assets to the trust, he/she transfers all legal ownership to the trustee and equitable ownership to the beneficiary.

Irrevocable Trust- refers to a trust that is set up in such a way that it cannot be changed, dissolved, or reversed without the consent of the trustees and beneficiaries.

Prepaid Irrevocable Funeral Trust – refers to an irrevocable trust that is established for the express purpose of paying for a Medicaid applicant’s funeral. Because it is irrevocable (it cannot be changed, dissolved, or reversed) the prepaid irrevocable funeral trust can be utilized as a technique to qualify for Medicaid. If one’s assets are above the state specified asset threshold, they can prepay their funeral expenses to bring their assets down to the allowed limit.

How it works:

The first step would be to determine how far above the asset threshold the Medicaid applicant currently is at. For example in the state of NY a single individual is allowed to keep $14,850.00 worth of assets and still qualify for Medicaid. If one were to have $20,000.00 put away, they would be$5,150.00 away from qualifying.

With that number established, the Medicaid applicant can plan the details of his/her funeral. Once the paperwork for the prepaid irrevocable funeral trust is drawn up, and the $5,150.00 is safely deposited, the applicant would now meet the asset limit, and be considered Medicaid eligible.

It should be noted that most states have a defined maximum that can be deposited into prepaid irrevocable funeral trust fund. If one’s resources exceeds the states prepaid funeral limit , they will have to utilize other methods to spend down their assets.

QIT-Qualified Income trust – also known as a Miller Trust- is a trust that is established to help one meet the state specified income limits, and qualify for Medicaid coverage (assuming they are otherwise eligible). If one has any monthly surplus income (income above the threshold) they can allocate the difference to the qualified income trust until they meet the income cap.

For example, the state of NJ, allows a monthly income of up to $2,199.00. If an applicant were to earn $3,000.00 a month, $801.00 would need to be assigned to the qualified income trust to bring them down to the allowable limit.

The monies in the trust are now non-countable and are no longer regarded as income. The money in the QIT is given to the Medicaid providers to help offset the cost of care.

Note: not every state allows the utilization of QITs.

Pooled income Trust- allows a Medicaid recipients to be enrolled with Community Medicaid while preserving most of his/her monthly income. Once the Trust has been established, the Medicaid recipient will then deposit his/her monthly surplus amount into the Trust account and submit bills to the Trust for payment. The Trust will then pay those bills accordingly.

The pooled income trust is managed by a non-profit association, and all the contributions made by applicants are pooled, and invested as a single entity.

Note: not every state allows the utilization of a pooled income trust.

Special Needs Trust – also known as a supplemental needs trust, is also a trust that can be established to help one meet Medicaid income eligibility requirements; however in this case, the beneficiary is a child with special needs.

Medicaid allows parents to set aside assets  that would otherwise disqualify them from Medicaid coverage, and put it into a special needs trust that can be used to enhance the disabled child’s quality of life. There are very specific items and services that can be purchased with a special needs trust, and the rules and regulations vary by state.

 

Spouses

Institutionalized Spouse- the spouse that is admitted to a facility and is receiving Medicaid benefits.

Community spouse – the spouse that is remaining at home and not receiving Medicaid benefits.

Community Spouse Resource Allowance – refers to the joint liquid assets the community spouse can keep when the institutionalized spouse is admitted to a skilled nursing facility. Some states allow the community spouse half the countable assets with a defined minimum and maximum, while other states more generously allow the community spouse up to a specified maximum regardless of whether this number is half the couple’s countable assets.

For example: In the state of NJ, if a couple were to have $100,000.00 in assets, and one spouse was applying for Medicaid, the total assets would need to be spent down to $52,000.00. $50,000.00 for the community spouse resource allowance, and $2,000.00 for the applicant-the maximum a Medicaid beneficiary can keep.

In the state of GA however, the same couple would not need to reduce their assets at all. The community spouse is allowed to keep up to $119,220.00. Because their total assets is actually less than the specified maximum, no spend down is required.

Monthly Maintenance Needs Allowance- refers to a carefully calculated number that Medicaid determines is the minimum a community spouse can live on. If the community spouses income is below the MMNA , the shortfall is supplemented with the institutionalized spouses income.

Spousal Refusal- refers to a legal loophole that can be utilized as a form of asset preservation in some states. When one spouse is being institutionalized and the other is remaining at home, there is generally a state specified limit to the assets the community spouse could keep.

However, in Florida, and New York, the community spouse can choose to refuse to contribute to the cost of his/her spouses care by submitting a spousal refusal along with the Medicaid application, and thus keep some of the assets in his/her name. If the institutionalized spouse is otherwise eligible, Medicaid would be forced to pay for the care.

Spousal Refusal is extremely complex when being utilized to preserve assets, it is imperative that one reach out to a knowledgeable consultant to be certain that it is executed properly.

 

Recouping Costs

 

Estate Recovery- Federal law requires states to attempt to recover the money they laid out paying for the individual’s long term care from the Medicaid beneficiary’s estate.

State regulations vary on what is defined as an estate. Some states will only go after the deceased ‘probate estate’ (assets that belonged solely to him/her with no heir or joint owner named) while other states enforce estate recovery on assets that bypass probate.

No state can attempt estate recovery if the deceased is survived by

1. a spouse

2. a child under the age of 21

3. a blind or disabled child of any age

States are also required to waive the estate recovery when it would cause an undue hardship.

Liens- are another method for Medicaid to recoup the costs paid out for a beneficiary’s long term care. Although an applicant may be eligible for Medicaid so long as the home is listed for sale , because Medicaid is a need based program and only a last resort payer, they can put a lien on the property and take a share of the sales as repayment when the home is sold (after the applicant’s death)

As is with estate recovery, a lien cannot be placed on the home if there is:

1. a spouse

2. a child under the age of 21

3. a blind or disabled child of any age

Additionally, if there was:

1. Sibling Caretaker-with an equity interest in the home that lived in the home within 1 year of the Medicaid beneficiary’s being committed to a nursing home

2. Child Caretaker- who resided in the home for at least 2 years prior to the parent’s institutionalization, and can prove that his/her caretaking delayed the need for Medicaid coverage.

 

Life Estate- refers to a deed that assigns interest of a property to one person for life (this person is known as the life tenant) but transfers the interest to a second person (aka as the remainder) as soon as the life tenant is no longer alive.

A typical scenario of a life estate would be when a parent deeds their home to his/her child while maintaining the rights to live in the property until he/she passes away. Life tenants are the practical owners of the property for as long as they live, and are responsible to pay the mortgage, property taxes and insurance as well as to make repairs.

Because life estates effectively circumvent probate laws, they also prevent Medicaid from putting a lien for reimbursement on the home. In order to work properly however, the life estate would need to have been created prior to the 5 year look back period (see look back). If it was not, Medicaid would require the remainder to reassign the deed back to the life tenant. If they do not, Medicaid considers the property to be a gift, and will impose a penalty.





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