BOARD FIDUCIARY RESPONSIBILITY AND RESIDENT ASSET PROTECTION STRATEGIES

BOARD FIDUCIARY RESPONSIBILITY AND RESIDENT ASSET PROTECTION STRATEGIES Presented by: Thomas E. Sweeney Tsoules, Sweeney & Martin, LLC 29 Dowlin Forge Road, Exton, PA 19341 Telephone: (610) 423 -4200 2006 PANPHA Annual Conference Hershey, PA

BOARD FIDUCIARY RESPONSIBILITY AND RESIDENT ASSET PROTECTION STRATEGIES WHAT CAN WE DO? LEGAL AND

BOARD FIDUCIARY RESPONSIBILITY vs. RESIDENT ASSET PROTECTION STRATEGIES BACKGROUND PANPHA – 2005 - “Asset Protection – How to be a ‘Hard Target’ ” BARCLAY FRIENDS Member of Board of Directors Chair/Vice Chair – Finance Committee Chairperson: 2006 -2007 HEALTH CARE ATTORNEY TSM Copyright © Tsoules, Sweeney & Martin, LLC 3

BOARD FIDUCIARY RESPONSIBILITY vs. RESIDENT ASSET PROTECTION STRATEGIES AGENDA TSM FIDUCIARY DUTY OF THE BOARD LTC FACILITIES: CCRC; ALF; SNF SCOPE OF SERVICES CONTRACT REQUIREMENTS SUBSIDIES, GUARANTEES, TRUSTS Copyright © Tsoules, Sweeney & Martin, LLC 4

BOARD FIDUCIARY RESPONSIBILITY vs. RESIDENT ASSET PROTECTION STRATEGIES AGENDA MEDICAID PLANNING – FUNDAMENTALS - TSM Millionaires & Medicaid Basics Medicaid Planning- Single Medicaid Planning – Married Pennsylvania Filial Support Laws LEGAL AND PRACTICAL ARRANGEMENTS/OPTIONS Copyright © Tsoules, Sweeney & Martin, LLC 5

BOARD FIDUCIARY RESPONSIBILITY THE NONPROFIT CORPORATION ACT OF 1988 (15 Pa. C. S. §§ 5711 et. seq. ) ATTY. GEN. TOM CORBETT’S HANDBOOK FOR CHARITABLE NONPROFIT CORPORATIONS http: //www. attorneygeneral. gov. consumers. aspx? id=227 TSM Copyright © Tsoules, Sweeney & Martin, LLC 6

FIDUCIARY DUTIES OFFICE OF INSPECTOR GENERAL (“OIG”) n n CORPORATE RESPONSIBILITY AND CORPORATE COMPLIANCE: A RESOURCE FOR HEALTH CARE DIRECTORS (April 2, 2003), Office of Inspector General AN INTEGRATED APPROACH TO CORPORATE COMPLIANCE: A RESOURCE FOR HEALTH CARE (July 1, 2004) See: http: //www. org. hhs. gov/fraud/complianceguidance. htm/#2 TSM Copyright © Tsoules, Sweeney & Martin, LLC 7

FIDUCIARY DUTIES OF DIRECTORS AND OFFICERS n THE DUTY OF CARE - Standard -

FIDUCIARY DUTIES n Reimbursement – Sources of Payment n LTC Organizations: CCRC; ALF; SNF

FIDUCIARY DUTIES n SOURCES OF PAYMENT TSM MEDICARE MEDICAID LTC INSURANCE PRIVATE PAY Copyright

FIDUCIARY DUTIES SOURCES OF PAYMENT – MEDICARE Part A Medicare Part A pays Skilled Nursing Care that is restorative care in a Medicare-approved skilled nursing facility following a 3 -day hospital stay. This coverage pays for nursing services, bed and board, therapies, drugs, supplies, etc. Day 1 – 20 Medicare pays all covered services Day 21 -100 Medicare pays all except coinsurance payment Day 101 Medicare pays 0% Medicare does not cover lower levels of care TSM Copyright © Tsoules, Sweeney & Martin, LLC 11

FIDUCIARY DUTIES Sources of Payment – Medicare Part A (Continued) Most individuals go into a SNF on Medicare following a hospital stay, and do not receive 100 days of skilled care because they are found to have reached a maximum level of improvement before the 100 days are up. n The SNF will advise the person or their family verbally and in writing that Medicare will no longer provide coverage so that other payment arrangements need to be made. n Often payment arrangements will mean private pay or immediate application for Medical Assistance. n TSM Copyright © Tsoules, Sweeney & Martin, LLC 12

