July 2016

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Deposits Directly into Miller Trust

Posted on July 28, 2016 by Jim Koewler — No Comments ↓

This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled (ABD) 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, 2016 installment 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. Today’s installment will discuss whether income is supposed to go directly into the Miller Trust.

The Ohio Department of Medicaid has finalized its new rule on Miller Trusts (aka Qualified Income Trusts or QITs.) A copy of the final rule is available here. The first form Miller Trust from the Ohio Department of Medicaid can be found here. The new version of the form Miller Trust from the Ohio Department of Medicaid can be found here.

Because the rule calls them QITs and today’s installment makes a number of references to the new rule, for this installment, I’ve started usually to call them QITs.

The Ohio Department of Medicaid had originally announced that the new rules would take effect on July 1, 2016. As that date approached, and the enormity of the changeover became more apparent, the effective date was delayed until August 1, 2016. I recently heard a rumor (and it is just that, only a rumor) that the implementation will be delayed again.

While the delays may seem frustrating, it is very hard to overstate the enormity of the changes that Ohio’s Department of Medicaid is trying to make. Not only are there the rule changes for people who need long term care that I have been discussing (and will continue to discuss) in my blog and newsletter. There are bigger changes (affecting tens of thousands more people) in the eligibility rules for Medicaid for people who are disabled but do not need long term care. In addition, to oversee the new requirements for all affected people, the state and county Medicaid offices have to move to a new software system to manage the Medicaid program.

As discussed previously, someone in Ohio who needs Medicaid support to pay for long term care whose gross monthly income exceeds the Special Income Level ($2,199.00 at this time) must use a QIT to make the income over the Special Income Level not “income” anymore in the eyes of Medicaid. (Yes, the process is as hard to follow in real life as it is to follow in that sentence.) In order to get the benefits of the QIT, the amount of income over the $2,199 (or more than just that excess income) must be placed into the QIT each month so that the remaining “countable” income is $2,199 or less each month. (It’s not getting any more understandable, is it?)

Despite what I wrote two weeks ago, it is not entirely clear whether income should be placed directly into the QIT upon the income’s arrival from the payer. Section H seems to conflict (at least partially) with the language of Section D(4) (discussed two weeks ago) on this point. The second sentence of Section H states, “Every effort should be made to have the individual’s excess income deposited directly into the QIT account on a monthly basis.” Section D(4), however, states states that the person cannot “cannot transfer or assign to the trust his or her right to receive income.” Arranging a deposit directly into the QIT (what Section H seems to require) sure sounds like assigning the right to receive income (what Section D(4) prohibits.)

Now, perhaps (as discussed two weeks ago) the arrival of income into the person’s hands must first be into a non-QIT account. The, money could be “transferred” into the QIT. Unfortunately, it’s not clear that Section H refers to “transfers” of income from one account to another or “deposits” of income upon its first arrival. Section H uses both “transfer” and “deposit,” and it’s not clear that these terms mean different things in the QIT rule. The first clause of the first sentence of Section H refers to income being “transferred” into the QIT account, and the second clause of the same sentence refers to income being “deposited” into the QIT account. The second sentence also uses the word “deposited,” adding to the confusion. In fact, Section H uses “transfer” once and “deposit” five times.

I believe that the rule means to have all income arrive into non-QIT account(s) and then get transferred into the QIT, but whoever wrote the rule did not make its intent clear. Perhaps, Ohio Department of Medicaid means “transfers” in Section H but used “deposits” because of sloppy writing or sloppy proofreading. Unfortunately, approximately $5,000 – $6,000 in Medicaid benefits for long term care costs is at stake each month for people who must comply with this rule. Is it too much to ask for clarity?

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Changes to form Miller Trust

Posted on July 21, 2016 by Jim Koewler — No Comments ↓

This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled (ABD) 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, 2016 installment 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. Today’s installment will discuss the changes that the Ohio Department of Medicaid has made to the form Miller Trust document.

Because the rule calls them QITs and today’s installment makes a number of references to the new rule, for this installment, I’ve started usually to call them QITs.

As discussed previously, someone in Ohio who needs Medicaid support to pay for long term care whose gross monthly income exceeds the Special Income Level ($2,199.00 at this time) must use a QIT to make the income over the Special Income Level not “income” anymore in the eyes of Medicaid. (Yes, the process is as hard to follow in real life as it is to follow in that sentence.) In order to get the benefits of the QIT, the amount of income over the $2,199 must be placed into the QIT each month so that the remaining “countable” income is $2,199 or less each month. (It’s not getting any more understandable, is it?)

As mentioned above, the Ohio Department of Medicaid already has changed the QIT template.

