Medicaid Long-term Care Update Basics Review, Estate Recovery and the Deficit Reduction Act of 2005
| Jurisdiction | Kansas,United States |
| Citation | Vol. 75 No. 8 Pg. 26-32 |
| Pages | 26-32 |
| Publication year | 2006 |
75 J. Kan. Bar Assn. 8, 26-32 (2006). Medicaid Long-Term Care Update Basics Review, Estate Recovery and the Deficit Reduction Act of 2005
75 J. Kan. Bar Assn. 8, 26-32 (2006)
Introduction
Even though you won't go to jail,(fn1) Medicaid planning is fraught with peril. Medicaid is a welfare program. It is, of course, appropriate for practitioners to advise clients of the rules, regulations, and statutes so that the client can position herself financially to her best advantage. But in so doing with respect to eligibility for Medicaid, the practitioner finds himself at odds with the thrust of prudent public policy, which seeks to conserve scarce public resources and provide assistance only to the truly needy. The 2004 Kansas Legislature's amendments(fn2) to K.S.A. 39-709(e) leave no doubt about the direction of public policy, prudent or otherwise. Two anomalous decisions from the Kansas Supreme Court - Miller v. SRS (fn3) and Brewer v. Schalansky(fn4) - highlight this tension and perhaps illustrate the maxim, "bad facts make bad law."
Most recently, do you remember when Vice President Cheney came back from the Middle East to break a tie vote in the Senate? It was just before Christmas last year, and the so-called Deficit Reduction Act of 2005 (DRA) passed the Senate 51-50. On Feb. 1, 2006, the House of Representatives (the vote was 216 to 214) adopted a slightly different version of the DRA, which President Bush signed into law on Feb. 8.(fn5) Although relatively few of the DRA's more than 700 pages deal with Medicaid, and the harshest changes will impact the 62 million Medicaid recipients who are not residing in long-term care facilities, the DRA contains significant eligibility rules changes that will have an impact on our elderly and disabled clients who might need assistance with the cost of nursing facility care.
Constitutionality of the DRA
As you may recall from eighth grade, for a federal bill to become law both the House and Senate must have approved it in identical form. Due to a mix-up in the Senate clerk's office, a Medicare provision of the DRA as passed by the House was different from that in the version passed by the Senate. (It's also known as the "$2 Billion Typo.") So, what the president signed on Feb. 8, 2006, may not actually be a law. Litigation has commenced seeking to declare the DRA unconstitutional. The House could eliminate the issue by acting again on the DRA, but House Republican leaders have indicated they do not intend to do so.
Medicaid Eligibility Basics
Applicants for long-term care assistance must meet a four-part eligibility test: medical need for institutional care, limited income, limited resources, and the absence of penalties for certain transfers. Applications for medical assistance(fn6) are submitted to the Kansas Department of Social and Rehabilitation Services (SRS), but the Medicaid authority - the state-designated entity responsible to the Centers for Medicare and Medicaid Services (CMS) is the new Kansas Health Policy Authority.(fn7) Its authority to administer Medicaid is delegated to SRS through a memorandum of understanding. This bifurcated structure becomes relevant at the administrative hearings process or when naming the state as a defendant in state or federal court.
Medical need
Nursing facility care, whether skilled, intermediate, or custodial, must be the appropriate level of care for the medical assistance applicant. Most states require applicants to complete a screening prior to, or soon after, nursing home admission. The purpose of the screening is to identify the medical assistance applicant's functional deficits and determine whether services short of institutionalization are available and appropriate.(fn8)
Income
Kansas does not have a specific income limitation for eligibility. Rather, if the Medicaid applicant's income is less than his private-pay cost of care, the applicant meets the income test. Attribution of income to the recipient follows the "name on the check" rule, that is, income is attributed to the spouse to whom payment is drawn. Jointly held income producing property is allocated pro rata.
Once a Medicaid applicant becomes eligible for assistance, some portion of his income will be used to meet his patient liability amount (aka client obligation), among other things, and he will retain very little for his own use. A Medicaid recipient without dependents would normally apply all his income to his nursing home expenses except the amount he pays in premiums for health insurance for himself and $50 per month personal needs allowance.(fn9)
Resources
A Medicaid recipient cannot retain more than $2,000(fn10) in available(fn11) nonexempt resources, but may retain unlimited exempt resources. Except for the special Medicaid rules regarding transfer of assets, division of assets, and special needs trusts, the resource rules are drawn from the law and regulations governing eligibility for Supplemental Security Income (SSI), which deal with the availability and exempt status of resources.(fn12) Practitioners can also rely upon the large body of case law in this area for guidance.(fn13)
Exempt resources include:
* A home and contiguous acreage valued at less than $500,000.(fn14)
* An applicant is entitled to exempt the home even if there is no real expectation that he or she will be able to return home.(fn15)
* A life estate in the home qualifies for the exemption(fn16) as well as sole or joint ownership.
However, in the absence of a community spouse or other eligible dependent residing there, the utility of this exemption is undercut by three problems: (1) Unless the recipient has family members who will act as custodians of the home, pay the property taxes, and keep the property insured, obvious practical problems arise - the Medicaid recipient has nothing but his $50 per month personal needs allowance to pay these expenses. (2) Because Health Policy's Estate Recovery Unit (ERU) will enforce a medical assistance claim against the estate of a deceased Medicaid recipient, family members are less likely to realize any benefit from performing these services unless the recipient really might be able to return home after a period of institutionalization.(fn17) (3) After a medical assistance recipient has resided in a nursing facility for at least six months, ERU may file a lien against any real property owned by the recipient to secure its claim; if the claim eventually exceeds the value of the property, ERU may foreclose its lien.(fn18) If the medical assistance recipient has a spouse, a minor child, an adult disabled child, or a sibling who's resided in the home for at least one continuous year,(fn19) SRS may impose, but may not enforce the lien.(fn20)
* Annuities, if the annuity is irrevocable, nonassignable, actuarily sound, and provides for payments in equal amounts during the annuity's term.(fn21)
Other exempt resources (which remain unchanged under the DRA) include:
* A car of any value.(fn22)
* Household goods, tools, personal effects, family keepsakes, memorabilia.(fn23)
* The cash value of life insurance with a total death benefit of $1,500 or less and unlimited term insurance.(fn24)
* Real property, equipment or materials used in an income-producing trade or business.(fn25)
* Contract Sales. A contract from the sale of real or personal property is exempt if the property is sold at fair market value, the proceeds are attributable as income, and the terms of the contract are otherwise commercially reasonable.(fn26)
* Burial plans.(fn27) The recipient can have a revocable burial fund set aside up to $1,500 or an irrevocable plan up to $5,000, not including the burial plot or mausoleum...
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