FIDUCIARY DUTIES SOURCES OF PAYMENT – PART B/MEDIGAP POLICIES n n n Medicare Part B pays for: Medical expenses (80% of costs); laboratory costs; outpatient treatment Medigap insurance is private supplemental insurance which is designed to help pay Medicare coinsurance amounts. It is sold to cover gaps in coverage provided by Medicare. Companies selling Medigap insurance must each offer the same coverages so cost is the major difference between their policies. If Medicare is not paying for skilled nursing care, then the Medicap policy is usually not applicable. TSM Copyright © Tsoules, Sweeney & Martin, LLC 13

FIDUCIARY DUTIES SOURCE OF PAYMENT – MEDICAID Rates are composed of the following components: - Resident Care Costs (related to peer group) Administrative Costs (caps are imposed) Capital Costs (facility based) Case Mix Index (Medicaid residents only) – medical acuity Rates are set quarterly - (1/1, 4/1, 7/1, 10/1) - changes based on facilities case mix index for prior years. TSM Copyright © Tsoules, Sweeney & Martin, LLC 14

FIDUCIARY DUTIES SOURCES OF PAYMENT – MEDICAID (Continued) Not only does the Medicaid rate cover room and board but other services either provided or paid for by the private pay resident such as over-thecounter medications, transportation to doctors’ offices, etc. , laundry services, palliative podiatry services. TSM Copyright © Tsoules, Sweeney & Martin, LLC 15

FIDUCIARY DUTIES LONG TERM CARE (“LTC”) INSURANCE n n n TSM LTC Insurance can cover care in a nursing home, a personal care home, an alternate care home, home health care or assisted living facility. One must qualify to receive benefits on Medical necessity which means: (i) inability to perform 2 -3 Activities of Daily Living (ADLs) without human help; and, (ii) cognitive impairment prevents functioning and/or accomplishment of ADLs. Medigap policies – covers co-pays in Medicare. Copyright © Tsoules, Sweeney & Martin, LLC 16

CONTINUING CARE RETIREMENT CENTERS (“CCRC”) n n CONTINUING CARE PROVIDER REGISTRATION ACT (40 P. S. § 3201 et seq. ) (31 Pa. Code § 151. 1 et seq. ) CCRC REGULATED BY THE PA. INSURANCE DEPARTMENT: “No providers shall engage in the business of providing continuing care in this Commonwealth without a certificate of authority therefor obtained from the commissioner as provided for in this act. ” 40 P. S. § 3204(a) TSM Copyright © Tsoules, Sweeney & Martin, LLC 17

CCRC DEFINITIONS – PA REGULATIONS n CONTINUING CARE n ENTRANCE FEE n LIVING UNIT

CCRC DEFINITIONS – PA REGULATIONS n PA RESIDENTS AGREEMENT n STATUTORY RESERVES n ENTRANCE

CCRC ACTUARIAL RESERVES COVER ALL LIABILITIES n n n OPERATING COSTS FOR: Shelter, Health Care, Dietary CAPITAL COSTS FOR: Fixed Asset Depreciation, Replacement, Reimbursements BUFFER FUNDS FOR: Adverse Experience, Assumption Errors, Margin TSM Copyright © Tsoules, Sweeney & Martin, LLC 20

CCRC CONTRACT TYPES: CARF-CCAC n Type A (Extensive) Agreement: An entrance fee contract that includes housing, residential services, amenities, and unlimited specific health-related services with little or no substantial increase in monthly payments, except to cover normal operating costs and inflation adjustments. TSM Copyright © Tsoules, Sweeney & Martin, LLC 21

CCRC CONTRACT TYPES: CARF – CCAC n Type B (Modified) Agreement: An entrance fee contract that includes housing, residential services and amenities and a specific amount of health care with no substantial increase in monthly payments, except to cover normal operating costs and inflation adjustments. After the specified amount of health care is used, persons served pay either a discounted rate or the full per diem rates for required health care services. TSM Copyright © Tsoules, Sweeney & Martin, LLC 22

