The Connecticut Elder Law Blog

Consider Supermarket Gift Cards as Medicaid Spend-Down Items

Big supermarkets have recently offered a new alternative to Medicaid spend-down planning when there is a spouse in the community.  The community spouse can now purchase gift cards to buy groceries, and to the tune of four figures! 

This makes sense since it's a necessary expense that the community spouse will definitely have for an indefinite length of time. 

If you're in New England, I found an offer from Shaw's Supermarkets which offers a 5% discount when you spend more than $5,000 on Shaw's gift cards. 

Medicaid Planning: An Important Non-Financial Consideration When Gifting Assets

Although the Deficit Reduction Act has certainly made it more difficult to transfer assets out of one's name in order to protect those assets from the nursing home, such transfers can still be a viable planning option for Medicaid planning purposes if the circumstances are appropriate (unfortunately, an adequate discussion of such circumstances are better covered in a full-blown seminar, not a blog post).  And although transferring assets can make perfect sense from a financial perspective, it's important to consider the entirely non-financial issue of taking such steps.

The non-financial concern is that if you're moving money from mom to one or more of the children, you are also removing that money from mom's control.  And although mom may love the kids dearly and trust them implicitly to give some or all of the money back to her if she needs it, there is probably still a sense of unease over not having direct access to that money anymore.  When you're talking about losing control you're also talking about losing independence, and maintaining a sense of independence is something that becomes more and more important to most people as they enter their "elderly" years. 

The other concern that mom may have is that the money may disappear while its in the hands of the children.  If someone gets sued in a big way or if a divorce issue comes up then some or all of the money may suddenly be at risk.  This could be an enormous source of stress for mom if she is not especially risk-tolerant.

So if the family and its elder law advisor determine that there is a financial benefit to mom gifting assets to the children, then it's time to have a very non-legal, non-financial discussion with mom regarding how she feels about that.  If mom is going to lose sleep over the loss of independence and/or the risks associated with the transfer, then the financial reasons for such planning may not be worth it.

Terminate Conservatorship of the Estate When T19 is Granted

As many of my clients will readily attest to, finding out that Medicaid has been granted for a loved one is cause for celebration.  The harrowing process usually takes months and the amount of information that needs to be generated, organized and sent to the State is mind-boggling.  So when the journey ends you feel like doing cartwheels.

But there's another benefit to achieving Medicaid eligibility; if you are acting as "conservator of the estate" (managing the finances for an incapacitated person with Probate Court oversight) for someone who has been granted Medicaid eligibility, the path should be clear for terminating the conservatorship.  Since the person now has less than $1,600 in assets and all of the person's income is going to the nursing home, the Probate Judge is usually happy to terminate the conservatorship of the estate since there are not enough funds left to warrant the continued Probate Court involvement in the person's finances.  That means no more preparing and filing annual "periodic" accountings, and no more hearings regarding finances.

So, unless there is an extraordinary situation which would require the conservatorship of the estate to continue, you can go ahead and file a final accounting and request termination.  Please note that any "conservatorship of the person" (when a person is in charge of managing personal affairs for an incapacitated person, with Probate Court oversight) will probably have to continue since health care decisions will still need to be made.

The Tricky "Medicaid Pick-Up Date"

A lot of my Medicaid clients get confused over the date that Medicaid coverage kicks in (also known as the Medicaid "pick up date) once Medicaid eligibility has been determined by the State of Connecticut.

The short answer is that Medicaid can start as early as the first day of the month during which the Medicaid "spend-down" was completed, assuming that there are no issues with periods of ineligibility that have been triggered by gifting during the look-back period.  So, if an applicant spends his/her assets down below the Medicaid asset limit ($1,600) today, then Medicaid coverage can begin retroactively on December 1st.

Why would it start later than the first of the month?  Because if the spend-down included private payments to the nursing home which effectively paid for nursing home care past the first of the month, then the nursing home would not need Medicaid coverage until later in the month.  So, in the above example, let's assume that the Medicaid applicant made a partial payment to the nursing home as part of her spend-down and that payment covered her up until December 10th.  In that case, the Medicaid pick-up date would be December 11th so that the payment for care would be "seamless" for the nursing home.

