NOTE: It is suggested that review of the Medicaid Basics page be done to gain an understanding of the basic financial eligibility criteria limits prior to reviewing the Medicaid Nursing Home Planning Tools page.

 

 

In November 2007, Florida Medicaid laws changed pursuant to Federal Deficit Reduction Act of 2005 (DRA 2005)

The most often question asked after the new Medicaid laws went into affect is “So what planning tools are left for us to consider?”
 

Medicaid laws are still designed so the middle class can qualify for Medicaid to pay for a nursing home and still retain access to assets that Medicaid does not count.
 

Below are a few of the most popular planning tools available.  These should be used in combination and properly mixed and matched based upon the applicant/families financial budget and portfolio.  One should look use the planning tools in conjunction with each other to optimize, or stretch the use of the family dollars to obtain the maximum benefits while getting the highest best use of the remaining family financial portfolio.

Medicaid Nursing Home Asset Protection Planning Tools Post-DRA 2005

(For those applying after November 1, 2007 in Florida)
 

1.    For married couples, the well spouse (non-applicant spouse) can still retain what Medicaid refers to as the community spouse resource allowance (CSRA) (104,100 in 2008) in liquid countable assets.
 

2.    Unlimited transfers of assets between spouses, disabled children or minor children are still allowable.
 

3.    Spend down assets to pay legal fees, accountants, financial advisors, care givers, out-of-pocket medical bills, purchase a prepaid funeral plan, purchase burial plots for the immediate family unit, update or renovate the homestead of the applicant.  There are many more options for spend down ideas, however, one should consult with an attorney whose practice is truly dedicated to submitting and doing asset protection for clients seeking Medicaid eligibility.
 

4.    Personal Service Contracts – Still viable under the new Medicaid laws (DRA 2005), however, in Florida they are coming under increased scrutiny by the Florida Department of Children and Families (DCAF).  Caution must be used when considering using a personal service contract especially with family members.  The contract must be drafted by an attorney, with appropriate documentation supporting the terms of the contract attached as exhibits and at a fair market rate. This is also an excellent tool for Veterans who are seeking eligibility for the VA Pension and Aid & Attendance to pay for a family member who is a caregiver.
 

5.    Spousal Refusal – Very popular and excellent tool for married couples.  Timing of transfers  as between the spouses and how and when the spousal refusal is executed become critical elements of ensuring a successful used of this Medicaid planning tool.  Florida, however, note there have been recent attacks on this planning option as seen in the Florida case of Feldman v DCAF (This case denied a spousal refusal for transferring assets in an in appropriate fashion).  The author does not recommend using this tool unless an elder law attorney whose practice is truly dedicated to doing Medicaid planning and submitting applications.
 

6.    Annuities for married couples – This is a very viable tool for married couples.  The community spouse (well spouse) can purchase an actuarially sound, level pay annuity, so long as the State is named primary beneficiary.  However, since the annuity is purchased by the well spouse, it can mature any time period that is less than the actuarially life of the well spouse.  Thus, a short term annuity owned by the well spouse, paying out to the well spouse is a very viable consideration.  Cash flow projections and careful financial planning is necessary to properly implement this planning tool.
 

7.   Use of a Pooled Special Needs Trust – This is an excellent planning tool for single individuals to consider.  With this option, the assets placed in the pooled trust are set aside in an account for the individual.  The funds can be used for anything other than what Medicaid pays for, but must be used and spent for the sole benefit of the individual.  Upon the individual passing away, anything Medicaid paid for must be reimbursed to the State where services were received (remember, Medicaid pays out much less for the same services than we would be paying  if we were private paying for the same services lien, about .40 for every $1.00 we would otherwise pay at private pay rates). This is where careful planning to choose the right Pooled Special Needs Trust company is critical.  There are many entities (Special Needs Trust companies) popping up in recent years who are offering the pooled special needs trust. However, careful selection is essential to ensuring the trust company is providing optimal service, accessibility to funds, and treatment of the funds during the life of the Medicaid recipient.  Many of these entities are retaining all of, if not a majority of the funds remaining at the death of the Medicaid recipient after paying Medicaid back for the services rendered during the life of the deceased Medicaid recipient.  Other Special Needs Trust companies are keeping a much smaller percentage of assets remaining in the Special Needs Trust account after paying Medicaid and offering the remaining balance back to the family or named beneficiaries of the deceased Medicaid recipient. Choose carefully, interview the trust company before you buy. Remember they work for you.  This is a complex planning tool that should be utilized as part of a Medicaid financial cash flow projection and used and selected with the help and oversight of an elder law attorney who specializes in Medicaid planning. 
 

8.     Annuities for single applicants – A Medicaid applicant can purchase an actuarial sound, level pay annuity, however the monthly payout will be considered income to the applicant and all income of the Medicaid recipient is paid towards Medicaid patient responsibility. 
 

9.    Purchase or retain income producing property – This is still considered exempt.  However, net income is still considered part of the applicant’s income (if the asset is still in the applicant’s name).  Now the applicant can transfer his/her interest to the well spouse and the income of the well spouse does not adversely impact the applicant’s eligibility for Medicaid benefits.
 

10.  Hardship Waiver criteria under the DRA 2005 has been revised under the DRA 2005.  The new law states that “undue hardship” exists when the application of the transfer of assets provisions of the rule would deprive the applicant of medical care in a manner which would endanger or deprive the applicant of food clothing, shelter or other necessities of life.  Historically arguments s to undue hardship has not been successful.  IT is yet to be seen exactly how effective such arguments will be under the new revised laws and just how the State of Florida will implement/adopt such laws.

NOTE: The above information is for informational purposes and should not be used without the appropriate legal advice. An elder law attorney whose practice focuses on Medicaid asset protection and benefits planning should be consulted to assist with selection of the appropriate mix of the above planning tools to implement.  The new Medicaid laws have become to complex to rely upon non-lawyers to create an appropriate well crafted Medicaid plan.