CCRC CONTRACT TYPES: CARFT – CCAC n Type C (Fee-For-Service) Agreement: An entrance fee contract that includes housing, residential services, and amenities for the fees stated in the resident agreement. Access to health care services is guaranteed, but it may be required at full feefor-service rates. TSM Copyright © Tsoules, Sweeney & Martin, LLC 23

CCRC CONTRACT TYPES: CARF-CCAC n TSM Type D (Rental) Agreement: Allows residents the opportunity to enter their housing and provides, but does not guarantee, access to health care services paid on a fee-for-services basis. Copyright © Tsoules, Sweeney & Martin, LLC 24

CCRC CONTRACT TYPES: CARF-CCAC n TSM Equity Agreement: These types of agreements involve the actual purchase of real estate or membership. Includes condominiums and cooperatives. Copyright © Tsoules, Sweeney & Martin, LLC 25

CCRC CONTRACTUAL PROHIBITIONS AGAINST TRANSFERS (Example) CCRC will not terminate this agreement if the resident is unable to pay the full monthly service fee as a result of financial reverses provided such reverses, in CCRC’s sole judgment, are not the result of willful or unreasonable dissipation of the resident’s assets. A financial gift to relatives or friends is considered to be a willful dissipation of funds subject to termination of this agreement by CCRC. (emphasis added) TSM Copyright © Tsoules, Sweeney & Martin, LLC 26

CCRC CONTRACTUAL PROHIBITIONS (Continued) For the period that resident is unable to pay the full monthly service fee …, the amount … shall be calculated and … totaled. The resident or his estate shall pay … following the death of the resident, or at such time as the resident sells the balance of the life estate in his unit. Resident grants CCRC right to review financial records, including … tax returns. TSM Copyright © Tsoules, Sweeney & Martin, LLC 27

CCRC CONTRACTUAL PROHIBITIONS (Continued) If a determination is made that Resident has willfully dissipated his or her assets or that Resident has sufficient and adequate assets to pay monthly service fee and resident refuses to pay monthly service fee or other amounts due, CCRC may terminate this Agreement. TSM Copyright © Tsoules, Sweeney & Martin, LLC 28

CCRC CONTRACTUAL PROHIBITIONS (Continued) Contractual Prohibition Against Transfer of Assets Oak Crest Village, Inc. v. Murphy, 841 A. 2 d 816(Md. Ct. App. 2004) n Facts n Court Holding TSM Copyright © Tsoules, Sweeney & Martin, LLC 29

CCRC DEFICIT REDUCTION ACT OF 2005 On February 8, 2006, President Bush signed the Deficit Reduction Act of 2005 (the “DRA”) into law. The DRA includes a number of significant changes to the Federal Medicaid rules, particularly in regard to CCRC contracts. TSM Copyright © Tsoules, Sweeney & Martin, LLC 30

CCRC Deficit Reduction Act of 2005 (Continued) SEC. 6015. ENFORCEABILITY OF CONTINUING CARE RETIREMENT COMMUNITIES (CCRC) AND LIFE CARE COMMUNITY ADMISSTION CONTRACTS “…contracts for admission to a State licensed, registered, certified, or equivalent continuing care retirement community or life care community, including services in a nursing facility that is part of such community, may require residents to spend on their care resources declared for the purposes of admission before applying for medical assistance. ” TSM Copyright © Tsoules, Sweeney & Martin, LLC 31

CCRC TRUST ACCOUNT AGREEMENT n INDEPENDENT LIVING – RETIREMENT n PERSONAL CARE SERVICES n

CCRC TRUST ACCOUNT AGREEMENT n n n Equity Model – Resident share 50% in appreciated value upon resale ALF or SNF are not included in CCRC contract. Resident obligated to pay. Trust Agreement – permits CCRC to insure payment for ALF or SNF services from residents 50% equity, upon sale. TSM Copyright © Tsoules, Sweeney & Martin, LLC 33

CCRC TRUST ACCOUNT AGREEMENT (Continued) n n n CCRC Arrangement: Resident/estate share equally in appreciated resale value of unit. Trust Account Agreement: All refunds due the resident from sale of unit are deposited in Trust account, established by the Trust Account Agreement. Parties to Trust Account Agreement: Resident, CCRC and local bank. TSM Copyright © Tsoules, Sweeney & Martin, LLC 34

