This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017. The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.) The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system. The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care. The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month. The June 23, 2016installment discussed the difficulty in understanding the need for a Miller Trust. The July 1, 2016 installment discussed the need to empty the Miller Trust account every month. The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance. The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts. The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document. The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust. The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic. The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust. The August 18, 2016 installment discussed the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums. The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust. The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust. The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice. The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.) The September 22, 2016 installment discussed keeping the house with an intent to return to home. The September 29, 2016 installment discussed keeping the house while a dependent family member lives there. The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.) The October 27, 2015 installment discussed real property that is “essential for self-support.” The November 10, 2017 installment discussed the retirement funds belonging to the spouse who does not seek Medicaid’s help with long term care costs. Today’s installment will discuss the 2016 changes in how Ohio Medicaid will allow applicants to give away some of their assets and still qualify for Medicaid.
Note: What I am calling “assets” Medicaid calls “resources.” In Medicaid’s terminology, “assets” includes both “resources” and “income.” Because most of the public thinks of “resources” as human resources or natural resources, and thinks of money in the bank as “assets,” I will use the term “assets” in this installment to refer to money in the bank and other similar things of value (like real estate, life insurance, etc.) that may be included in the applicant’s life savings.
Generally, when an applicant for Medicaid for long term care services gives away something of value (aka “assets,”) Medicaid will not pay for services for the amount of time that the given-away assets would have covered. This “penalty” is found within the “transfer of assets” rule in Medicaid’s regulations.
Despite the penalty, some Medicaid applicants wish to give away some of their assets. Usually, the applicants wish to give assets to their children. The giving of these assets to the applicant’s children often gives the applicants a great deal of emotional relief because it allows some of their money (the results of their working lives) to outlive them. Most parents want to leave something to their children and grandchildren. Finding a way to allow these applicants to give some of their assets is what most elder law attorneys try to do.
The trick is finding a way to cover the applicant’s long term care costs during the time that Medicaid will not (i.e., during the “penalty period” aka the “Restricted Medicaid Coverage Period.”) There used to be 4 different ways to cover such a penalty period. During 2016, Ohio Medicaid changed the rules on covering this penalty period. Today’s installment will discuss the “partial give-back” method.
Before January 2016, the Medicaid applicant could give away substantially all of his/her assets and then receive back enough each month to pay for his/her long term care for that month. (The conveyance back of pieces of the gift leads to call this the “partial give-back” approach.) The penalty period would be reduced a little bit at a time because the net amount given away went down a bit each month with the monthly return of part of the gift. At the same time, with the passage of a month during which Medicaid didn’t have to pay for the person’s long term care, part of the money still held by the applicant’s children is forgiven (The amount of the gift that is forgiven each month that Medicaid doesn’t have to pay for long term care is equal to the average amount that it pays to nursing homes throughout the state. That amount is adjusted from time to time with as the care costs go up with inflation.)
In January 2016, Ohio Medicaid enacted a rule that completely ended this partial give-back strategy.
The end of partial give-backs is an inconvenience but not a tragedy in the practice of elder law. It has, however, led to some Medicaid applicants getting caught in a penalty period without knowing it would happen.
Some Medicaid applicants have given gifts of money to family members within the five years before asking for Medicaid’s help. If someone makes gifts to family and then fails to account for the resulting penalty period before applying for Medicaid, the Medicaid caseworker will probably find a record of the gift in the person’s bank records. Then, the caseworker will have to impose a penalty period. By the time the person applies for Medicaid, however, he or she will have reduced assets to $2,000 through spending or other gifts. If the reduction of assets leading up to the application doesn’t include a way to cover the penalty from the prior gifts, the person will be left without a way to pay for care for the unexpected penalty period.