2. MEDICAL ASSISTANCE, TRUSTS AND TRANSFERS by Laurie Hanson

3. 22 Overview of Presentation  Payment Sources for Long-term Care  Medicare  Veterans Home and Veterans Benefits  Medicaid  Medicaid Eligibility and Transfer Rules in General  Medicaid Eligibility and Trusts  Transfers and Trusts  Transfers into (d)(4)(C) trusts – the rules and applications across the states  Strategies to bring resolution POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.

4. 33 PPOSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Acronyms MA-LTC – Medicaid for Long-Term Care POI – Period of Ineligibility A or R – Applicant or Recipient PTSA – Pooled Trust Sub Account

5. Private pay Medicare and supp. insurance Long-term care insurance Veterans Benefits and Veterans Home Medicaid PAYING FOR LONG-TERM CARE

6. MEDICARE  Federal health insurance program for persons over age 65 and some disabled persons under age 65.  Long-term care coverage under Medicare:  3 days hospitalization and admitted to NH within 30 days of discharge  Skilled care only is covered  Maximum coverage: 100 days per spell of illness  After first 20 days, co-payment of $148.00/day in 2013

7. VETERANS HOME RULES Eligibility:  181 consecutive days of active duty  Honorably discharged  Wife or widow of veteran 55 years old or older Payment:  If assets more than $3,000, pay full charge  If $3,000 or less, pay only part of income

8. VETERANS HOME RULES Allowable Transfers:  To spouse or dependent child if made before admission: admission is the key.  To others if made more than one year before admission

9. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  Aid and Attendance for veterans or widows of veterans receiving skilled care  Prescriptive drugs  Adult day care  Disability pension  Death and survivorship benefits  Military Child Protection Act of 2013 – authorizing monthly annuity benefits under a Survivor Benefit Plan to be directed into a supplemental needs trust for a child of a veteran who is disabled so that the child can maintain eligibility for needs-based benefits. S. 1076 and H.R. 2249  VA contract nursing homes > 70% disability VETERANS BENEFITS

10. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  Medicaid -- A joint federal-state program created to serve certain categories of lower income, disabled, and elderly persons. Eligibility is based on need.  To participate in the Medicaid program, states must comply with federal law.  Medicaid is called Medical Assistance (MA) in Minnesota. WHAT IS MEDICAL ASSISTANCE?

11. MA ELIGIBILITY GENERAL REQUIREMENTS  Minnesota resident  Meet citizenship requirements  Categorical Eligibility  MA for Adults without Children (Affordable Care Act)  MA for dependent children and foster children  MA for low income families with dependent children  MA for people aging or living with disabilities  MA for Long Term Care

12. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  An entitlement program: If you qualify for benefits, you receive benefits.  Benefits for Medical Assistance include:  Hospitalization, physician services, some dental and eye care  Mental health services for adults and children  Skilled nursing home therapies, home health care, hospice, medical supplies and treatments, etc. MEDICAL ASSISTANCE

13. 12 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Basic MA-LTC Financial Eligibility 3 basic financial eligibility criteria:  Income Limits  After allowable deductions, costs exceed income – must apply income to the cost of care (MA-EPD exception)  Asset Limits  No more than $3,000 (MA-EPD exception)  No transfers within look back period

14. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  MA recipient is required to pay portion of income towards cost of services  Income standards for persons living in community:  100% FPG, currently $958 OR  Spending down to 75% FPG ($619) if income is greater than $958.  In Nursing home: Must spenddown to personal needs allowance, currently $94.00 INCOME RULES FOR MA-LTC RECIPIENTS

15. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  Income of Individual $ 1,900.00  less Medicare Part B - 104.90  less personal needs allowance - 719.00  less insurance premium - 100.00 Income applied to care $ 976.10  Cost of Care $ 4,405.00  less - 976.10 MA pays: $ 3,429.90 INCOME SPENDDOWN FOR SINGLE PERSON IN COMMUNITY:

16. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  Income of Individual $ 1,900.00  less Medicare Part B - 104.90  less personal needs allowance - 94.00  less insurance premium -100.00 Income applied to care $ 1,601.10  Cost of Care $ 4,405.00  less - 1,601.10 MA pays: $ 2,803.90 INCOME SPENDDOWN FOR SINGLE PERSON IN NURSING HOME:

17. WHAT IF THE MA RECIPIENT IS MARRIED? Spousal Impoverishment Rules Apply  Income allocation to community spouse  Bring the CS’s income up to minimum of $1,940 per month  Up to a maximum of $2,898 per month, depending upon shelter expenses

18. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A.  Income of Individual $ 1,900.00  less personal needs allowance - 94.00  Less spousal income allocation - 1,100.00  less Medicare Part B - 104.90  less insurance premium - 100.00 Income applied to care $ 601.10  Cost of Care $ 4,405.00  less -601.10 MA pays: $ 3,803.90 INCOME SPENDDOWN FOR MARRIED PERSON IN NURSING HOME:

19. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. ‣ Single person - $3,000 in available assets. ‣ Married couple where both spouses are applying - $6,000 in available assets. ‣ One spouse applying - spousal impoverishment rules apply. MA ASSET LIMITS

20. KINDS OF ASSETS  Available Assets  personal/real property with monetary value that is not excluded or unavailable  Excluded Assets  homestead, household goods, one motor vehicle, burial funds, some life insurance, etc.  Unavailable assets  property not excluded but cannot be liquidated

21. TRUSTS ARE SUBJECT TO ASSET AND INCOME STANDARDS ELEMENTS OF A TRUST  Grantor/Settlor  Trustee  Beneficiary  Res POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. 20

22. 21 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Trusts are Subject to Asset and Income Standards  Revocable Trusts - Assets are counted.  Excluded Trusts - Are not counted. (d)(4)(A) (d)(4)(B) (d)(4)(C)  Irrevocable Trusts (§1396p(d)(3)(B)(iii)) – If there are any circumstances under which payment from the trust could be made to or for the benefit of the individual, the corpus is counted.

23. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. SPECIAL NEEDS TRUST 42 U.S.C.A §1396p(d)(4)(A) Minn. Stat. 501B.89 subd. 3  Established for a disabled person under age 65 by a parent, grandparent, guardian, or court  Funded only with the disabled person’s assets.  Trust states: at death of the disabled person, any remaining trust assets must be distributed first to the State as repayment for any MA received by the disabled person.  Trust must be for the sole benefit of the disabled person.  Trust administered so that distributions supplement and do not supplant government benefits.

24. 23 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Statute – Pooled Trusts ( 42 U.S.C.A §1396P (d)(4)(C) - Minn. Stat. 501B.89 subd. 3. ) A (d)(4)(C) trust is a trust containing the assets of an individual who is disabled that meets the following conditions: i.The trust is established and managed by a non-profit association. ii.A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts. iii.Accounts in the trust are established solely for the benefit of individuals who are disabled by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court. iv.To the extent that amounts remaining in the beneficiary’s account upon death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this title.

25. CURRENT LEGISLATION AFFECTING TRUSTS FOR INDIVIDUALS WITH DISABILITIES  H.R.2123: Special Needs Trust Fairness Act of 2013  Amends Section 1396p(d)(4)(A) to allow a competent disabled individual to establish a trust with his or her own resources.  Bill has not yet been introduced in the senate.  H.R.647: Achieving a Better Life Experience Act of 2013 (“the ABLE Act of 2013")  Amends the Internal Revenue Code to establish tax-exempt ABLE accounts to assist an individual with a disability in building an account to pay for qualified disability expenses. Defines "qualified disability expenses" to include expenses for education, including higher education expenses, a primary residence, transportation, obtaining and maintaining employment, health and wellness, and other personal support expenses.  Requires amounts in ABLE accounts to be disregarded in determining eligibility for Medicaid and other means-tested federal programs. POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. 24

26. SPOUSAL IMPOVERISHMENT RULES - ASSETS  LTC spouse in NH or Elderly Waiver  Community spouse in community  Asset Assessment Date:  NH/HH, completed only once  Community spouse asset allowance

27. COMMUNITY SPOUSE ASSET ALLOWANCE  CSAA = 1/2 of non-excluded assets on asset assessment date with a  Minimum of $32,890 and  Maximum of $115,920  Allowable assets at time of MA application = CSAA + $3,000

28. DATE OF INSTITUTIONALIZATION  Protected Assets:  CSAA $32,890  MA limit $ 3,000  Excess Assets: $ 810 Date of MA application, if in 2013: $32,890$3,000 $35,000

29. DATE OF INSTITUTIONALIZATION  Protected Assets:  CSAA $50,000  MA limit $ 3,000  Excess Assets: $47,000 Date of MA application, if in 2013: $50,000$3,000 $100,000

30. DATE OF INSTITUTIONALIZATION  Protected Assets:  CSAA $115,920  MA limit $ 3,000  Excess Assets $131,080 Date of MA application, if in 2013: $115,920$3,000 $250,000

31. 30 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Reducing Assets to Eligibility Standards - Applicants and Recipients  Purchase services or items for fair market value.  Purchase excluded assets (house, car, burial plan, etc.)  All purchases must be for the benefit of the MA- LTC A or R.  CANNOT GIVE AWAY MONEY OR ASSETS AND THEN APPLY FOR MA-LTC WITHIN FIVE YEARS

32. 31 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfer Penalties  §1396p(c)(3)(c)(1)(A) … if an institutionalized individual … disposes of assets for less than fair market value on or after the look-back date…  The individual is ineligible for MA-LTC  During the period beginning on the first date the person is otherwise eligible for MA-LTC and  Equal to the number of months calculated by dividing the amount transferred by average monthly cost to a private patient of nursing facility services in the state.