CCRC TRUST ACCOUNT AGREEMENT (Continued) n Trust Account is for the exclusive benefit of resident for payment for services provided by CCRC’s other ALF or SNF facilities. Note: SNF is not licensed by Medicaid. TSM Copyright © Tsoules, Sweeney & Martin, LLC 35

PERSONAL HOME CARE/ ASSISTED LIVING FACILITY (“ALF”) LICENSURE REGARDLESS OF THE LABEL/TITLE USED (PERSONAL CARE HOME/ASSISTED LIVING FACILITY) , A FACILITY MUST BE LICENSED BY THE DEPARTMENT OF PUBLIC HEALTH AS A PERSONAL CARE HOME IF IT PROVIDES PERSONAL CARE SERVICES. (55 Pa. Code § 2600) TSM Copyright © Tsoules, Sweeney & Martin, LLC 36

DEFINITIONS PERSONAL CARE HOME OR HOME – A premise in which food, shelter and personal assistance or supervision are provided for a period exceeding 24 hours, for four or more adults who are not relatives of the operator, who do not require the services in or of a licensed long-term care facility, but who do require assistance or supervision in activities of daily living or instrumental activities of daily living. n (emphasis added) TSM Copyright © Tsoules, Sweeney & Martin, LLC 37

DEFINITIONS PERSONAL CARE HOME OR HOME – (Continued) The term includes a premise that has held or presently holds itself out as a personal care home and provides food and shelter to four or more adults who need personal care services, but who are not receiving the services. (emphasis added) n Personal Care Services includes activities of daily living or instrumental activities of daily living. n TSM Copyright © Tsoules, Sweeney & Martin, LLC 38

ALF ADL – Activities of Daily Living The term includes eating, drinking, ambulating, transferring in and out of a bed or chair, toileting, bladder and bowel management, personal hygiene, securing health care, managing health care, self-administering medication and proper turning and positioning in a bed or chair. TSM Copyright © Tsoules, Sweeney & Martin, LLC 39

ALF IADL – Instrumental Activities of Daily Living The term includes the following activities when done on behalf of a resident: n n n TSM Doing laundry Shopping Securing and using transportation Managing finances Using a telephone Making and keeping appointments n n n Caring for personal possessions Writing correspondence Engaging in social and leisure activities Using a prosthetic device Obtaining and keeping clean seasonal clothing Copyright © Tsoules, Sweeney & Martin, LLC 40

ALF Who Pays for Personal Care Services ? n n Private Pay is primary source covering ALF. Medicaid does not pay for assisted living services. Medicare does not pay for day-to-day costs; resident may qualify for Medicare Part B services. Long Term Care Insurance TSM Copyright © Tsoules, Sweeney & Martin, LLC 41

ALF PA Contract Requirements (31 Pa. Code § 2600. 25) n Contract shall be signed by representative of ALF and the payer, if different from the resident, and cosigned by the resident’s designated person, if any, if the resident agrees (emphasis added). TSM Copyright © Tsoules, Sweeney & Martin, LLC 42

ALF PA Contract Requirements n (Continued) At a minimum, the Contract must specify: - the fee schedule the party responsible for payment (emphasis added) TSM refunds Copyright © Tsoules, Sweeney & Martin, LLC 43

ALF PA Contract Requirements n n (Continued) A list of personal care services to be provided to the resident based on the outcome of the resident’s support plan, a list of actual rates that the resident will be periodically charged for food, shelter and services and how, when and by whom payment is to be made. (emphasis added) Charges for holding a bed. TSM Copyright © Tsoules, Sweeney & Martin, LLC 44

ALF PA Contract Requirements (Continued) The home may not require or permit a resident to assign assets to the home in return for a life care contract/guarantee. A life care contract/guarantee is an agreement between the legal entity and the resident that the legal entity will provide care to the resident for the duration of the resident’s life. Continuing care communities that have obtained a Certificate of Authority from the Insurance Department and provide a copy of the certificate to the Department are exempt from this requirement. TSM Copyright © Tsoules, Sweeney & Martin, LLC 45

ALF Financial Guarantees – Third Parties n n Landlord/Tenant Relationship: resident leaves unit and signs Assisted Living Service Agreement As inducement for Landlord (i. e. , ALF) to: TSM enter into apartment lease; or provide any assisted living services; or provide access or admission to an assisted living unit Copyright © Tsoules, Sweeney & Martin, LLC 46

