Paying for Long Term Care: Putting the Pieces Together Frances M. Pantaleo, esq. BLEAKLEY PLATT & Schmidt, LLP One North Lexington Avenue White Plains, NY 10601 Tel: (914) 287-6118 fpantaleo@bpslaw.com

Continuum of Care Home Care Day programs (social and medical model) Assisted Living Skilled Nursing Facility Hospice Hospital

Sources of Payment for Care Private Funds Private health insurance Long Term Care Insurance Medicare Medicaid

Average Cost of Care Home Care:-$15 to $30 per hour Cost of “live-in” care --$7,000 to $10,000 per month. Costs are rising due to recent cases involving wage and hour protections for workers. Assisted Living: $6,000 to $11,000 per month. Extra if private care aides also retained. Nursing Home: $13,000 to $18,000 per month.

Long Term Care Insurance Individuals with dementia, other chronic conditions unlikely to obtain insurance. Purchase price influenced by age, daily benefit, number of years policy will pay and inflation rider. Can be very expensive. Policies generally provide a pot of money which can be drawn upon to provide reimbursement for home care, assisted living, nursing home care, day programs at a specific dollar amount per day. Respite and care management expenses may also be covered. New hybrid policies—life insurance with long term care rider.

PARTNERSHIP POLICIES Partnership Policies enable access to Medicaid benefits upon expiration of the policy without regard to assets or transfers. Partial asset protection plans protect assets valued up to the amount of benefits covered by the plan.

National Health Insurance for Seniors over age 65 and persons under age 65 who have received Social Security Disability benefits for 24 months Part A: Hospital care Part B: Doctors and medical procedures— 80% Part C: Medicare Complete or Advantage (HMO) Part D: Prescription drugs Many co-pays and deductibles

MEDICARE SNF COVERAGE (Part A) Requires 3 day prior inpatient hospital stay (not for observation) Care in nursing home must be skilled-not custodial (PT, OT, bedsores, ventilator care) MEDICARE PAYS THE FIRST 20 DAYS IN FULL DAYS 21-100 ARE SUBJECT TO CO-INSURANCE OF $164.50 PER DAY (2017) MEDICARE COVERAGE WILL END PRIOR TO 100TH DAY IF CARE IS NO LONGER SKILLED.

MEDICARE SUPPLEMENT INSURANCE Plans cover deductibles and coinsurance. NOT LONG TERM CARE. 11 plans available in NY. Obtain explanations and comparison of plans at http://www.dfs.ny.gov/consumer/caremain.htm#sub_open May switch plans during open enrollment periods generally from October to December. Consider purchase of Plan F which covers the nursing home deductible ($164.50 per day in 2017.) Although Medicare HMO or Part C insurance may be attractive to younger, healthy retirees, restrictions on providers generally make these plans inappropriate for individuals with chronic conditions.

MEDICARE COVERAGE OF HOME CARE (Part B) The recipient must be homebound and also require skilled services such as nursing care, physical, occupational or speech therapy. Care is rarely provided for more than 20 hours per week and never on a daily basis. Usually short term in duration (less than six weeks) Long term custodial care at home is not covered.

Medicaid Covers long term custodial care in a nursing home, long term non-skilled home care, adult day programs Stringent financial eligibility requirements Different rules for nursing home and home care coverage. Many mechanisms for middle-class individuals to access the program, but rules are complex and confusing.

MEDICAID HOME CARE 24 hour care available but increasingly difficult to obtain No penalties for transfers of assets Availability of informal caregivers may reduce authorization. Recipients required to enroll in managed care plans. Excess income can be contributed to not for profit “pooled” trust and used for household expenditures.

2017 MEDICAID INCOME LIMITS COMMUNITY SERVICES BUDGETING: $825 FOR AN INDIVIDUAL $1,209 FOR A MARRIED COUPLE Excess income must be “spent down on medical care or deposited to a “pooled trust” run by a not for profit agency. Pooled trust can then use the excess income to pay for household expenses of the Medicaid recipient. NURSING HOME BUDGETING: $50.00 PER MONTH “NAMI”. No ability to shelter income through pooled trust.

EXEMPT ASSETS PLUS Exempt Assets: Maximum in countable assets: $14,850 for individual or $21,750 for a couple PLUS Exempt Assets: PRIMARY RESIDENCE with a value up to $840,000. However, if not occupied by a spouse, home may be subject to Medicaid estate claims or liens PRE-PAID FUNERAL CONTRACT - unlimited value or a burial account up to $1,500. RETIREMENT ACCOUNTS if placed into “pay-out” status. AUTOMOBILE

PROTECTION FOR THE SPOUSE COMMUNITY SPOUSE RESOURCE ALLOWANCE MINIMUM OF $74,820 MAXIMUM OF $120,900 SPOUSAL INCOME ALLOWANCE : $3,022.50 Income of institutionalized spouse may be diverted to well spouse to bring spouse’s income up to this amount. Limits may be increased if there is a finding of substantial hardship in a fair hearing or court proceeding. Spouse may have more than CSRA through use SPOUSAL REFUSAL

TRANSFER OF ASSET PENALTIES 60 month (5 year) “Look back period” Gifts during the look back period create periods of disqualification for Medicaid coverage for skilled nursing facility coverage, but not for home care. Penalty only starts to run once individual is in a nursing home AND assets are below the resource limit.