Get Organized Before Filing Your Medicaid Application (Part 2 of 2)

In the vast majority of cases with my clients one or more adult children of the Medicaid applicant are the ones filing the application. And if mom or dad has not kept organized financial records and lacks the mental capacity to provide reliable information then the kids are often left in the dark regarding where mom or dad's accounts are held, the size of the assets, whether or not there is a life insurance policy, etc.

Sometimes the best solution (after scouring the household records and safe deposit box) is to simply mointor mom or dad's mail where statements and other correspondence from financial institutions will eventually arrive. Working with the local post office to re-direct mail to your own address may be appropriate in some circumstances.

Although the statements and cancelled checks represent the lion's share of information that you will end up sending to the State, they will also ask for copies of various demographic items such as a Social Security card, Medicare card, health insurance cards, birth and marriage certificates, documents to verify sources of income, trusts for which you are the beneficiary and a laundry list of other miscellaneous items. The importance of having all of these documents as organized as possible prior to submitting your Medicaid application is difficult to overstate.

One other organizational tip to offer is to make copies of everything you send to the State (I hate to sound like a broken record, but scanning all of your Medicaid application documents makes this a non-issue). It is absolutely not unprecedented for the State to misplace documents. If this happens and you have neglected to keep copies then you are back to square-one in the information-gathering process.

Get Organized Before Filing Your Medicaid Application (Part 1 of 2)

You may have already heard this, or perhaps you've learned first-hand, but filing an application for Medicaid benefits is no picnic. And if the applicant's financial and demographic information is not organized then the application process can be an absolute nightmare.

The first item of advice is to simply save your account statements. When you apply for Medicaid the State will insist on receiving copies of every single statement of every single month for every single account on which the applicant's name appears. These statements have to go back for the last 3 years (soon to be 5 years), This can be a particularly onerous task if there are several accounts involved, so start saving those statements and keep them organized. If statements are missing, most banks will conduct research and produce the missing statements free-of-charge if you can prove that you need the statements in order to apply for Medicaid, but such research will add time to an already lengthy process.

One high-tech tip for helping with the logistics is to invest in a small scanner and scan each statement as they come in. This will allow you to create a computer file for each financial institution and save each statement in the appropriate file in PDF format. You can then run the original statement through a shredder as long as you have a back-up system in place for your computer files. This system makes it easy to organize all of the statements and they will be easy to find when it comes time to file the application, not to mention that it will help you cut down on household clutter.

The State will also want to see copies of all cancelled checks with a value of $1,000 or more. Nowadays most bank statements include digital images of each check right on the account statement, but if your bank still sends a small stack of the actual checks then make sure you save the four-figure ones somewhere. Again, scanning can come in handy here.

The "Pick-Up Date" for Medicaid Coverage

There is some confusion among my cilents as to when exactly Medicaid coverage "kicks in" for their loved one.  There are a couple of misconceptions on this issue.  Some think it's the date the application is submitted while some think it's the day that the "spend-down" is completed (which would actually make sense), but neither is correct.

The basic rule is that Medicaid coverage starts on the first day of the month that the spend-down is accomplished.  So if you officially spent-down at any time during this month, your Medicaid "pick up" date is June 1st, meaning that the Medicaid program will cover your nursing home costs (home care costs, in some cases) starting on June 1st and going forward.

But be careful!  DSS doesn't consider the writing of a check as something that contributes to the spend-down...money has to actually leave the account. 

So...if you are a single person and you have $2,000 and you write a $500 check to the nursing home today in order to get under the $1,600 level during the month of June, then you will not be eligible for Medicaid as of June 1st.  It will probably be July 1st instead.  That's because the money doesn't physically leave your account when you write the check; that does not occur until the check is actually cashed.  A good way to avoid this problem is to use a bank check or cashier's check which immediately pulls the money from the account. 

Life Insurance: A Medicaid Application Land Mine

I have worked on many Medicaid (also known as "Title 19") applications, and I have heard a lot of Medicaid application stories over the last ten years, and from my experience nothing trips up an application more often than life insurance issues.