First, a sentence has been added to specify that the trust’s taxpayer identification number will be the Social Security number of the Primary Beneficiary (i.e., the person receiving or applying for Medicaid for long term care.) This added sentence clarifies that the money handled by the trust, and the small amount of interest earned by the trust, belong to the Primary Beneficiary for tax purposes. (Few, if any, people receiving Medicaid’s help to pay for long term care have to pay taxes, but the income (even the possibility of income) in a bank account must be assigned to a taxpayer ID number or a Social Security number.) This added sentence takes away the question of the number to use. That added language will also, for some banks and credit unions, clarify what kind of account the QIT will need. (e.g., a personal checking account, or a business account, or a fiduciary account, etc.)

Second, language has been added regarding powers of the trustee . Like the language specifying the taxpayer ID number, this language alleviates some of the concerns that banks and credit unions had about their obligations to verify that the trustee was following the law and carrying out his/her/its duties. Among the concerns was the issue whether the trustee has the power to open an account, for example. (Remember, there are no inherent powers of a trustee. The trustee has only the powers given to him/her/it by the trust agreement.) The new language makes it clear that the trustee can open an account.

Third, in the same part of the document describing the trustee’s powers, language has been added to require the trustee to prepare a Certification of Trust. A Certification of Trust is a document that has existed under Ohio law (Revised Code section 5810.13) before the new QIT rules were written. The Certification is a verification by the trustee that he/she/it has the authority to act as trustee and to carry out the activities that he/she/it is asking the bank to help with (such as opening a trust account, accepting deposits into the trust account, and paying money out of the trust account.) Banks and credit unions have certain obligations to make sure that they aren’t used to defraud anyone and aren’t defrauded themselves. There are lots of legal obligations placed on banks and credit unions. A Certification of Trust relieves the bank or credit union from having to investigate the trustee to determine if he/she/it is legitimate and is performing his/her/its duties correctly. Because these QIT accounts will not have much money in them and because the accounts must be emptied each month, forcing the banks and credit unions to spend a great deal of time and money to investigate and oversee the QIT trustee would cause the banks and credit unions to lose money on these account. If these QIT accounts were money-losers to the banks and credit unions, they wouldn’t take these accounts. If banks and credit unions didn’t take these accounts, there would be no way to comply with the QIT requirements. In short, allowing banks and credit unions to accept QIT accounts without undertaking expensive oversight is better than not having QIT accounts in Ohio. We can’t let people lose their Medicaid benefits because banks and credit unions don’t want the QIT accounts.

To go along with this requirement that the trustee prepare a Certification of Trust, the new QIT template includes a template for a Certification of Trust as well.

Finally, the QIT template changes the terminology that describes the person signing the trust declaration with the Trustee. In the first version of the QIT template, a Trustee and a Settlor signed the document. In the new version, a Trustee and a Grantor sign the document. This change may not mean much, or it may mean a great deal. I haven’t figured it out yet.

Historically, in trust law, Grantor and Settlor meant the same thing. There was no reason to choose one term or the other. In fact, some trust documents (even some published form trust documents) used the terms interchangeably in the same document. But, someone at the Ohio Department of Medicaid consciously chose to change these terms. My distrust of the Ohio Department of Medicaid makes me think over and over that the change of terms has some significance that I haven’t yet found.

This terminology change is even more puzzling coming at the same time that the requirement for a Certification of Trust was inserted into the document. The Ohio statute that created the Certification of Trust (Revised Code section 5810.13) uses the term Settlor and doesn’t use the term Grantor. In fact, despite the use of the term Settlor in the Certification of Trust statute, the template Certification of Trust uses the term Grantor. One would think that whomever was looking at the statute would probably have used the same term (i.e., Settlor) in the template documents, especially when Settlor was already in the first version of the template QIT.

This change bothers me. I’m wondering what I’m missing. (I’m puzzling and puzzling ’til my puzzler is sore, like the Grinch did.) I’ve posed this question to a number of elder law colleagues but have not yet received any response. This one really gnaws at me.

Thanks go out to my friend Steve Caine, a Solon, Ohio estate planning attorney, for his help with in confirming that “Grantor” and “Settlor” usually mean the same thing.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Miller Trust deposit rules confusing

Posted on July 14, 2016 by Jim Koewler — No Comments ↓

This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled (ABD) 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, 2016 installment 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 installment discussed the need to balance the Miller Trust with the desire to have health insurance. Today’s installment will discuss the confusing deposit rules for Miller Trusts.

The Ohio Department of Medicaid has finalized its new rule on Miller Trusts (aka Qualified Income Trusts or QITs.) A copy of the final rule is available here. The form Miller Trust from the Ohio Department of Medicaid can be found here. Because the rule calls them QITs and today’s installment makes a number of references to the new rule, for this installment, I’ll usually call them QITs.