Exemptions Gifts to Spouse Gifts to a Trust for the benefit of a Disabled Child Gifts of primary residence to a caretaker child, a disabled child, or a sibling with an equity interest in the home Gifts made exclusively for a reason other than Medicaid planning

MEDICAID PLANNING TO PROTECT ASSETS Outright Gifts Exempt Transfers Irrevocable Trusts Spousal Refusal

Outright Gifts Pros: Simple Low legal fees Cons: Possible negative tax issues Risk of creditor claims, divorce, litigation, death

Irrevocable trusts PROS: Retain STAR and Veterans Exemptions Preserve $250,000 per person capital gains exclusion if home in trust is sold during grantor’s life Protection from creditor claims, death, lawsuits or divorce of trustees or beneficiaries Assets receive step up in basis at death of grantor Assets in trust not subject to probate Grantor may retain right to Income

Irrevocable Trusts CONS: Legal fee to create trust and prepare deed to transfer real estate Burden of transferring assets to trust Legal fees to dissolve trust if nursing home care required in five years. Must return ALL funds transferred to the Trust. No credit for amounts paid to beneficiaries if they then use these funds to pay for long term care for trust creator.

Gift of House: Outright Gift vs Life Estate Deed Outright to Children: Vulnerable to creditors, divorce, pre-deceased child Children have basis of parents--no step up in basis when parents die No $250,000 exemption from capital gains tax unless children live in house for two years after becoming owners Deed with Life Estate: If sold during parents’ lifetime, proceeds will be divided between children and parent. Child’s portion will be larger and subject to capital gains tax with no exemption if child does not reside at home. Parents entitled to portion of sale proceeds—may affect Medicaid eligibility or have to be spent on care.

Transfer of House to Trust If sold during lifetime of parent, may use $250,000 exemption from payment of capital gains tax If held to death, property stepped up to value at death of death—no capital gains tax if sold within six months. During lifetime, parents retain STAR, Veteran’s Exemptions if they have a right to use and occupancy of property Parents may retain ability to change the beneficiaries of the trust May be revoked with consent of creator and all beneficiaries. Creator cannot compel.

EMERGENCY MEDICAID PLANNING With advance planning, can protect up to 100% of assets if transfers made more than 5 years before nursing home care needed. Without advance planning, can protect some assets if there is a valid power of attorney and/or unrestricted access to accounts. First consider: Purchase of exempt assets—pre-paid funeral, car, home for spouse, home improvements, Exempt transfers to spouse, minor or disabled children, residence to caretaker child, sibling with equity interest.

SPOUSAL REFUSAL Pros: Cons: Spouse may be sued for support by DSS Not a Free Ride!! Does not protect assets from care needs of the spouse Pros: Medicaid must be processed without counting assets of the spouse Spouse’s liability for care is limited to cost of care paid by Medicaid

EMERGENCY MEDICAID PLANNING: Gift and Loan INSTITUTIONALIZED INDIVIDUALS WHO HAVE NOT PLANNED IN ADVANCE CAN PROTECT A PORTION OF THEIR ASSETS BY MAKING A GIFT ACCOMPANIED BY: A LOAN OR PURCHASE OF A MEDICAID COMPLIANT ANNUITY Use of Loan is more common in NY

Gift/Loan Strategy Illustration Unmarried person in a nursing home with $300,000 in non-exempt assets and one child. Private cost of nursing home-- $14,500 per month. Gift to child of $145,000 will result in Medicaid transfer penalty of @12 months Loan to child of @$145,000 to be repaid over 12 months at interest rate of 3%. Loan payments will be @$12,281 per month. Child pays loan to mother during penalty period. Mom uses the loan payment plus monthly income of $2,000 to pay the nursing home during the penalty period. Mom becomes eligible for Medicaid payments to nursing home in month 13.

PERSONAL CARE CONTRACTS Not used very often Medicaid program disfavors Rate of payment carefully scrutinized Caregiver will be asked whether paid tax on earnings Meticulous records must be maintained

THANK YOU! This presentation is not intended as legal advice for any particular situation or person. Medicaid rules are complicated and change frequently. Individuals who seek to protect assets in the event of long term care needs should consult with a qualified elder law attorney.