Part of the problem is that the Medicaid eligibility rules regarding life insurance are a bit confusing.  First of all, any "term" insurance is completely exempt under Medicaid rules.  You can have an enormous term policy and it's not a problem for Medicaid.  This is because a term policy does not pay interest or dividends and it has no cash surrender value.  DSS is only interested in assets that you can liquidate into cash and spend on your care, and term insurance does not fall into that category. 

Now, here's the tricky part: all other types of insurance, known as "whole", "permanent" or "universal" (the types of insurance that can generate income and carry a cash value) are exempt as long as the face value of all the policies combined totals $1,500 or less. 

The problem is that "face value" is often confused with "cash value" (a.k.a. "cash surrender value").  Remember that "face value" is what your beneficiaries will collect upon your death.  "Cash value" is what you can get back in cash if you voluntarily terminate the policy.  These numbers are usually very different.

So, under Medicaid rules, applicant #1 could have a universal policy with a face value of $1,500 and cash value of $5,000 and the policy is exempt...no need to cash it out and spend it down to become eligible for Medicaid even though there is a significant cash value that could be used to pay for the applicant's care.  Meanwhile, applicant #2 could have a policy with a face value of $1,501 and a cash value of $1,000 and the policy is a "countable asset" for Medicaid eligibility purposes.  I don't make these rules, I just report them to you!

I refer to life insurance as a Medicaid application "land mine" because an applicant who is confused by these rules could file an application thinking that he's eligible because the cash value for life insurance is under $1,500.  Then four months later, when the DSS caseworker takes a good look at the life insurance, she announces that since the face value is over $1,500 the policy is countable and the applicant is over-assets (after adding the cash value to the other countable assets).  Therefore, the applicant has been inelgible for the last four months and the nursing home has a $30,000+ unpaid bill that is not going to be paid by Medicaid.  That's when the nursing home administrator calls the facility's attorney, and the rest of the story is never pleasant.

So if you are applying for Medicaid, make sure you fully understand the life insurance rules and that you are crystal-clear on the face value and cash value of your policies.

Confusion Over Gift Tax and Medicaid Law

One of the most common misconceptions that my clients have about Medicaid eligibility involves gift tax and gifting that triggers penalty periods under Medicaid law.  The question usually goes something like this:  "I'm allowed to gift $10,000 each year without any Medicaid problems, right?"

Gift tax and Medicaid gifting are two entirely separate issues.  Let's look at gift tax first...

First of all, the gift tax exemption amount is no longer $10,000.  The figure has been indexed for inflation and it now stands at $12,000.  This means that you can gift up to $12,000 per person, per year, without the need to file a gift tax return.  Please note the "per peson, per year" part.  This means that you can give a $12,000 check to as many people as you want and have no gift tax liability.

However, the Department of Social Services (DSS) does not care about gift tax.  When you file a Medicaid application, DSS wants to know about any gifts you have given during the look-back period and they do not care if you had to pay any gift tax. 

So the good news about the $12,000 gift is that it was gift-tax free.  The bad news is that it still triggers a 1.4-month penalty period.  In other words, if the gift took place during the look-back period then there will be no Medicaid eligibility for the 1.4-month period after you have successfully spent your assets down below the asset limit ($1,600 for a single person).

So be careful..."gift tax-free" does not mean "Medicaid problem-free".

Connecticut's Medicaid Program Ranks Well Nationally

Public Citizen has released a 50-state comparative ranking of Medicaid programs, and Connecticut didn't do too bad coming in at 19th place.  The study considered eligiblity, scope of services, quality of care and provider reimbursement. 

Connecticut's score in the "scope of services" category, where it ranked a dismal 42nd, dragged down it's overall score.  The study was disturbed by the number of services that Connecticut's Medicaid program excludes compared to other states.  It also scored low in the "quality of care" category with a ranking of 36th, mostly due to deficiencies with nursing home care.  Connecticut scored high in regards to "provider reimbursement" where it ranked 10th nationally.

Click here to see the overview of the study's results.  Make sure to click the tabs for each category for a detailed analysis of how Connecticut fared.