I. Long Term Care Medicaid in Florida

After the Deficit Reduction Act of 2005

II. DRA 2005

• • • • • Legislative History Major changes to eligibility for LTC NAELA analysis of federal law is excellent Florida implemented DRA effective 11/1/07 Areas addressed by DRA – Look Back extended to 5 years for transfers before February 8, 2006 (federal) or 11/1/07 (state)

II. DRA 2005

– Purchase of an annuity is a transfer unless annuity meets certain criteria (irrevocable, non-assignable, payout of P & I over life expectancy) and State is named as primary beneficiary • If spouse, minor or disabled child then State must be in second position – Promissory notes, mortgages are transfers unless pay out in equal installments and prohibit cancellation at death – Purchase of life estate in a home is transfer unless buyer lives in home for at least one year after purchase

II. DRA 2005

– Equity in home exceeding $500,000 defeats long term care eligibility (States may raise to $750,000); individual may receive other types of Medicaid – Income first is mandatory before allowing an increase in the CSRA – Continuing Care Retirement Communities (CCRC) – deposit can be asset and CCRC can require spend down as condition for entrance

II. DRA 2005

• • CMS issued guidelines on July 27, 2006 Litigation is still pending in several venues

III. The Medicaid Program Background • • • • • • Federal/State program Basic concept is “Coverage Group” Generally means tested: limited income/assets Poverty alone is NOT sufficient Initial coverage groups: SSI & AFDC Mandatory vs. Optional Groups

III. The Medicaid Program Background – Eligibility Formula • (Coverage group) + (Financial Test) = Eligibility • For example • Pregnant Women + income less than 185% of PLIS = benefits • Institutionalized individual + financial criteria = long term care benefits

IV. The Medicaid Program Mandatory Coverage Groups • Mandatory Coverage Groups – State must provide Medicaid to SSI Recipients w/ one major exception.

• SSI is a means tested cash assistance program for the aged, blind and disabled with limited income and assets.

– Income less than maximum Federal Benefit Rate – Assets limited to $2000 plus exempt assets – Exempt assets include home, car, burial.

IV. The Medicaid Program Mandatory Coverage Groups – Exception to mandatory Medicaid coverage for SSI recipients • So called 209(b) states may use income, resource and disability standards no more restrictive than those in place on January 1, 1972 this altering the mandatory Medicaid – SSI equation • 209(b) States: Connecticut, Illinois, Hawaii, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma & Virginia

IV. The Medicaid Program Mandatory Coverage Groups • Medicare Savings Groups – Qualified Medicare Beneficiaries (QMB) • Income at 100% FBR/ Assets $5,000/$6,000.

• • Pays Medicare premiums, deductibles coinsurance Does not pay long term care, drugs, acute care – Specified Low Income Medicare Beneficiaries (SLMB) • Eligibility criteria same as QMB but income between 100%FBR and 120 % FBR • Pays only Medicare Part B premium – Qualified Disabled and Working Individuals (QDWI) • Disabled individuals who lose Medicare because return to work, but continue to be disabled • Income 200% of FBR/Assets below 200% of SSI rate

IV. The Medicaid Program Mandatory Coverage Groups – Qualifying Individuals (QI-1) • • Income between 120% and 135% of FBR Pays monthly Medicare part B until allotment depleted.

V. Medicaid Program Optional Coverage Groups – Disabled elderly with incomes below 100% FBR – Nursing home residents – Medically Needy – Working disabled

VI. Medicaid Program Waivers • What is a Waiver? Permits deviation from Federal mandates – Three types of waivers • Home and Community Based Services (HCBS) • • Freedom of choice Waiver Pilot Project Waiver – See generally www.cms.gov/medicaid/waivers

VI. Medicaid Program Waivers – Florida Waivers • • • • • • • • Channeling Project Aids Aged/Disabled Adult Developmental Services (DS or DD Waiver) Assisted Living Long Term Care Community Diversion (Diversion) Cystic Fibrosis Program for all Inclusive Care for Elderly (PACE)

VII. Medicaid Program Administrative Process • Applications – Online and paper – Designated Representative – Interview – Time limits – Documents required

VII. Medicaid Program Administrative Process – Notice of Case Action • • Triggers appeal rights Should state basis for action taken – Hearings • Chapter 120 hearings before agency Hearing Officer • De Novo proceeding

VII. Medicaid Program Administrative Process – Appeals • To applicable District Court of Appeal – Change of Circumstance • Report within 10 days • Responsibility of Designated Representative

VIII. Eligibility for Long Term Care • Categorical/Technical Criteria – Aged (65 or older), blind OR disabled – US citizen, legal alien etc.