ALF Financial Guarantees – Third Parties (Continued) n Guarantor (one or more parties) guarantees payment to Landlord (i. e. , ALF) of the lease or any Assisted Living Agreement or any payment obligations related to assisted living services. TSM Copyright © Tsoules, Sweeney & Martin, LLC 47

ALF TERMINATION/SUBSIDIES n n Termination upon 30 days’ written notice for breach, including non-payment of charges. Other grounds for termination; misrepresentation of financial information; misuse of financial resources; disbursement of funds to outside parties to the point you cannot meet your financial obligations. TSM Copyright © Tsoules, Sweeney & Martin, LLC 48

ALF TERMINATION/SUBSIDIES (Continued) n No termination for nonpayment of charges, if the sole reason for such nonpayment is insufficient funds, beyond your control, and so long as sufficient resident assistance funds are available; use of resident assistance funds is in sole discretion of facility. TSM Copyright © Tsoules, Sweeney & Martin, LLC 49

ALF TERMINATION/SUBSIDIES (Continued) n n TSM Resident is responsible for seeking assistance from family members before any subsidy by the facility may be granted. If ALF provides subsidy, ALF agreement may be enforced against estate. Copyright © Tsoules, Sweeney & Martin, LLC 50

SKILLED NURSING FACILITY (“SNF”) FEDERAL AND STATE REGULATIONS n n n TSM “Improving the Quality of Care in Nursing Homes” – Institute of Medicine, 1986 Nursing Home Reform Act – OBRA 1987 Conditions of Participation in Medicare and Medicaid – 1989 Federal Regulations Copyright © Tsoules, Sweeney & Martin, LLC 51

SNF Federal and State Regulations (Continued) n n Pennsylvania Department of Health licenses longterm care nursing facilities. “Department incorporates by reference…Federal requirements for long-term care facilities (42 C. F. R. § 483. 1 -483. 75) as licensing regulations for longterm care nursing facilities [with limited exceptions]. 28 Pa. Code § 201. 2 TSM Copyright © Tsoules, Sweeney & Martin, LLC 52

SNF DEFINITION Skilled or intermediate nursing care – Professionally supervised nursing care and related medical and other health services provided for a period exceeding 24 hours to an individual not in need of hospitalization, but whose needs are above the level of room and board and can only be met in a long-term care nursing facility on an inpatient basis because of age, illness, disease, injury, convalescence or physical or mental infirmity. TSM Copyright © Tsoules, Sweeney & Martin, LLC 53

SNF DEFINITION (Continued) The term includes the provision of inpatient services that are needed on a daily basis by the resident, ordered by and provided under the direction of a physician, and which require the skills of professional personnel, such as registered nurses, licensed practical nurses, physical therapists, occupational therapists, speech pathologists or audiologists. TSM Copyright © Tsoules, Sweeney & Martin, LLC 54

SNF WHO PAYS FOR SNF SERVICES ? n Medicaid n Medicare – Limited n

SNF FEDERAL REGULATIONS EQUAL ACCESS TO QUALITY CARE n TSM A facility must establish and maintain identical policies and practices regarding transfer, discharge, and the provision of services under the State plan for all individuals regardless of source of payment. Copyright © Tsoules, Sweeney & Martin, LLC 56

SNF FEDERAL REGULATIONS (Continued) THE FACILITY MUST: n TSM NOT REQUIRE RESIDENTS OR POTENTIAL RESIDENTS TO WAIVE THEIR RIGHTS TO MEDICARE OR MEDICAID; AND Copyright © Tsoules, Sweeney & Martin, LLC 57

SNF FEDERAL REGULATIONS (Continued) n NOT REQUIRE ORAL/WRITTEN ASSURANCE THAT RESIDENTS OR POTENTIAL RESIDENTS ARE NOT ELIGIBLE FOR, OR WILL NOT APPLY FOR, MEDICARE OR MEDICAID BENEFITS; AND TSM Copyright © Tsoules, Sweeney & Martin, LLC 58

SNF FEDERAL REGULATIONS (Continued) n Facility must not require a third party guarantee of payment to facility as a condition of admission or expedited admission, or continued stay in facility. However, facility may require an individual who has legal access to a resident’s income or resources available to pay for facility care to sign a contract, without incurring personal financial liability, to provide facility payment from resident’s income or resources (emphasis added); and TSM Copyright © Tsoules, Sweeney & Martin, LLC 59