33. 32 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfer Penalty Example  Anne gives $40,000 to her daughter on October 1, 2013;  Anne applies for and is eligible for MA-LTC on December 1, 2015;  County agency asks if she has given away any money in the last five years;  She reports the transfer;  $40,000 ÷ $5,583 = 7.16 months beginning December 1, 2015.

34. SOME TRANSFERS ARE EXEMPT An A or R may transfer the homestead without penalty for FMV or for less than FMV to:  To spouse  To disabled child  To child under 21  To caretaker child  To sibling with equity interest

35. SOME TRANSFERS ARE EXEMPT An A or R may transfer other assets without penalty for FMV or for less than FMV to:  To spouse  To disabled child  Into a trust for the sole benefit of a disabled child  Into a trust for an individual under the age of 65 who is considered a disabled person  Hardship waiver  Minn. Stat. 256B.0595, subd. 4; 42 U.S.C.A. 1396p(c)(2)(B)

36. 35 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfers into Revocable Trusts  No penalty because the assets are available.  Counted toward the standard.

37. 36 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfers into Irrevocable Trusts §1396p(d)(3)(B)(ii) any portion of the trust from which, or any income on the corpus from which, no payment could under any circumstances be made to the individual shall be considered, as of the date of establishment of the trust (or, if later, the date on which payment to the individual was foreclosed) to be assets disposed by the individual for purposes of subsection (c) of this section, and the value of the trust shall be determined for purposes of such subsection by including the amount of any payments made from such portion of the trust after such date. (Emphasis added)

38. 37 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfers into Excluded Trusts  Do the transfer provisions of the federal statute govern?  1396p(c)(1) and (c)(2)(B)  Do the trust provisions of the federal statute govern?  1396p(d)(3)?  Turns out it this is a subject of intense debate and much confusion

39. 38 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. The Source of Confusion The Transfer Provisions  Section 1396p(c) establishes the general rules for transfers.  Section 1396p(c)(2)(B) sets forth the exceptions to the general rules.  Section 1396p(c)(2)(B)(iii) and (iv) sets forth the exceptions for certain trusts.  This section does NOT say that transfers into PTSA by individuals age 64 and older should be penalized … only that they are exempt.  Must do a fair market analysis.

40. 39 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. The Source of Confusion, cont’d: The Transfer Provisions Section 1396p(c)(2)(B)(iv) states - An individual will not be eligible for MA due to a transfer if the assets  were transferred to, or to a trust (including a trust described in subsection (d)(4) of this section) established solely for the benefit of, the individual’s child …, or  were transferred to a trust (including a trust described in subsection (d)(4) of this section) established solely for the benefit of an individual under 65 years of age who is disabled.  Applies only to transfers to trusts for individuals other than the A or R – children, grandchildren, a disabled nephew, etc.

41. 40 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. The Source of Confusion, cont’d: The Trust Provisions  Section 1396p(d)(1) states “for purposes of determining an individual’s eligibility for, or amount of, [Medicaid] benefits under a State plan under this subchapter, subject to paragraph (4), the rules specified in paragraph (3) shall apply to a trust established by such individual.”  Subparagraph 3 addresses availability of trusts and defines when a penalty should be applied.  The pooled trust is irrevocable but there are circumstances in which payment could be made to the individual. Therefore assets are available and no penalty- except that assets are exempt.  Subparagraph 4 addresses the exempt trusts and says “This section shall not apply to … (d)(4)(A)(B) and (C) trusts.”  This section presumably means that the treatment of transfer and asset provisions shall not apply to the (d)(4) trusts.

42. 41 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfers into (d)(4)(A) and (d)(4)(C) trusts for people under the age of 65  No penalty for persons age 64 and younger.  Authority:  Trust not allowed for individuals 65 and older beyond that is it the (c)(2)(B)(iv)?  Or is it just that it is an exempt trust?

43. 42 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfers into (d)(4)(B) trusts  No penalty for persons of any age.  Authority:  Only the trust provisions  State Medicaid Manual

44. 43 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Transfers into (d)(4)(C) trusts for people over the age of 64  Depends on the State.  Eighteen States (18) and the District of Columbia allow transfers without penalty.  Twenty-six (26) States penalize the transfer per se.

45. 44 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. Six States Have Different Standards Colorado New York Connecticut Illinois Minnesota Michigan

46. 45 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. What are advocates around the country doing about it?  Legislation  Transfer for Fair Market Value litigation  NAELA CMS Task Force

47. 46 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. What are advocates around the country doing about it?  Educating - As to why special needs trusts are important to the lives of people with disabilities.  Legislators  Policy makers  NAELA CMS Task Force

48. 47 POSITIVE STRATEGIES FOR AGING AND LIVING WITH DISABILITIES LONG REHER & HANSON P.A. FINAL THOUGHT POOLED TRUST SUB-ACCOUNTS FOR PEOPLE OVER THE AGE OF 64 ARE ABOUT ENHANCING THE LIVES OF INDIVIDUALS LIVING WITH DISABILITIES NOT ABOUT PROTECTING MONEY FOR HEIRS.