March 7

State Cannot Retroactively Recover Medicaid Benefits from Estates

A Michigan appeals court rules that the state cannot recover Medicaid benefits from estates before the date that the estate recovery program was implemented. In re Estate of Gorney (Mich. Ct. App., No. 323090, Feb. 4, 2016).

Four individuals applied for Medicaid benefits sometime before 2010. They did not receive any notification about estate recovery at the time of their initial application. In 2011, the state received federal approval for its estate recovery program, and the state determined that July 1, 2010, was the effective date. In 2012, the Medicaid recipients applied for Medicaid redetermination and received notice that the state could seek recovery for Medicaid benefits from their estates.

When the recipients died, the state filed claims against their estates to recover Medicaid benefits paid since July 1, 2010, but the estates denied the claims. The probate court rejected the state’s claim, and the state appealed. The estates argued that the state violated due process by recovering benefits paid since July 1, 2010, when the state did not notify them about the estate recovery program until 2012. 

The Michigan Court of Appeals affirms in part, holding that while the notice provided to the estates in 2012 did not violate due process, the state could not recover benefits retroactive to July 1, 2010. According to the court, “by applying the recovery program retroactively to July 1, 2010, the Legislature deprived individuals of their right to elect whether to accept benefits and encumber their estates, or whether to make alternative healthcare arrangements.”

For the full text of this decision, go to: http://publicdocs.courts.mi.gov:81/OPINIONS/FINAL/COA/20160204_C323090_52_323090.OPN.PDF

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March 3

Medicaid Applicant’s Irrevocable Trust Is an Available Resource Because Trustee Can Make Distributions

An Alabama appeals court rules that a Medicaid applicant’s special needs trust is an available resource because the trustee had discretion to make payments under the trust. Alabama Medicaid Agency v. Hardy (Ala. Civ. App., No. 2140565, Jan. 29, 2016).

Denise Hardy inherited a one-half interest in a house and placed it in an irrevocable trust. The trust instrument stated that the trustee could distribute income to Ms. Hardy at the trustee’s discretion and that the trust was intended to be a special needs trust. Ms. Hardy entered a nursing home and applied for Medicaid. The state determined that the trust was an available resource.

Ms. Hardy appealed, and an administrative law judge agreed that the trust was an available resource. Ms. Hardy appealed to court, arguing that the trust was not available because it was irrevocable and could not be altered. The trial court reversed the state’s decision and ordered the state to pay Ms. Hardy benefits. The state appealed.

The Alabama Court of Civil Appeals reverses, holding the trust is an available resource. According to the court, a trust is an available resource if there is any circumstance under which payments can be made to the beneficiary, and that in this case, “if the house was sold and half of the proceeds of the sale were placed in the trust, the trustee could then make distributions as required by the terms of  [Ms.] Hardy’s trust.”

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February 29

Federal Court Grants Preliminary Injunction Continuing Medicaid Benefits in Decanting Case

A federal district court grants a Medicaid beneficiary’s request for a preliminary injunction preventing the Connecticut Department of Social Services from treating two trusts established for the beneficiary by her deceased mother as countable resources before they were decanted into supplemental needs trusts.  Simonsen v. Bremby (D.Ct., No. 15-cv-1399, Dec. 23, 2015).

Joy A. Miller established two inter vivos trusts for her daughter, Dawn Simonsen, that were funded when Ms. Miller died in 2003.  The trusts, established in Florida, gave the trustee the ability to “pay to [Dawn] or utilize for her benefit so much of the income and principal of her trust as the trustee deems necessary or advisable from time to time for her health, maintenance in reasonable comfort, education and best interest considering all of her resources known to the trustee . . . the trustee is encouraged to be liberal in its use of the funds for her even to the extent of the full expenditure thereof.”  

Ms. Simonsen, a quadriplegic on a ventilator, was admitted to a nursing home in October 11, 2013, and she applied for Medicaid on July 31, 2014.  On August 29, 2014, the trustee of the two trusts successfully petitioned a Florida court for permission to decant the two trusts into two new supplemental needs trusts.  Although the Connecticut Department of Social Services (DSS) initially approved Ms. Simonsen’s Medicaid application, it subsequently determined that the original trusts were countable resources and assessed a seven year transfer of assets penalty for the decanting into the clearly inaccessible supplemental needs trusts.  Ms. Simonsen appealed DSS’s decision and while that appeal was pending filed a request for a preliminary injunction with the federal district court asking it to prohibit the state from terminating her Medicaid benefits and to hold that the previous trusts were not accessible resources, voiding the transfer penalty.