As discussed previously, someone in Ohio who needs Medicaid support to pay for long term care whose gross monthly income exceeds the Special Income Level ($2,199.00 at this time) must use a QIT to make the income over the Special Income Level not “income” anymore in the eyes of Medicaid. (Yes, the process is as hard to follow in real life as it is to follow in that sentence.) In order to get the benefits of the QIT, the amount of income over the $2,199 must be placed into the QIT each month so that the remaining “countable” income is $2,199 or less each month. (It’s not getting any more understandable, is it?)

So, the people who must comply with this rule must place a certain amount of money (the amount over $2,199) into the QIT bank account each month. (Sounds easy, when you reduce it to that level. Right?) Unfortunately, the QIT rule does not make it that easy. Sections D(4) and H describe the requirements on placing money into the QIT each month.

Section H provides that money should be “transferred” into the QIT account each month. Despite the headline of this article, the rule doesn’t require “deposits” into the QIT account, but instead requires “transfers” into the QIT account. What’s the difference?

Section D(4) states that the person cannot “cannot transfer or assign to the trust his or her right to receive income.” I believe that means that income cannot be place directly into the QIT. For example, someone who receives a monthly Social Security payment cannot change the account where that payment is deposited to the QIT account. I believe that, to comply with section D(4), the social security payment must get deposited by Social Security (Remember, Social Security uses direct deposit for the vast majority of its monthly payments.) into an account in the name of the person and then, sometime during the month, get transferred into the QIT account.

Unfortunately, I cannot explain why the rules have this requirement. I can only show you that the requirement is there.

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Miller Trust can’t pay Health Insurance Premium

Posted on July 7, 2016 by Jim Koewler — No Comments ↓

This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled (ABD) 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, 2016 installment 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. Today’s installment will discuss the need to balance the Miller Trust with the desire to have health insurance.

As discussed in previous installments, the QIT is tricky to use each month. Many people are considering whether it would simplify managing the QIT to put all of the person’s income into the QIT each month. Section K of the QIT rule allows the Medicaid recipient “to have all,or only a portion, of his or her income placed into the QIT account” as long as at least the income over $2,199 is placed into the QIT account. No one can doubt that that it would be easier to deal with one bank account each month than it would be to deal with multiple bank accounts.

Once income is placed into the QIT account, it becomes subject to the limitations of the QIT rule and the QIT’s declaration of trust. Section E of the QIT rule and Article III of the QIT template limit payments from the QIT account to (1) the monthly income allowance of the Medicaid beneficiary for his or her personal spending, (2) the share of the Medicaid recipient’s income that must be shared with his or her spouse according to Medicaid’s rules , (3) incurred medical costs of the Medicaid recipient, and (4) a small amount for bank fees, legals fees, accounting fees, and other similar fees. (Note: There is also a reference in subsection 2 to an income share for family dependents, but there has never before been a sharing of income with anyone other than the spouse, and there does not seem to be any change to the income rules allowing income to be shared with dependents, so I am not sure that sharing of income with dependents is really going to be allowed.)

None of the allowed payments from the QIT account is available for the payment of medical insurance premiums.

Before this recent change in rules, Ohio Medicaid allowed a covered person to use part of his or her income each month to pay for health insurance premiums. (The payment of insurance premiums leaves less money to pay for care costs, but Medicaid would increase its payment to the care provider to make up for the revenue lost to the insurance premium.)

The new version of the income rules has not changed the requirements regarding insurance premiums. A Medicaid covered person still can purchase medical insurance without running afoul of the new rules. BUT, the insurance premiums can’t be paid out of the QIT. In short, medical insurance premiums are an allowed expense for the person, but not an allowed expense for the person’s QIT.

So, if the Medicaid recipient wants to have medical insurance, payment arrangements must be made outside of the QIT. The ease of using the QIT to manage all income is lost if the person wants to keep medical insurance. Likewise, if the person handling the income for the Medicaid recipient wants to ease his or her administrative burden by placing all income into the QIT, medical insurance won’t be available.

(As an additional result of having no medical insurance, the Medicaid recipient will have both Medicare and Medicaid controlled in the My Care Ohio program, which might result in a loss of some care through the program’s cost controls. For a review of the My Care Ohio program, read the blog posts available through the My Care Ohio category.)

Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Must empty Miller Trust every month

Posted on July 1, 2016 by Jim Koewler — No Comments ↓

The Ohio Department of Medicaid has finalized its new rule on Miller Trusts (aka Qualified Income Trusts or QITs.) A copy of the final rule is available here. Because the rule calls them QITs and today’s installment makes a number of references to the new rule, for this installment, I’ll usually call them QITs.

