Blog - Medicaid

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How Does the Medicaid Look-Back Period Work?

Navigating the complexities of Medicaid can be daunting, especially when considering the "Medicaid look-back period." This crucial aspect involves reviewing an individual's financial transactions to determine eligibility for long-term care benefits. Understanding how this period works is essential for proper planning and compliance.

Defining the Look-Back Period

What is it?

The Medicaid look-back period refers to a specific timeframe that Medicaid examines for any asset transfers made by an individual seeking long-term care coverage. This period helps determine if any assets were transferred below fair market value. 

During this time, Medicaid scrutinizes all financial transactions to prevent individuals from transferring assets to fraudulently qualify for benefits. 

Purpose of a Look-Back Period in Determining Medicaid Eligibility

The primary aim of the look-back period is to ensure that individuals do not give away their assets just before applying for long-term care benefits. By doing so, they may artificially lower their asset levels to meet eligibility requirements.

This scrutiny discourages improper asset transfers and maintains the integrity of the Medicaid program, ensuring that benefits are allocated fairly and only to those who genuinely need them. This is not to be confused with a spend-down plan, where an individual can pay bills, or purchase exempt resources which helps them meet financial eligibility requirements.

Duration Overview

Typically, the look-back period for Medicaid spans sixty (60) months, or five years, preceding the date of application. Any transfer of assets during this duration is carefully evaluated. If improper transfers are identified, penalties such as a waiting period for benefits may be imposed.

Understanding Look-Back Penalties

Calculating Penalties

Medicaid look-back penalties are determined by dividing the total value of transferred assets by the penalty divisor.

The penalty divisor is calculated based on the average private pay rate for a nursing home in a specific state. In Michigan, the state typically publishes these numbers twice a year, in January and July.

Transfers made during the look-back period that exceed Medicaid's asset limits trigger these penalties.

Financial Implications

Look-back penalties can result in individuals being ineligible for Medicaid coverage for a certain period, delaying their access to crucial healthcare services.

Individuals may have to cover long-term care costs out of pocket until the penalty period ends, leading to significant financial strain.

Assets transferred within the look-back period can impact an individual's eligibility for Medicaid benefits, affecting their overall financial stability.

Impact of Gifts and Transfers

Gifts or transfers made during the look-back period can lead to penalties if they exceed Medicaid's asset limits.

These transfers are scrutinized to prevent individuals from artificially impoverishing themselves to qualify for Medicaid benefits quickly.

It is essential for individuals to carefully consider any gifts or transfers they make within the look-back period due to potential repercussions on their Medicaid eligibility and finances.

The penalty period, or months of ineligibility for Medicaid benefits, does not start to run until 1) the individual is in a skilled nursing facility and 2) they meet the Medicaid eligibility criteria. In short, the individual is in a nursing home and has no money but has to somehow privately pay for their care during the penalty period. The impact of improper gifting can be severe.

Exceptions to the Rule

Exempt Assets

Certain assets are exempt from the Medicaid look-back period, allowing individuals to qualify for benefits while owning these assets. These include a primary residence, personal belongings, a prepaid funeral contract, and one vehicle. A properly drafted special needs trust and ABLE account are also exempt resources.

Medicaid does not take these exempt assets into consideration when determining eligibility during the look-back period. For instance, if an individual has been residing in their primary home or using a single vehicle regularly, these assets are typically not subject to review.

Family Member Situations

In some cases, transfers of assets between family members may be exempt from the Medicaid look-back period. For example, if a property transfer occurs between siblings with shared ownership rights without exchange of funds, it might not violate Medicaid rules.

Family members who provide care for an elderly individual and receive compensation through asset transfers may also fall under certain exemptions. This scenario involves a direct correlation between caregiving services provided and asset transactions.

Asset Spend-Down Strategies

Legal Methods

Asset transfer is a common strategy to reduce countable assets within the Medicaid look-back period. It involves transferring excess assets to family members or setting up trusts.

To protect assets while complying with Medicaid rules, individuals can utilize legal tools such as irrevocable trusts. These trusts allow for asset protection by removing ownership from the individual.

Financial Transactions/Spend Down

Another effective strategy is converting countable assets into non-countable ones through financial transactions, often called a spend down, like purchasing exempt items or paying off debts. This helps lower the individual's asset levels for Medicaid eligibility.

