Advising
Clients Who are Losing Their Waiver Benefits
Written
By: Attorney
Jeffrey A. Marshall
, CELA*
As
a result of
Pennsylvania
’s new Act 42, hundreds of married seniors will be losing their
benefits under the PDA 60+ Waiver Program.
The
Waiver program provides home services to seniors who are so frail that
they would qualify for nursing home care.
Seniors who qualify receive Medicaid-funded assistance to allow
them to live at home instead of in a nursing institution.
In this way, the Waiver program supplements the help being
given by families, who still must meet most of their loved one's care
needs.
Before
Act 42,
Pennsylvania
did not consider the assets of the healthy spouse when determining
financial eligibility for Waiver. The income and savings of the
non-applicant spouse were not counted.
Act
42 changed the rules. Under Section 441.8 of Act 42, the assets of
both spouses must now be pooled together, the same as if one spouse
were in a nursing home. Assets
owned by the healthy spouse will make the frail spouse ineligible for
benefits. As a result,
many married recipients of Waiver funded care are going to lose their
benefits.
This
article is intended to provide guidance to elder law attorneys and
Area Agency on Aging care managers who need to counsel seniors who are
in jeopardy of losing their Waiver eligibility.
Donna
and Ralph:
Ralph
is 65 and suffers from a degenerative brain disease that interferes
with his walking and speech. He has started falling, and his care is
becoming more difficult. He
could stay at this level of care for a significant amount of time.
Ralph’s
wife Donna, age 56, is a waitress. When Ralph was discharged from the
hospital, Donna left her job at a restaurant to care for her husband.
She wants to keep Ralph at home for as long as possible.
I married him “in sickness and in health, for better or
worse” she says. The
couple is childless and has no other family supports.
After
Ralph was discharged from the hospital, Donna soon reached the
breaking point. Caring for him was a 24 hour/7 day a week job,
involving immense physical and emotional stress.
She could not safely leave Ralph alone.
It appeared that a nursing home placement was inevitable.
Donna
called an elder law attorney to see if there was anyway she could get
some help. The lawyer told
Donna to call her local area agency on aging and apply for Waiver
benefits for Ralph.
N
ow Donna is getting the help she needs to keep Ralph at home.
The aging office is providing an average of 3 hours a day in
various forms of Medicaid Waiver-funded home care assistance to the
couple. Donna is
especially grateful for the help with bathing Ralph, which was a real
big p
rob
lem for her. Ralph is a
big man, and Donna is quite petite. The Waiver-funded help also allows
Donna to go shopping and get some respite from the constant drain of
care-giving. Although she is still “on duty” 21 hours a day, at
least she now has some “down time.”
She has joined a care-giver support group.
Unfortunately,
Donna has $70,000 in savings. Her
assets were not counted in the past.
However, under Act 42, Ralph will no longer be able to qualify
for the Medicaid-funded Waiver program. Even though he qualified in
the past, he will be denied further assistance in a few months, after
the Department of Public Welfare requires the couple to file a
resource assessment.
Under
Section 441.8 of the new law, the savings held in Donna’s name will
be treated as available to pay for Ralph’s care.
Donna will be allowed to retain only $35,000 of the couple’s
$70,000 as her spousal protected share and Ralph will be able to
retain $8,000. But the
couple will still have $27,000 too much to qualify for the Waiver
program under the new Act 42 rules.
Ralph will be thrown off the Waiver program and the four hours
of daily assistance will cease.
When
Donna gets this news, she will hopefully call her elder law attorney.
The lawyer can outline her choices under Act 42:
Choice
1. Place Ralph in
a nursing home and go back to work.
This will p
rob
ably be the best choice for Donna’s long-term financial (and
possibly physical and mental) well-being.
Donna and Ralph will still have to spend down $27,000 but Donna
will be able to keep all of her earnings from work. The nursing home
staff will relieve Donna of her care-giving burdens and she will be
able to get back to a relatively normal life.
(
N
ote that this option will cost the state more each month than it would
have cost if Ralph had remained at home under Waiver.
Waiver costs less than nursing home care because Waiver
services simply supplement the services being provided by family
care-givers like Donna.)
Choice
2. Apply for home care services under the totally state-funded
“Options” program. There
is usually a cap on the cost of services the state will provide under
Options, and Ralph needs more assistance than could be provided within
that cap. But, the local
office of aging can choose to waive the cap in certain cases.
If the cap is ignored, Donna and Ralph may be able to get the
same level of services that they were getting under the
Medicaid-funded Waiver program. (
N
ote that this option will cost the state more each month than it would
have cost to keep Ralph at home on the mostly federally-funded Waiver
program)
Choice
3. Stay home and continue to care for Ralph, but without any
assistance or respite. Or
private pay for help with Ralph’s care until the $27,000 has been
used up. This will negatively affect Donna’s long-term financial
security and effectively punish her for choosing to provide care for
her husband at home.