SNF FEDERAL REGULATIONS (Continued) n TSM In the case of a person eligible for Medicaid, a nursing facility must not charge, solicit, accept or receive, in addition to any amount otherwise required to be paid under the State plan, any gift, money, donation, or other consideration as a precondition of admission, expedited admission or continued stay in the facility. Copyright © Tsoules, Sweeney & Martin, LLC 60

SNF CONTRACTUAL OBLIGATION BY RESPONSIBLE PARTY Sunrise Health Care v. Azarigian, 821 A. 2

MEDICAID PLANNING MILLIONAIRES AND MEDICAID “Insurers Help Elderly Get Medicaid To Pay For Nursing Homes – Annuity That Converts Assets Into Income Can Let Even Affluent People Qualify – States Start to Crack Down” n The Wall Street Journal, June 6, 2001 n “Some Heirs Find A Costly Surprise: Bill From Medicaid” The Wall Street Journal, June 24, 2005 TSM Copyright © Tsoules, Sweeney & Martin, LLC 62

MEDICAID PLANNING Millionaires and Medicaid (Continued) n Georgetown University Long-Term Care Financing Project, “Medicaid’s Coverage of Nursing Home Costs: Asset Shelter for the Wealthy or Essential Safety Net” (April, 2005) http: //www. ltc. georgetown. edu/pdfs/nursinghomecosts. pdf “There is little evidence that large numbers of the elderly are planning their estates for the purpose of acquiring easy access to Medicaid in the event they need nursing home care. ” TSM Copyright © Tsoules, Sweeney & Martin, LLC 63

MEDICAID PLANNING Millionaires and Medicaid n (Continued) National Academy of Elder Law Attorneys (NAELA) Survey of Members (April/May 2003) suggests it is mainly the middle class, not wealthy, seniors who are involved in Medicaid planning. http: //www. elderlawanswers. com/resources/s 4/r 36488. asp TSM Copyright © Tsoules, Sweeney & Martin, LLC 64

MEDICAID PLANNING Millionaires and Medicaid (Continued) United States Government Accountability Office “Medicaid – Transfers of Assets by Elderly Individuals to Obtain Long-Term Care Coverage” (September 2005)(GAO-05 -968) “In 2002, over 80% of approximately 28 million elderly households had annual incomes of $50, 000 or less…about 6 million elderly households (22%) reported transferring cash…In general, the higher the household asset level, the more likely it was to have transferred cash…” TSM Copyright © Tsoules, Sweeney & Martin, LLC 65

MEDICAID PLANNING MEDICAID FUNDAMENTALS n n Federal law contains broad guidelines relating to what services are covered by Medicaid and who is eligible. (Title XIX of Social Security Act) Pennsylvania Legislative establishes statutory framework; Department of Public Welfare promulgates regulations. (62 P. S. § 444. 1 et seq. ; 55 Pa. Code §§ 100 -275; 1101 -1251) n TSM Medicaid is a federal-state matching program. Copyright © Tsoules, Sweeney & Martin, LLC 66

MEDICAID PLANNING FINANCIAL ELIGIBILITY n n Medicaid Applicants Must Meet Financial Eligibility Requirements Three Categories - Categorical: SSI Criteria - Institutionalized Home Applicant: Income Less Than 300% of SSI - Medically Needy (Higher Income Individuals) TSM Copyright © Tsoules, Sweeney & Martin, LLC 67

MEDICAID PLANNING MEDICALLY NEEDY ELIGIBILITY n n n U. S. Citizen/Resident Alien Resident of State 65 Years of Age or Disabled or Blind Care Must Be Deemed Medically Necessary Countable Resources Must Not Exceed $2, 400 TSM Copyright © Tsoules, Sweeney & Martin, LLC 68

MEDICAID PLANNING RESOURCE ELIGIBILITY n n TSM An applicant/recipient is resource eligible for MA if his or her total resources that are counted in determining resource eligibility do not exceed the MA resource limit for the appropriate MA program. In determining resource eligibility for MA, resources may be categorized in one of three categories: (1) available; (2) exempt (excluded); or (3) unavailable. Copyright © Tsoules, Sweeney & Martin, LLC 69