Utilizing these strategies requires careful planning and consideration of the look back period regulations. While they can be beneficial, it's crucial to ensure full compliance with all legal requirements. 

Avoiding Look-Back Violations

Proper Documentation

Maintaining detailed records of all financial transactions is crucial to avoid inadvertent violations of the Medicaid look-back period. Documenting every expenditure, transfer, or asset conversion helps in demonstrating compliance. Without proper documentation, the government agencies reviewing a Medicaid application will assume such a transfer was a gift or transfer for less than full market value.

Seek Professional Guidance

Consulting with a financial advisor, special needs or elder law attorney can provide valuable insights into navigating the complexities of Medicaid regulations. These experts can offer tailored advice on structuring assets to adhere to look-back rules.

Be Mindful of Timing

Understanding the specific timeframes involved in the Medicaid look-back period is essential. Being aware of when the clock starts ticking and ensuring that all financial decisions align with these timelines can prevent violations.

Consequences of Violations

Violating Medicaid's look-back rules can result in significant repercussions, including penalties, delayed eligibility for benefits, and even legal consequences. It's vital to prioritize compliance to avoid these adverse outcomes.

Michigan Specifics

Asset Documentation

Michigan applicants must meticulously document their property and assets to successfully navigate the Medicaid look-back period. Proper documentation is essential to avoid ineligibility.

Time Frames and Rules

Michigan has specific time frames and rules concerning asset transfers that can lead to Medicaid ineligibility. These regulations may differ from those of other states, requiring careful consideration by applicants. An experienced elder law or special needs planning attorney will be able to help outline the best available options that meet a client’s goals and unique circumstances.

Seeking Professional Medicaid Planning

Importance

Consulting with an elder law or special needs planning attorney is crucial when preparing for potential nursing home care needs. These experts possess in-depth knowledge of the intricate program requirements and regulations.

Expert guidance can help individuals navigate the complex Medicaid look-back period, ensuring compliance with all necessary rules. This proactive approach can prevent costly mistakes and protect assets from being disqualified.

Benefits

Seeking advice from an experienced elder law or special needs planning attorney can lead to significant benefits, such as maximizing eligibility for Medicaid benefits while safeguarding assets. Professionals can develop tailored strategies to meet individual needs and goals.

By leveraging the expertise of these attorneys, individuals can potentially reduce the financial burden associated with long-term care, making it more manageable for families in challenging situations.

Finding Professionals

When looking for a Medicaid planning expert, consider factors such as experience, credentials, and client testimonials, including involvement in organizations that support the experience you are looking for. Research reputable firms or professionals specializing in elder law or Medicaid planning services.

It's advisable to schedule consultations with multiple professionals to compare their approaches and determine who best aligns with your objectives and preferences.

Final Remarks

The complexities of Medicaid's look-back period demand careful navigation to avoid penalties and ensure compliance. Understanding the nuances, exceptions, and strategies is crucial for asset protection and successful Medicaid planning. Seeking professional guidance in this intricate process can provide invaluable insights tailored to individual circumstances.

For those embarking on Medicaid planning journeys, staying informed and proactive is key. By implementing asset spend-down strategies effectively and adhering to regulations, individuals can safeguard their financial well-being. Remember, meticulous planning and expert advice are instrumental in securing a stable financial future amidst the intricacies of the Medicaid look-back period.

Frequently Asked Questions

What is the significance of the Medicaid look-back period?

The Medicaid look-back period is crucial as it determines if any assets were transferred for less than their value. This affects eligibility for Medicaid benefits and can lead to penalties.

How do look-back penalties impact Medicaid eligibility?

Look-back penalties result in a delay of Medicaid coverage based on assets transferred during a specific timeframe. Understanding these penalties is essential to avoid complications in the application process.

Are there exceptions to the look-back period rule?

Yes, certain circumstances like transfers made for fair market value or transfers to a spouse are exempt from the look-back period scrutiny. Knowing these exceptions can help navigate through Medicaid planning effectively.

What are asset spend-down strategies in relation to Medicaid planning?

Asset spend down strategies involve reducing assets legally to qualify for Medicaid benefits. This may include converting excess resources into exempt items or paying off debt strategically within guidelines.

How can one avoid violations related to the look-back period?