Referring to the Social Security Administration’s Program Operations Manual System (POMS), the U.S. District Court for the District of Connecticut grants the motion for a preliminary injunction, finding that the original trusts are not countable resources because they “do not contain terms providing the beneficiary with any right or authority to direct any payments, and instead empowered the Trustee with the sole discretion to determine when to make a distribution . . . Moreover, the Predecessor Trusts contained a valid spendthrift clause . . . In short, if a trust contains a spendthrift clause, the beneficiary has no legal right or authority to access the trust principal, and, therefore, it is not counted as an available resource for SSI, and consequently Medicaid, eligibility purposes.”

For the full text of this decision, click here. 

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February 25

CMS Makes It Official That Medicaid Home Health Recipients Need Not Be Homebound

On February 2, 2016, the Centers for Medicare and Medicaid Services (CMS) will issue a final rule clarifying that Medicaid beneficiaries do not need to be “homebound” in order to receive home health services.  In addition, the final rule, which revises Medicaid home health regulations (42 C.F.R. § 440.70(c)(1-2)), makes clear that Medicaid home health services are not limited to home settings. 

As Gene Coffey, formerly an attorney with the National Senior Citizens Law Center (now called Justice in Aging), wrote in the January 2010 issue of Caring magazine, “Medicaid’s coverage for home health services plays a critical role in helping individuals stay in their homes and communities while also helping states meet their responsibilities under the [Americans with Disabilities Act].”

According to Justice in Aging, which has been at the forefront of efforts to bring federal and state regulations into compliance with federal law in this area, the final rule “codifies longstanding agency policy, previously articulated in a 2000 letter to state Medicaid directors, that a Medicaid homebound requirement for home health services violates the Americans with Disabilities Act (ADA), as articulated in Olmstead v. L.C., 527 U.S. 581 (1999).”  Despite this, some states have required that recipients be homebound.

Justice in Aging notes that the final rule does not change Medicare’s homebound requirement, although CMS acknowledges the challenges this poses for dual eligible recipients and notes in its rule commentary that “we would permit states the flexibility to authorize additional hours of home health services to account for medical needs that may arise out of the home.” (pg. 56)

The rule will take effect July 1, 2016.  However, to ensure that states and providers are implementing the rule appropriately, CMS is delaying compliance with the rule for up to two years, depending on a state’s legislative cycle.

For more details from Justice in Aging, click here.

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February 15

The Benefits and Drawbacks of Buying an Annuity Doubler to Pay for Long-Term Care

As long-term care insurance premiums keep rising and fewer companies are offering policies, seniors are looking for other ways to help pay for long-term care. Annuity “nursing home doublers” have emerged as a new long-term care option. These doublers can be beneficial, but as with any annuity product, customers should use caution before purchasing.

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Immediate annuities are a way to receive a guaranteed income for life and can be useful in Medicaid planning. 

Many insurance companies that sell annuities are now offering “nursing home doublers” to help pay for long-term care. If the beneficiary of such an annuity needs long-term care, the insurance company will make double payments for five years or until the annuity’s cash value is depleted. To activate the doubler, the annuitant needs to be unable to perform two of six activities of daily living (i.e., eating, bathing, dressing, transferring, toileting, and continence). Once the five years are up and if the annuity still has a cash value, the insurance company would go back to making regular payments.

The benefit of a doubler is that it is relatively inexpensive. Many insurance companies offer the doubler at no additional cost beyond the lifetime income rider fee. If there are additional fees, the fees are usually low. The double payments are not designed to cover the full cost of long-term care, but the double payments can help defray the cost.

Before purchasing an annuity, you should fully research the product. While annuities—particularly immediate annuities–can be a valuable retirement product, annuity salespeople have come under scrutiny for targeting older Americans with deceptive sales tactics. Before purchasing an annuity with a doubler, find out whether it covers home care in addition to nursing home care. In addition, using a doubler depletes the cash value of your policy, which means there would be less left in the annuity to leave to your heirs. Also, if you purchase a joint annuity, the doubler will only cover one spouse’s long-term care.

Before making any purchases consult with your elder law attorney to find out the best way to plan for long-term care. 

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