MEDICAID PLANNING AVAILABLE RESOURCES n n TSM All resources are counted unless “exempt” or unavailable in determining M. A. eligibility; partial ownership. Examples of available resources: real property (excludes home) bank account stocks, bonds, mutual funds, CDs IRAs, Keogh, pension plans Vehicles, boats and other vehicles Cash surrender value Copyright © Tsoules, Sweeney & Martin, LLC 70

MEDICAID PLANNING EXEMPT OR EXCLUDED RESOURCES n Residential Property – Applicant or spouse lives in home; see DRA: homes valued in excess of $500, 000 (states may increase to $750, 000) are not excluded. n Household Goods n One Motor Vehicle n Burial Space TSM Copyright © Tsoules, Sweeney & Martin, LLC 71

MEDICAID LIABILITY ASSSET TRANSFERS THAT CREATE MEDICAID PENALTY n n Transfers of assets for less than fair consideration within look back period (now 5 years) Calculation of Penalty Periods: Uncompensated Value of Transfer ÷ Average Monthly Cost for Private Nursing Home Care (July 1, 2005 = $6, 062. 35) TSM Copyright © Tsoules, Sweeney & Martin, LLC 72

MEDICAID LIABILITY EXEMPT TRANSFERS THAT DO NOT INCUR A PENTALTY n n To the Community/Spouse Transfer of Home; - To Minor or Disabled Child - Caregiver Child Who Lives at Home - Sibling with Equity TSM Copyright © Tsoules, Sweeney & Martin, LLC 73

MEDICAID PLANNING TECHNIQUES FOR THE UNMARRIED APPLICANT Spending Down Assets n n n TSM Buy clothing or medical equipment Pay debts; prepay scheduled bills Pay legal and professional fees Prepay funeral and burial expenses Take vacation Employ personal care assistance Copyright © Tsoules, Sweeney & Martin, LLC 74

MEDICAID PLANNING Techniques for Unmarried Applicant (Continued) Convert Available Assets to Exempt Status n n n Trade In Exempt Motor Vehicle for More Expensive Model Purchase New or More Expensive Home (if applicant still lives at home) Make Home Improvements Purchase Household Goods Purchase An Annuity TSM Copyright © Tsoules, Sweeney & Martin, LLC 75

MEDICAID PLANNING Techniques for Unmarried Applicant (Continued) n n TSM Period of Ineligibility Assess for asset transfers without fair consideration No Period of Ineligibility Pre-look Back Transfers (DRA expands look back period to 5 years) Transfers of Excluded Assets (e. g. , personal property) Exempt Transfers • Transfer to Spouse Copyright © Tsoules, Sweeney & Martin, LLC 76

MEDICAID PLANNING Techniques for Unmarried Applicant (Continued) n n n “Half a Loaf Transfers” Medicare transfer rules provide that the transfer penalty must be based upon the average cost of nursing facility care. This permits transfer of half the assets to a family member and use the other half for nursing home care prior to applying for Medicaid. Illustration – See Attachment TSM Copyright © Tsoules, Sweeney & Martin, LLC 77

MEDICAID PLANNING MARRIED APPLICANT n The Medicare Catastrophic Coverage Act of 1988 (P. L. 100 -360, 102 Stat. 753, codified at inte alia, 42 U. S. C. § 1396 r-5) and commonly called MCCA established a system for allocating income and resources between the Institutionalized and Community Spouse n Community Spouse (“CS”) is permitted to keep all of his/ her income; CS’s income may not be deemed available to pay care of Institutionalized Spouse (“IP”) TSM Copyright © Tsoules, Sweeney & Martin, LLC 78

MEDICAID PLANNING MARRIED APPLICANT – INCOME Minimum Monthly Maintenance Needs Allowance (“MMMNA”) n n TSM As of July 1, 2005, MMMNA is $1, 604 MCCA permits IS to allocate some or all his/her monthly income to CS if needed to maintain MMMNA Copyright © Tsoules, Sweeney & Martin, LLC 79

MEDICAID PLANNING MARRIED APPLICANT – RESOURCES Community Spouse Resource Allowance (“CSRA”) n n n TSM CS allowed to keep one-half of the total value of the countable assets CSRA is the amount of couples combined jointly and separately owned resources allocated to CS and unavailable to IS for determining eligibility to MA CSRA = Minimum (July 1, 2005) is $19, 020 CSRA = Maximum (July 1, 2005) is $95, 100 Copyright © Tsoules, Sweeney & Martin, LLC 80