Avoiding look-back violations involves careful planning and adherence to regulations. Seeking professional guidance, understanding permissible asset transfers, and following proper procedures are key steps in compliance with Medicaid rules.

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Transferring Assets to Qualify for Medicaid

Transferring assets to qualify for Medicaid can make you ineligible for benefits for a period of time. Before making any transfers, you need to be aware of the consequences.

Congress has established a period of ineligibility for Medicaid for those who transfer assets. The so-called “look-back” period for all transfers is 60 months, which means state Medicaid officials look at transfers made within the 60 months prior to the Medicaid application.

While the look-back period determines what transfers will be penalized, the length of the penalty depends on the amount transferred. The penalty period is determined by dividing the amount transferred by the average monthly cost of nursing home care in the state. For instance, if the nursing home resident transferred $100,000 in a state where the average monthly cost of care was $5,000, the penalty period would be 20 months ($100,000/$5,000 = 20). The 20-month period will not begin until (1) the transferor has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer. Therefore, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018 and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

Transfers should be made carefully, with an understanding of all the consequences. People who make transfers must be careful not to apply for Medicaid before the five-year look-back period elapses without first consulting with an elder law attorney. This is because the penalty could ultimately extend even longer than five years, depending on the size of the transfer.

Be very, very careful before making transfers. Any transfer strategy must take into account the nursing home resident’s income and all of his or her expenses, including the cost of the nursing home. Bear in mind that if you give money to your children, it belongs to them and you should not rely on them to hold the money for your benefit. However well-intentioned they may be, your children could lose the funds due to bankruptcy, divorce, or lawsuit. Any of these occurrences would jeopardize the savings you spent a lifetime accumulating. Do not give away your savings unless you are ready for these risks.

In addition, be aware that the fact that your children are holding your funds in their names could jeopardize your grandchildren’s eligibility for financial aid in college. Transfers can also have bad tax consequences for your children. This is especially true of assets that have appreciated in value, such as real estate and stocks. If you give these to your children, they will not get the tax advantages they would get if they were to receive them through your estate. The result is that when they sell the property they will have to pay a much higher tax on capital gains than they would have if they had inherited it.

As a rule, never transfer assets for Medicaid planning unless you keep enough funds in your name to (1) pay for any care needs you may have during the resulting period of ineligibility for Medicaid and (2) feel comfortable and have sufficient resources to maintain your present lifestyle.

Remember: You do not have to save your estate for your children. The bumper sticker that reads “I’m spending my children’s inheritance” is a perfectly appropriate approach to estate and Medicaid planning.

Even though a nursing home resident may receive Medicaid while owning a home, if the resident is married he or she should transfer the home to the community spouse (assuming the nursing home resident is both willing and competent). This gives the community spouse control over the asset and allows the spouse to sell it after the nursing home spouse becomes eligible for Medicaid. In addition, the community spouse should change his or her will to bypass the nursing home spouse. Otherwise, at the community spouse’s death, the home and other assets of the community spouse will go to the nursing home spouse and have to be spent down.

Permitted transfers

While most transfers are penalized with a period of Medicaid ineligibility of up to five years, certain transfers are exempt from this penalty. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:

  • Your spouse (but this may not help you become eligible since the same limit on both spouse’s assets will apply)
  • A trust for the sole benefit of your child who is blind or permanently disabled.
  • Into trust for the sole benefit of anyone under age 65 and permanently disabled.

In addition, you may transfer your home to the following individuals (as well as to those listed above):

  • A child who is under age 21
  • A child who is blind or disabled (the house does not have to be in a trust)
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.
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Nursing Home Residents Win Back Right to Sue

In recent years, nursing homes have increasingly asked — or forced — patients and their families to sign arbitration agreements prior to admission. By signing these agreements, patients or family members give up their right to sue if they believe the nursing home was responsible for injuries or the patient’s death.

Now, in an unexpected move, the federal Centers for Medicare and Medicaid Services (CMS) is forbidding nursing homes from entering into binding arbitration agreements with a resident or their representative before a dispute arises.  The agency has issued a final rule prohibiting so-called pre-dispute arbitration agreements in facilities that accept Medicare and Medicaid patients, affecting 1.5 million nursing home residents. After a dispute arises, the resident and the long-term care facility could still voluntarily enter into a binding arbitration agreement if both parties agree.