Choice
4. Hire the lawyer to seek an increase in her CSRA through
judicial court ordered support. See 42 U.S.C.1396r-5(d)(5).
Choice
5. File an
administrative fair hearing appeal under 1396r-5(d) of Federal
Medicaid law (42 U.S.C.). This
section provides for an increase in the MMM
N
A if either spouse can show “exceptional circumstances resulting in
significant financial duress.”
Choice
6. Appeal the
denial of continued benefits as a violation of Federal Medicaid Law
which specifies that once the institutionalized spouse’s eligibility
is determined, the state is not authorized to take any resources
belonging to the community spouse and deem them available to the
institutionalized spouse. 42 U.S.C. 1396r-5(c)(4).
Choice
7. Seek to retain Ralph’s Waiver eligibility by filing an
appeal under Section 441.7 of Act 42. Because she is a low-income
spouse, the appeal, if successful, may allow Donna to purchase a
Hurly/resource-first annuity rather than having to spend the $27,000
on Ralph’s care. Unfortunately, to pursue this appeal, Donna and
Ralph will have to run a gauntlet of obstacles.
Under Act 42, they will have to do all of the following:
A.
Fill out a resource assessment form.
B.
Prepare an application (PA600) and submit it to the
appropriate CAO in the county where the client reside
C.
When the application for Medical Assistance is denied
and the applicant will receive a written notice of the denial (PA162),
the applicant must then appeal the decision in a timely manner and
request a fair hearing.
D.
The applicant must provide the County Assistance Office
(CAO) with documentation of the couple’s gross monthly incomes and
project the amount of Ralph’s income that Donna would receive in the
future in the event that Ralph predeceases Donna. This means Donna and
Ralph will have to contact Social Security and Ralph’s pension plan
and ask them to calculate this information and provide verification of
it. (Whether they can actually obtain this kind of verification, and
how long that will take, is open to question). They must provide the
verification to the CAO before they can pursue the appeal. (To
expedite the fair hearing and the processing of the stipulated
agreement, Donna and Ralph should try to submit complete income and
expense information sufficient for the CAO to perform the Hurly
calculation at the time of submitting the PA600 Medicaid application).
E.
Wait for notification from the CAO as to whether Donna
can keep any additional savings.
F.
If the CAO says Donna can keep all or any part of the
excess $27,000, Donna must then contact at least 3 insurance companies
and get quotes on immediate annuities that meet all the following
special requirements:
(1)
The annuity must generate income for as long as Donna will live with a
guaranteed period that is equal to Donna’s actuarial life
expectancy. (This type of
annuity is generally referred to as a "Lifetime Guaranteed Period
Annuity.") At age 56, Donna’s actuarial life-expectancy is
approximately 26 years. An
immediate annuity with a purchase price of $27,000 and the provisions
required by Department of Public Welfare (DPW) will p
rob
ably generate about $130-$140 a month for Donna;
(2)
The annuity must pay out principal and interest in equal monthly
payments;
(3)
DPW must be named as the designated beneficiary of the annuity upon
the death of Donna;
(4)
DPW must receive the remaining annuity payments if Donna dies before
the expiration of the guaranteed payment period of the annuity; and
(5)
DPW can receive a lump sum payment from the annuity if Ralph
predeceases Donna.
G.
Donna must provide the CAO with the three annuity quotes. The
CAO will select the cheapest annuity quoted in its calculations and
advise the couple of this decision.
H.
The CAO will prepare a Stipulated Agreement to be signed by all
parties that specifies how much of the $27,000 Donna will be able to
retain.
I.
After the Stipulated Agreement is reviewed and signed, the CAO
will forward it to the Bureau of Hearings and Appeals.
J.
Upon receipt of an Order from the Bureau of Hearings and
Appeals, the CAO will notify Donna and Ralph that they must actually
purchase the annuity and provide a copy of the annuity to the CAO.
K.
Upon receipt of the annuity document from the couple, the CAO
will review the annuity to ensure that it meets the DPW requirements
and, if it qualifies, forward a copy of the annuity to the Third Party
Liability (TPL) Unit in
Harrisburg
.
L.
Ralph will not be eligible for waiver services until after all
of the above is accomplished. The CAO will then authorize Medicaid/LTC
benefits effective the date set forth in the Stipulated Agreement.
Without
expert assistance it’s unlikely that most community spouses will be
able to navigate this complicated maze to obtain the full financial
protections allowed by law.