– Florida resident • Medical Criteria – Institutional residence for 30 continuous days – CARES evaluation of LOC

VIII. Eligibility for Long Term Care • Financial Criteria – Income • Applicant – Income Cap – QIT – Retroactive eligibility – Termination of QIT • Community Spouse

VIII. Eligibility for Long Term Care – Post Eligibility Treatment of Income • • Personal Needs Allowance Spousal Diversion – MMNA – Excess Shelter Costs

VIII. Eligibility for Long Term Care – Assets • Applicant can own countable assets totaling $2,000.00

• Community Spouse can own countable assets totaling $104,400 (2008) • Countable assets do NOT include exempt, unavailable or certain income producing assets

VIII. Eligibility for Long Term Care – Exempt Assets • Homestead up to $500,000 in equity – DRA – Be sure to distinguish from constitutional protection • • • • • • Vehicles Personal Property Life Insurance Burial Plan Burial Fund Life estates - DRA

VIII. Eligibility for Long Term Care • Lookback, Transfers & Penalty Periods – Lookback • • Pre DRA Post DRA – Transfer • • • • Generally FMV of asset transferred Presumption Rebuttal Hardship

VIII. Eligibility for Long Term Care – Penalty Period • • • • Not a fine Divisor Example Pre/Post DRA – Exempt Transfers • Transfers for value • • • For purposes other than Medicaid Hardship Life Estate

VIII. Eligibility for Long Term Care – Exempt Transfers • To a spouse or to a third party for sole benefit of spouse • To blind or disabled child or to a trust for the benefit of such child • To trust for benefit of disabled individual under age 65 • NOTE: Transfers of exempt assets are not automatically exempt transfers!

VIII. Eligibility for Long Term Care • • • Trusts assets generally considered available and income is counted as income in determining patient responsibility Transfers to irrevocable trusts may trigger transfer penalty Revocable living trusts DO NOT protect assets for eligibility purposes

VIII. Eligibility for Long Term Care – Exempt Trusts • • • • Self Settled “d4A” trusts Pooled trusts QITs Payback trusts

IX. Planning

• General Concepts – Goal is to protect the elder, NOT the money – It is OK to use money for elder’s care – that is the point.

– It is OK to pay the state back – It is NOT OK to let Medicaid tail wag the dog

IX. Planning

• Spousal Impoverishment – MCCA – MMNA – Increasing CSRA – Income First Rule - DRA – Court ordered support – Right of refusal

IX. Planning

• Spend Down – Best use of funds concept – Don’t spend for the sake of spending – Does not involve uncompensated transfers – Examples • Purchase or improve exempt assets • • Prepay burial Purchase Burial CD

IX. Planning

• Transfer Issues – Post DRA – Typically between spouses or for benefit of disabled children – Beware adverse consequences such as loss of control, security and tax implications – Ethics – Transactional Capacity – Self dealing – Underlying document authorizing transfer • POA, Trust, etc.

IX. Planning

• Disclosure – It is imperative to be totally candid and truthful in disclosing all income, assets and transfers during the application process – Failure to disclose is fraud and may subject the applicant or advisor to criminal and/or civil penalties – Benefits may be lost at much later date and benefit recovery instituted

IX. Planning

• Tax Issues – Capital Gain • Donor vs donee – Loss of step-up in basis at death – Sale of home – Gift tax – Valuation

IX. Planning

• Personal Care Contracts – Payment for services, not gift.