For years, patient advocates have contended that those seeking admission to a nursing home are in no position to make a determination about giving up their right to sue. Families are focused on the quality of care, and forcing them to choose between care quality and forgoing their legal rights is unjust, the advocates said.  Courts have sometimes struck down arbitration agreements as unfair, but others have upheld them.

“Clauses embedded in the fine print of nursing home admissions contracts have pushed disputes about safety and the quality of care out of public view,” the New York Times wrote in its coverage. “With its decision, [CMS] has restored a fundamental right of millions of elderly Americans across the country: their day in court.”

The nursing home industry has countered that the new rule will trigger more lawsuits that could increase costs and force some homes to close.  Mark Parkinson, the president and chief executive of the American Health Care Association, said that the change “clearly exceeds” CMS’s statutory authority.

Although the rule could be challenged in court, for now it is scheduled to take effect on November 28, 2016, and will affect only future nursing home admissions. Pre-existing arbitration agreements will still be enforceable.

To read the final rule, click here.

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What Is a Life Estate?

The phrase “life estate” often comes up in discussions of estate and Medicaid planning, but what exactly does it mean? A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner. Life estates can be used to avoid probate and to give a house to children without giving up the ability to live in it.  They also can play an important role in Medicaid planning.

In a life estate, two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the remainderman — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out, and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant’s death the ownership will pass automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property.

Although the property will not be included in the probate estate, it will be included in the taxable estate. Depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation.

The life tenant cannot sell or mortgage the property without the agreement of the remaindermen. If the property is sold, the proceeds are divided up between the life tenant and the remaindermen. The shares are determined based on the life tenant’s age at the time — the older the life tenant, the smaller his or her share and the larger the share of the remaindermen.

Be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if you apply for Medicaid within five years of the transfer. Purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else’s home, pay an appropriate amount for the property and live in the house for more than a year.

For example, an elderly man who can no longer live in his home might sell the home and use the proceeds to buy a home for himself and his son and daughter-in-law, with the father holding a life estate and the younger couple as the remaindermen. Alternatively, the father could purchase a life estate interest in the children’s existing home. Assuming the father lives in the home for more than a year and he paid a fair amount for the life estate, the purchase of the life estate should not be a disqualifying transfer for Medicaid.  Just be aware that there may be some local variations on how this is applied, so check with your attorney.

To find out if a life estate is the right plan for you, contact your attorney.

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About to Turn 65? Your Health Insurer May Be Automatically Enrolling You in Its Own Medicare Plan

As people approach age 65, they should be thinking about their Medicare enrollment choices, including whether to sign up for traditional Medicare or with a Medicare Advantage plan, and if so, which one. But it turns out that some Medicare-age people are having these important decisions made for them, often without their knowledge.

Before they become eligible for Medicare, many Americans are covered by a commercial or a Medicaid health care plan run by an insurance company. These insurers often also operate Medicare Advantage plans, which are the privately run managed-care alternative to traditional Medicare. Under a little-known process authorized by the federal government, insurers can shift their beneficiaries who are turning 65 to their own Medicare Advantage plan. It’s called “seamless conversion,” and all it requires is that the health plan obtain Medicare’s prior approval and send a letter to the beneficiary explaining the new coverage, which takes effect unless the member opts out within 60 days.

The idea is to preserve continuity for those who want to stay with the same company, but some seniors are unaware that they have been signed up, in part due to the flood of mail they get from insurers around age 65. In a recent Kaiser Health News expose, reporter Susan Jaffe related the stories of several new Medicare beneficiaries who were shocked to learn that they had been enrolled in a Medicare Advantage plan. One, Judy Hanttula of Carlsbad, New Mexico, signed up for traditional Medicare and then ignored the subsequent mail, which apparently included the notice from her insurer telling her that it had automatically enrolled her in its Medicare Advantage plan.

“I felt like I had insured myself properly with Medicare,” she said. “So I quit paying attention to the mail.”

Unfortunately for Ms. Hanttula, before she became aware of the automatic assignment to a Medicare Advantage plan, she had surgery that her new plan subsequently refused to cover, leaving her with a $16,622 bill. Eventually, with the help of David Lipschutz, a senior attorney at the Center for Medicare Advocacy in Washington, Medicare officials disenrolled Ms. Hanttula from her unwanted Medicare Advantage plan, restored her traditional Medicare coverage and agreed to cover her medical bills, reports Jaffe.