Choice
8. Purchase a Section 441.6 “Safe-Harbor” Annuity
Under the Mertz
case, Donna should be able to purchase a “safe-harbor”
annuity. Act 42 attempts
to limit the ability of an individual to purchase a Mertz
annuity by requiring that the annuity will be considered a resource
unless it satisfies Section 441.6 of Act 42.
Whether these Act 42 restrictions are legal under federal law
is an open question.
Recently, DPW legal counsel has informally
advised that DPW considers Section 441.6 not applicable to annuities
purchased by a community spouse. This
position does not seem to be in conformity with either state or
federal law. It is quite
possible that DPW intends merely to deter the use of Mertz
type annuity purchases by community spouses, even though this planning
strategy is allowed under Medicaid law.
The purchase of a Mertz
type safe harbor annuity should allow Ralph to regain eligibility
on the date that the purchase of the annuity becomes irrevocable.
However, legal counsel should consider the possibility of a
denial being issued by DPW.
More information on annuities is available at the
following website: www.paannuity.com.
Attorney Marshall can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552
Medicare
Part D and PACE
Written
By: Marshall & Associates’ Planning Specialist Lisa Barner
The
PACE program currently provides prescription drug coverage to over
200,000 Pennsylvanians. (PACE
has annual income limits of $14,500 for a single person and $17,700
for a married couple.) Medicare
Part D provides special assistance or subsidies for Medicare
beneficiaries with low incomes ($12,920 for an individual and $17,321
for a married couple) and low resources ($6,000 for an individual and
$9,000 for a married couple).
Residents of
Pennsylvania
who would be eligible for this lowest income subsidy and who are
already enrolled in the PACE program will be receiving some assistance
in signing up for the new Medicare prescription drug benefit.
PACE has been working with federal officials to
offer a combined benefit. The
Pennsylvania Department of Aging will select plans that meet PACE’s
current standards for coordinating benefits for the program.
Under a new agreement, PACE beneficiaries would remain in the
PACE program, however, they would also enroll in one of the
pre-selected Part D plans. The
hope is that the PACE program will save $100 million next year by
shifting some of their drug costs to the Medicare Part D program.
PACE provides drugs to low-income seniors for
co-payments of $6 (generic) or $9 (name brand).
But, seniors who would qualify for the lowest income subsidy
through Medicare Part D may pay even lower co-payments under one of
these plans. They would
pay $2 (generic) or $5 (name brand) co-payments for drug costs up
$5100. After drug costs
meet $5100, there would be no co-payments at all.
The agreement reached by PACE and the federal
government regarding Part D should allow low income seniors to pay the
lower co-payments of the federal program while maintaining their PACE
coverage. Beneficiaries should actually notice no changes in their
PACE coverage. The PACE
program will coordinate benefits.
These changes do not
affect those currently receiving PACE if they don’t qualify for the
lowest income subsidy. Also,
this has no impact on those receiving PACE
N
et benefits.
For more information, you can contact PACE at
1-800-225-7223 or online at www.aging.state.pa.us.
Lisa can be contacted at lbarner@paelderlaw.com
or at 1-800-401-4552
Estate
Planning Gifts
Written
By: Attorney
Jeffrey A. Marshall
, CELA*
This
time of year many people are thinking of gifts. Don’t be surprised
if your lawyer and your accountant may also be thinking of the gifts
you might want to make.
Gifts are one of the most effective estate
planning tools available. Making gifts during your lifetime rather
than at your death can provide many tax and non-tax advantages.
But there can be disadvantages. Here are some things to
consider.
Advantages:
N
ot only is it rewarding to have the chance to see your beneficiaries
use your gift while you are alive, lifetime gifts reduce the size of
your taxable estate and can limit federal and state death taxes. This
means more for your family and less for the government.
By giving money away, your assets can be
protected from health care costs and creditors and you can be freed
from having to manage properties or invest assets.
If you’re unsure how your beneficiaries will
handle the gifted assets, making a gift while you’re alive will
allow you to see your beneficiaries manage them which will leave you
time to revise your estate plan if needed.
Making gifts to charities can provide immediate
income tax savings.
Disadvantages:
Of course, there can be disadvantages as well.
Ordinarily you will lose control of the gifted
property. (There may be ways to retain some control through the use of
trusts and other agreements.)
Gifts can make you ineligible for public benefits
such as Medicaid, in the event you need financial help with the cost
of long term care. Be careful that your gifts don’t leave you with
insufficient resources if unanticipated needs arise.
The recipient of the gift may get a low tax basis
in the gifted property, rather than the stepped-up basis on inherited
property. And, a gift may actually have a negative influence on the
recipient.
Thus, serious thought, planning, and expert
advice should precede any substantial gift.