MEDICAID PLANNING PRE-ACT 42: HURLY RULE n CS has opportunity to protect more than the standard CSRA if CS income does not equal the MMMNA n Resource First Methodology – Hurly Settlement n CS is entitled to retain an amount equal to an unguaranteed, single lifetime commercial annuity n Under Hurly, no duty to purchase the annuity TSM Copyright © Tsoules, Sweeney & Martin, LLC 81

MEDICAID PLANNING IMPACT OF ACT 42 and DRA n n n TSM DRA and Act 42 legislatively modifies Hurly; DRA mandates income first methodology Act 42 limits excess resources that can be retained by low-income CS Use of annuity; DPW must be named beneficiary so it is reimbursed Copyright © Tsoules, Sweeney & Martin, LLC 82

MEDICAID PLANNING SPOUSAL REFUSAL 42 U. S. C. § 1396 -5(c)(3): An IS is not ineligible for Medicaid if the CS refuses to make resources in excess of the CSRA available, provided the IS assigns his/her support rights to the state. TSM Copyright © Tsoules, Sweeney & Martin, LLC 83

MEDICAID PLANNING SPOUSAL REFUSAL (Continued) MORENZ v. WILSON-COKER 2 nd Civ. , No. 04

MEDICAID PLANNING DEFICIT REDUCTION ACT OF 2005 (“DRA”) n n n n TSM Look Back Period Lengthened to 60 Months Penalty Start Date Revised Hardship Waivers Treatment of Annuities Income – First Mandate Excess Home Equity Enforceability of CCRC Provisions Inclusion of Transfers to Purchase Life Estates Copyright © Tsoules, Sweeney & Martin, LLC 85

MEDICAID PLANNING PENALTY START DATE REVISED n DRA changes the way the penalty start date is calculated n The latter of: - TSM the first day of month when transfer made OR date on which individual is eligible for Medicaid and is receiving LTC services Copyright © Tsoules, Sweeney & Martin, LLC 86

MEDICAID PLANNING PENALTY START DATE REVISED (Continued) Since penalty begins to run after the person who made the gift can no longer pay for care, who pays: - TSM Spouse (out of protected assets) Children (moral payment/Act 43 law suit by NH) Facility (uncompensated care) Medicaid (individual qualifies under hardship category) Copyright © Tsoules, Sweeney & Martin, LLC 87

MEDICAID PLANNING PA FILIAL SUPPORT LAWS – ACT 43 n n TSM Revitalization of a dormant statutory support law Statutory obligation of adult children to financial support parents reinstated in Domestic Relations Code Copyright © Tsoules, Sweeney & Martin, LLC 88

MEDICAID PLANNING ACT 43 “All of the following individuals have the responsibility to care for and maintain or financially assist an indigent person regardless of whether the indigent person is a public charge: (1) (2) (3) The spouse of the indigent person. The child of the indigent person. The parent of the indigent person. ” (23 Pa. C. S. A. § 4601 -4606) TSM Copyright © Tsoules, Sweeney & Martin, LLC 89

MEDICAID PLANNING n EXCEPTIONS - - TSM If individual does not have sufficient financial ability. Support amount is set by court in judicial district where resident lives. Copyright © Tsoules, Sweeney & Martin, LLC 90

MEDICAID PLANNING FINANCIAL LIMITS: LESSOR OF: n - 6 times the excess of the liable individual’s monthly average income over the amount required for reasonable support of the liable individual; or - cost of the medical assistance for the aged. - Contempt – failure to pay would result in six months in jail. TSM Copyright © Tsoules, Sweeney & Martin, LLC 91

MEDICAID PLANNING ACT 43 PRESBYTERIAN MEDICAL CENTER v. BUDD 832 A. 2 d 1066

LEGAL AND PRACTICAL CONSIDERATIONS n ADMISSION FINANCIAL CRITERIA: - n TSM Verification of resources; increase Actuarial criteria Financial spread sheet Consider “eldercare” transfers FINANCIAL ASSISTANCE FOR ALF SERVICES Copyright © Tsoules, Sweeney & Martin, LLC 93

LEGAL AND PRACTICAL CONSIDERATIONS n DRA and CCRC Declared Assets n CCRC – Trust Account n n TSM Third Party Guarantees - ALF - SNF (Limited) Pennsylvania Filial Support Laws Copyright © Tsoules, Sweeney & Martin, LLC 94