Medicare officials won’t say which insurance companies have sought or received approval to seamlessly convert their members to their own Medicare Advantage plans, but Jaffe reports that among the insurers that are already automatically enrolling members into Medicare plans in at least some parts of the country include Aetna and United Healthcare and that Humana, he nation’s second-largest Medicare Advantage provider, has asked for federal permission to also do auto-enrollment.

Medicare officials are developing procedures for seamless conversion requests and implementation, but in response to complaints from her constituents and health care advocates, Rep. Jan Schakowsky (D-Ill.) wants to build in stronger consumer protections.

In the meantime, those enrolled in a health plan offered by a Medicare Advantage organization when they become eligible for Medicare should “be attentive,” says attorney Lipschutz of the Center for Medicare Advocacy. “Be on the lookout for written notice regarding conversion and carefully consider whether to opt-out of the [Medicare Advantage] plan.”

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Fighting Nursing Home Discrimination Against Medicaid Recipients

While it is illegal for a nursing home to discriminate against a Medicaid recipient, it still happens. To prevent such discrimination, nursing home residents and their families need to know their rights.

The potential for discrimination arises because Medicaid pays nursing homes less than the facilities receive from residents who pay privately with their own funds and less than Medicare pays. Nursing homes are not required to accept any Medicaid patients, but Medicaid payments are a steady guaranteed payment, so many nursing homes agree to accept Medicaid recipients.

When a nursing home agrees to take Medicaid payments, it also agrees not to discriminate against residents based on how they are paying. Medicaid recipients are entitled to the same quality of care as other residents. A nursing home cannot evict residents solely because they qualified for Medicaid.

Unfortunately, discrimination against Medicaid patients does occur, and the discrimination can take different forms. The nursing home may refuse to accept a Medicaid recipient or may require that a resident pay privately for a certain period of time before applying for Medicaid. When a resident switches from Medicare or private-pay to Medicaid payments, the nursing home may transfer the resident to a less desirable room or claim that it doesn’t have any Medicaid beds.

There is at least one way that nursing homes can treat Medicaid recipients differently, however. Nursing homes are allowed to switch residents who were privately paying for a single room to a shared room once they qualify for Medicaid. In addition, the nursing home is not required to cover personal and comfort care items, such as a telephone or television. In some states families are allowed to pay the difference to get a private room or the care item. Other states do not allow any supplementation.

Helpful Links

If you feel you have been discriminated against by a nursing home, contact your state’s long-term care ombudsman or your attorney.

A guide to 20 common nursing home problems, including discrimination against Medicaid recipients

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Beware of Non-Lawyers Offering Medicaid Planning Advice

In recent years a number of non-lawyers have started businesses offering Medicaid planning services to seniors. While using one of these services may be cheaper than hiring a lawyer, the overall costs may be far greater.

If you hire a non-lawyer to do Medicaid planning, the person offering services may not have any legal knowledge or training. Bad advice can lead seniors to purchase products or take actions that won’t help the senior qualify for Medicaid and may actually make it more difficult. The consequences for taking bad advice can include the denial of benefits, a Medicaid penalty period, or tax liability.

As a result of problems that have arisen from non-lawyers offering Medicaid planning services, a few states (Florida, Ohio, New Jersey, and Tennessee) have issued regulations or guidelines providing that Medicaid planning by non-lawyers will be considered the unauthorized practice of law. For example, in Florida, a non-lawyer may not render legal advice regarding qualifying for Medicaid benefits, draft a personal service contract, determine the need for or execute an income trust, or sell income trust kits. In Florida, the unlicensed practice of law is a felony that is punishable by up to five years in prison while in Ohio, practicing law without a license is subject to civil injunction, civil contempt, and civil fine

Applying for Medicaid is a highly technical and complex process. A lawyer knowledgeable about Medicaid law in the applicant’s state can help applicants navigate this process. An attorney may be able to help your family find significant financial savings or better care for you or your loved one. This may involve the use of trusts, transfers of assets, purchase of annuities or increased income and resource allowances for the healthy spouse.