Taxes
on Gifts:
Many people are confused and unduly concerned
with taxes on gifts.
Gifts are generally not subject to income tax.
The recipient does not have to pay income tax on the value he
or she receives. Unless
the gift is to a charity, there is usually no tax deduction available
to the donor.
There is no gift tax imposed by the
Commonwealth
of
Pennsylvania
. The Federal Government
does impose a gift tax but gives each taxpayer a $1 million dollar
lifetime exclusion. Individuals and couples who want to make combined
lifetime and death transfers in excess of $1 million should try to
maximize the benefit of those gifts. One method is through the use of
the annual gift tax exclusion.
The Federal annual gift tax exclusion is the
amount the Internal Revenue Service allows a taxpayer to gift to
another individual without reporting the gift. Currently, each
individual can transfer up to $11,000 (taxable value) per recipient
per year. Because of inflation the annual gift tax exclusion is
expected to increase to $12,000 effective
January 1, 2006
.
The increase means that more can be given away
each year by high net worth individuals and couples without gift tax
consequences. For example, a married couple with two children will be
able to give away up to $48,000 in 2006 with no gift tax implications.
Annual exclusion gifts essentially reduce your
taxable estate by the amount of the gift and any post-gift
appreciation. To qualify for the annual exclusion, the gift must be a
gift of a “present interest,” which means the recipient must have
the right to currently enjoy the property.
Gifts in excess of the annual exclusion must be
reported by the donor on a gift tax return (IRS Form 709) by April 15
of the year following the calendar year in which the gift was made.
However, unless the total cumulative taxable gifts made by a
donor exceed $1,000,000, there will be no gift tax. This means most
people do not have to be concerned with gift taxes.
For those with high net worth, use of the
$1,000,000 lifetime exemption (in addition to your annual exclusion
amount) reduces the estate tax exemption that will be available at
death.
Gifts are complicated.
Therefore, it is wise to discuss lifetime gifts with your tax
and legal advisors before making them.
Attorney
Marshall’s article originally appeared in the December 4th
edition of Insights &
Opportunities in the Williamsport
Sun-Gazette
.
It’s also posted on the
Sun-Gazette
’s website at http://www.sungazette.com/articles.asp?articleID=803
Attorney Marshall can be contacted
at webmail@paelderlaw.com
or at 1-800-401-4552
Attorney Marshall’s
Book, Elder Law in Pennsylvania,
N
ow
Available
Attorney
Marshall
has written Elder Law in
Pennsylvania – an essential tool for lawyers and anyone involved
in providing legal and financial planning to those over age 60.
It is more difficult than ever for lawyers and
other professionals to provide good advice to older consumers.
Complex programs like Medicare, Medicaid, Social Security and
Veterans Benefits are critical to the financial and physical well
being of millions of
Pennsylvania
seniors. A misstep can
jeopardize a family’s health and financial security. But, these laws
and programs are so complicated that seniors and their advisors often
have great difficulty obtaining correct information about options and
essential services.
Elder Law
in Pennsylvania fills a gap in the research resources available to
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The 700-page book, published by PBI
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The book is intended to assist advisors in
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lack of knowledge will not prevent clients from reaching their goals
in a desirable, appropriate, and cost-effective manner.
More information about Elder
Law in Pennsylvania is available from PBI Press at www.pbi.org,
on our website at www.paelderlaw.com/newsandevents.html
or by contacting Melissa Bottorf at 570-321-9008 or at mbottorf@paelderlaw.com.
Marshall &
Associates’ Paralegal Karen Griswold Returns Home after Serving in
Iraq
Last
N
ovember, Marshall & Associates Estate Planning Paralegal Karen
Griswold deployed in support of Operation
Iraqi Freedom. Karen
served as the First Sergeant for the 14th Quartermaster, a
water purification detachment based out of
Greensburg
,
Pennsylvania
. Over the past year, the
unit operated out of seven locations--Logistical Support Area
Anaconda,
Balad
,
Iraq
, five forward operating bases, and one combat outpost near the Syrian
border. The unit was
responsible for purifying over 68 million gallons of water in support
of US combat troops and the multinational coalition forces.
Karen was responsible for traveling across
Iraq
to oversee the actions of the water teams.
This month Karen has returned to the
U.S.
We’re glad to welcome her home and to thank her for her brave and
dedicated service to her country.
Karen has served in the US Army Reserves for over twenty years.
She will soon be back to the Marshall & Associates’staff
where she will continuing helping our clients meet their estate
planning goals.
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issues of The
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*Attorneys
Marshall and Parker are certified
as Elder Law Attorneys by the National Elder Law Foundation under
authorization from the Pennsylvania Supreme Court.