– Must be arms length transaction – Cannot be for past services – Should be considered well before need for services in drafting legal documents – Consider using escrow agent for lump sum payments – Tax implications

IX. Planning

– Process for implementing PSC • • • • • • • • • Assessment Log Appropriateness of services Cost in community Life expectancy Discount Calculate Authority Written agreement

X. Medicaid Estate Recovery

• • • • OBRA ’93 required estate recovery Definition of “estate” up to states but must include at least probate estate Expanded estate may include joint property, survivor property, life tenancies, etc.

Exempt categories of property – Home if decedent survived by spouse, minor, blind or disabled child or if sibling lived there for year

X. Medicaid Estate Recovery

• Florida – Must notify ACHA upon death of individual 55 or older – State has claim as class three creditor in estate for benefits paid during life of decedent – Claim can only be filed after death and is currently limited to probate estate or if those assets insufficient, revocable trust assets – See generally 409.9101; 733.212(d); 733.707(1)c & 733.707(3) Fla. Stat. (2005)

XI. Special Needs Trusts

• • • Concept simple and based on well thought out public policy.

General rule is that trusts are available and income is counted Special Needs Trusts are exception to general rule – Revocable Trusts • Invisible to creditors and for public benefits

XI. Special Needs Trusts

– Irrevocable Trusts subject to two inquiries: • Could any portion of the trust (income or assets) be used for the individual’s benefit?

• Is any portion of the trust available to someone else?

– Pre DRA look back was 60 months • This was major exception to three year rule generally applicable to transfers for less than fair market value • • DRA does not distinguish between transfers to trusts or otherwise Beware of trusts bearing annuities post DRA?

XI. Special Needs Trusts

• Types of Special Needs Trusts – Third Party Trusts • Funded with assets that do not belong to disabled individual • • May be inter vivos or testamentary Not subject to payback requirement – First Party or Self Settled Trusts • Funded with disabled individual’s own assets

XI. Special Needs Trusts

• Self Settled Trusts – “D4A” or “Disability Trusts” (42 USC 1396p(d)4(A) • Established by for benefit of disabled individual under age 65 • May only be established by parent, grandparent, court or guardian • • Must be funded with assets of disabled individual Must provide for payback to state for Medicaid benefits paid during life

XI. Special Needs Trusts

– “Pooled Trusts” (42 USC 1396p(d4(C) • • • • • • Established by non-profit Maintain separate accounts for each beneficiary Established for benefit of disabled individual May be created by individual, parent, grandparent guardian or the Court Individual’s funds used to create account At death of beneficiary, any funds not retained must be used to pay the state back for Medicaid benefits paid over life

XI. Special Needs Trusts

• • Execution, Funding and Administration are critical to success of SNT Examples of Supplemental Needs – ALF – Medical, dental, mental health – Care and Case management services – Travel – Companionship – Professional (Attorney, guardian, accountant)

XI. Special Needs Trust

• Benefits of SNT – Preserve critical public benefits for medical care – Significantly increase quality of beneficiary’s life – May avoid guardianship – Trust assets are restricted but invested and less likely to be misused by beneficiary, family or friends

XI. Special Needs Trusts

• Some issues to watch out for with SNTs – Beware of deeming rules when suit is settled for minor or spouse – Selection of Trustee is important • Administration requires specialized knowledge – Be wary of over structured settlement of lawsuit • May end up with insufficient funds to care for beneficiary – Liens must be satisfied before trust is funded • May take time to obtain these documents – Payback provision means assets frozen at beneficiary’s death • Stinking body rule – Be sure to notify applicable agencies of funding, death of beneficiary etc.

XI. Special Needs Trusts

• Consider using Trust Protector, Trust Advisor and/or Trust Advisory Committee – Trust Protector may be able to hire and fire trustee, serve as mediator, distribution manager, obtain service providers, or any or all of these – Family often best suited for Trust Advisor – Trust Advisory Committee may be helpful for continuity if parent dies, but may be cumbersome and expensive

XII. Conclusion

• • Constantly changing statutory, regulatory and public policy environment Stay in touch with organizations on cutting edge of interpretation and advocacy for the aging and disabled populations – NAELA – AFELA – Elder Law Section of Florida Bar