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Medicaid’s Benefits for Assisted Living Facility Residents

Assisted living facilities are a housing option for people who can still live independently but who need some assistance.  Costs can range from $2,000 to more than $6,000 a month, depending on location. Medicare won’t pay for this type of care, but Medicaid might.  Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

Unlike with nursing home stays, there is no requirement that Medicaid pay for assisted living, and no state Medicaid program can pay directly for a Medicaid recipient’s room and board in an assisted living facility. But with assisted living costs roughly half those of a semi-private nursing home room, state officials understand that they can save money by offering financial assistance to elderly individuals who are trying to stay out of nursing homes.

As of May 2016, 46 states and the District of Columbia provided some level of financial assistance to individuals in assisted living, according to the website Paying for Senior Care, which features a “State by State Guide to Medicaid Coverage for Assisted Living Benefits” that gives details on each state’s programs.   According to the website, the Medicaid programs of Alabama, Kentucky, Louisiana and Pennsylvania are the only ones that provide no coverage of assisted living, although non-Medicaid assistance may be available.

Nevertheless, the level and type of support varies widely from state to state.  Prevented from paying directly for room and board, some states have devised other strategies to help Medicaid recipients defray the cost of assisted living, including capping the amount Medicaid-certified facilities can charge or offering Medicaid-eligible individuals supplemental assistance for room and board costs paid for out of general state funds. States typically cover other services provided by assisted living facilities.  These may include, depending on the state, coverage of nursing care, personal care, case management, medication management, and medical assessments and exams.  

In many states, this coverage is not part of the regular Medicaid program but is delivered under programs that allow the state to waive certain federal rules, such as permitting higher income eligibility thresholds than regular Medicaid does.  To qualify for one of these waiver programs, applicants almost always must have care needs equivalent to those of nursing home residents.  These waiver programs also often have a limited number of enrollment slots, meaning that waiting lists are common.  In some states, the support programs may cover only certain regions of the state.  And one state’s definition of “assisted living” may differ from another’s, or other terms may be used, such as “residential care,” “personal care homes,” “adult foster care,” and “supported living.”

If your state does not cover room and board at an assisted living facility, help may be available through state-funded welfare programs or programs run by religious organizations. If the resident is a veteran or the surviving spouse of a veteran, the resident’s long-term care may be covered.  

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The New MSA Reporting Requirement And The Probate Practictioner

Many probate practitioners advise and support litigation firms and obtain probate court approval of pre-suit settlements. There is a new CMS (Center for Medicare and Medicaid Services) reporting requirement, Section 111 of the Medicare, Medicaid & SCHIP Extension Act (MMSEA), 42 USCS §1395(y)(b)(8), effective July 1, 2009 that we need to be prepared to advise litigation firms and the court when serving as Guardian Ad Litem. Practitioners are already accustomed to resolving Medicare and Medicaid liens for past medical services before finalizing a settlement in liability and PIP cases. However, as of July 1, 2009 they must also consider future medical expenses for their client and evaluate whether their client’s situation triggers the new reporting requirement. This has generated wide discussions among settlement planning attorneys and structured settlement professionals whether this triggers the use of Medicare Set Aside accounts in these cases now and in the future. Unfortunately, CMS has enacted this new requirement without any regulations or procedures, and common review and enforecement practices may vary regionally. There are differing opinions among professionals as to the impact of the new reporting requirements and the effect on our clients.However, CMS officials reportedly comment that the purpose of the enactment is to ensure that any funds allocated for future medicals are to be spent before any claims are submitted to Medicare for payment, and CMS is to be notified when future medicals were a consideration in reaching the settlement. Collegues reportedly have encountered clients with large settlements who have already had Medicare refuse to pay providers.

An insurer has to report the settlement to CMS if the Plaintiff is: (1) a current Medicare beneficiary, or reasonably expected (i.e. a pending appeal) to qualify for Medicare within 30 months of settlement, and (2) the settlement is over Two Hundred Fifty Thousand Dollars ($250,000.00.) If the claimant meets the threshold for reporting, liability insurers, including self-insured entities, must complete a questionnaire/notice of the settlement and submit it electronically to CMS. Failure to do so is a $1,000/day penalty per claim. The Department of Justice is enforcing these requirements against all parties to the settlement, including Plaintiff counsel, and the Plaintiff themselves. All of us who advise counsel or the court with regard to settlement agreements need to be vigilant for our clients and the beneficiaries, and be aware of future developments as CMS forms policies to implement and enforce the new requirements.