The final version of the rule, consistent with the original draft version and proposed versions of the rule, requires that the trustee spend all of the money contained in the trust each month, month in and month out. Unfortunately for the trustees, the rule doesn’t state this requirement in English but instead states it in Bureaucrat-ese. Section M of the final rule provides “When income placed into the QIT exceeds the amount paid out of the QIT . . ., the excess income may be subject to penalties . . . .”

Translating into English (to the extent possible):

First, one must understand that, in Medicaid’s rules, money is “income” only during the month in which it arrives in the account or in the hands of the Medicaid-covered person. If the money is still in the person’s account or in the person’s possession at the end of the month, that money is now considered as part of “assets” (often called “resources”) belonging to that person. (Assets/Resources are controlled by a different set of Medicaid rules. Assets/Resources are just as important as Income for the person’s Medicaid eligibility. They just have different rules that apply to them. During this change of Medicaid rules, the Asset/Resource rules are not changing significantly except for an increase in the amount of Assets/Resources that a Medicaid-covered person can keep from $1,500 to $2,000.) So, because the QIT can accept only “income,” money must be placed into the QIT during the month that the money arrived and only during that month.

Second, section H of the new rule requires that “excess income” (meaning the amount above $2,199 per month (Note: That amount will be adjusted for inflation from time to time.)) must be placed into the QIT. Section J of the new rule provides that income that should have placed into the QIT but was not “will be considered available for purposes of determining the individual’s medicaid eligibility for that month.” When money is “available” to a person, it is counted as that person’s money. When a person has income “available” to him or her that exceeds $2,199, that person is not eligible for Medicaid for long term care. The purpose of the QIT is to make the income above $2,199 “unavailable” to the person. (I know, your starting to think that I’m talking gibberish. I warned you in the last installment that this Miller Trust (aka QIT) requirement isn’t logical in the real world. It’s not even close. “Them’s the rules” is the only explanation I can provide.) So, putting sections H and J together means that a person whose income over $2,199 doesn’t go into the QIT is not eligible for long term care Medicaid.

This leads us to section M’s language “when income placed into the QIT exceeds the amount paid out of the QIT . . ., the excess income may be subject to penalties . . . .” The language “income placed into the QIT exceeds the amount paid out” means that more money went into the trust that came out of the trust in a particular month. The “excess income” is the amount of money that went into the QIT account during the month but didn’t come out or, in other words, the amount left in the QIT at the end of the month. This amount left at the end of the month “may be subject to penalties.”

The “subject to penalties” clause in section M refers to a separate Medicaid rule that controls how Medicaid penalizes people for giving away resources in order to become poor enough for Medicaid eligibility (aka “improper transfers.”) Medicaid penalizes such “improper transfer” by refusing to pay for the person’s care for the amount of time that the “improperly transferred” money would have covered. So, if there is money not spent out of a QIT during the month, the person will be off Medicaid coverage for a time.

So, compliance seems easy, right? Every QIT trustee must just empty the trust every month. That may not be so easy.

I realize that we all try to be conscientious, but aren’t there some months when you just don’t get your bills paid on time? Maybe you get really busy. Maybe you go on vacation. Maybe you get sick. It doesn’t happen every month, but it happens sometimes.

In addition, during some months, it may be really tricky to pay out of the QIT because there may not be enough bills to pay. Section E of the QIT rule gives only 4 ways to spend money out of the QIT: the Medicaid-covered person’s monthly allowance, the spouse or dependent child’s income share, the person’s care incurred medical expenses, and administrative fees. The monthly allowance, the spouse/dependent income share, and the administrative fees will probably occur each month. The medical expenses may not occur each month. If a person on long term care Medicaid gets injured or becomes sick, the person may go onto Medicare covered rehab. When Medicare is paying for rehab, it (along with the person’s additional insurance) often pays for ALL care costs. The person may not have any medical costs that month. In such months, the QIT deposit that would normally go to medical expenses may not have anywhere to go and become “trapped” in the QIT. The person still needs to meet the Medicaid requirements during months when Medicare is paying the bills, so this “trapped” money is a failure to comply with the rules.

If you’re late on a bill, you get a late fee. It costs a little money, but it isn’t a tragedy. If a trustee doesn’t empty the QIT every month, the person in long term care loses Medicaid coverage. That person doesn’t have money stored away to pay for care during that time. (Remember, the person had to be poor to get on Medicaid in the first place.)

For some people, losing Medicaid even temporarily can mean a really long time. Some Medicaid programs have waiting lists (especially some of the waiver programs.) A person who loses Medicaid eligibility because of a QIT violation may not get back onto coverage without having to go back onto the waiting list.

Even if one can get past the illogic of the requirement for a Miller Trust (discussed in the last installment) and set up such a trust, the requirement to spend all of the money out of the trust will make month-to-month compliance difficult.