December 2005 Notes from Wendy A. Craig, P.A.

Notes from Wendy A. Craig, P.A.

December 2005

Recent speaking engagements:

Presented at the North Carolina Bar Association’s seminar “Basics of Elder Law” for attorneys on the topics of Medicare, Veterans Benefits and Long-Term Care Insurance as sources of payment for long-term care

Presented at the Park Ridge Hospital Caregiver Wellness Program meeting on the topic of Medicaid planning

Recent conferences attended:

Medicare Part D entitlement and enrollment issues presented by the Center for Medicare Advocacy

Upcoming conferences:

Uniform Trust Code

QUESTION & ANSWER CORNER

I recently heard that there have been some changes in North Carolina’s Medicaid law. Can you summarize these?

     In connection with benefits planning for yourself or for a loved one, you may have signed a life estate deed. The life estate deed specifically recited that the property belongs to you (or to the person for whom you act as agent if you signed the deed as attorney-in-fact) during your lifetime and then named who will own the property upon your death. The purpose of signing the life estate deed was to protect the property from Medicaid estate recovery. Under current North Carolina law, a life estate interest is not subject to estate recovery and is not a ‘countable’ property interest subject to transfer penalties for Medicaid eligibility purposes.

     In its summer session, the North Carolina legislature passed two pieces of legislation that impact Medicaid planning using life estate deeds. One piece of legislation deals specifically with estate recovery (the state’s right to recover the Medicaid dollars it spends on a recipient’s long-term care from that recipient’s estate upon his or her death) and the other piece deals with eligibility issues.

     The estate recovery statutes purport to allow North Carolina to place a lien against a Medicaid recipient’s life estate interest in property beginning July 1, 2006. This legislation also extends to property interests that pass by ‘survivorship’, such as joint tenancies with rights of survivorship. We expect this new law to be effective to permit North Carolina to place a lien during life against such interests held by Medicaid recipients and to enforce the lien against those who die on or after July 1, 2006. In addition, our General Assembly approved new laws making life estate interests in any property other than the homesite countable for eligibility purposes and subject to transfer penalties. The effective date for making life estates countable interests and subject to transfer penalty is not clear at this point. This legislation was originally scheduled to be effective as of October 1, 2005, but the effective date has been delayed due to drafting considerations and likely due to the legislative changes being considered at the federal level (see “Legislative Alert!” below).

     Many people are wondering if their property interest will be subject to a lien. The Division of Medicaid Assistance has not yet shared any policy statements to indicate how the new Medicaid lien law will be implemented. We do not expect property interests created prior to the effective date of the legislation, July 1, 2006, to be “grandfathered” or otherwise exempted from the lien law. But, at this point we do not know how effective the lien law will be or how North Carolina will actually enforce such liens. What we do know is that (i) prior to the effective date of the legislation, a life estate can be transferred without penalty and (ii) on or after such effective date, the transfer of such an interest will be subject to penalty unless to a protected class. Again, the effective date of the life estate legislation is unclear at this point. We also know that there are serious disadvantages to transferring such interests, including loss of control of such property, loss of a ‘step-up’ in tax basis in the property, and subjecting such property to the claims of creditors of the transferee. Therefore, the transfer of such interests should not be undertaken without consideration of the risks to the property owner and available alternatives.

Medicare Part D Prescription Drug Coverage . . .

. . . begins January 1, 2006. If you are receiving Medicare Part A or Medicare Part B, you are eligible for prescription coverage under Medicare Part D – income and resources tests apply only to eligibility for the low-income subsidy. For people already receiving Medicare, the initial enrollment period is November 15, 2005 – May 15, 2006. During this initial enrollment period, you may be permitted to change the pharmaceutical plan in which you enroll. In subsequent years, you may not be able to change plans. So, it is very important to choose the correct plan. Also note that there are penalties for not enrolling in a Part D plan when you first became eligible

When evaluating a Part D plan, you should (1) evaluate your current health insurance coverage, (2) make a list of the names and dosages of all medications that you are currently taking, (3) note your pharmacy preferences, and (4) note your income and resources.

Sources of information to help evaluate Part D plans:

Medicare Prescription Drug "Personal Plan Finder" at www.medicare.gov
Medicare Rx Help Is Here Resource Kit at www.cms.hhs.gov/FFSProvCustSvcGen/
Prescription Drug Plan Cost Estimator Finder at www.medicare.gov/medicarereform/MPDP_Cost_Estimator.asp
Landscape of Local Plans at www.medicare.gov/medicarereform/map.asp
Formulary Finder at http://formularyfinder.medicare.gov/formularyfinder/selectstate.asp

Please note as you review Part D plans that drug prices can be, and are, updated as often as weekly. Also note that plans can change covered drugs with 60 days’ notice.

The exclusion amount for estate taxes goes up from $1.5 million to $2 million dollars on January 1, 2006. The generation skipping transfer exemption also goes up to $2 million on January 1, 2006. The annual gift exclusion goes up from $11,000 to $12,000 for gifts made on or after January 1, 2006. We will be performing an audit of our estate planning files based upon these changes and upon North Carolina’s adoption of the Uniform Trust Code. Expect to hear from us in January!

Legislative Alert! Legislative Alert! Legislative Alert!

On November 18, 2005, the House of Representatives passed a budget reconciliation bill that included several proposals to cut the Medicaid budget. These proposals will have a significant and detrimental impact on our senior population. The House bill would amend the current Medicaid rules as follows:

To increase the “lookback” period from 36 months to 60 month for all applications;
To require residents in continuing care retirement communities to use all assets declared on their entrance application to pay for their care prior to applying for Medicaid benefits;
To "stay" any penalty periods created by transfers of assets (including church pledges, birthday gifts, tuition payments, etc.) so that such penalties do not begin to run until the Medicaid applicant otherwise eligible for Medicaid (e.g., Grandmother pays college tuition of $20,000 for grandson and then 4 years later has a stroke and requires nursing home care. The 4 month period of ineligibility for Medicaid benefits created by the $20,000 transfer will not begin until Grandmother has less than $2,000 in assets and is in the nursing home. Grandmother would have no assets to pay for her care and would be ineligible for Medicaid benefits.)

The National Academy of Elder Law Attorneys and AARP, among others, have fought hard to educate Congress about the devastating effects that the House bill would have on our senior population. As a result, the Senate passed a bill that also attempts to save dollars in the Medicaid program but that does not contain these draconian measures. The entire Congress will vote on these measures later this month.

It is absolutely imperative that you let your Senators and your Representative know that the House bill does not serve the seniors of Western North Carolina. Our office, along with other elder law attorneys across the state, has sent letters to Senators Dole and Burr and to Representative Taylor. However, it is your voice and your opinion that matters to our legislators. We have attached a sample letter to Senators Dole and Burr and to Representative Taylor that expresses our concerns about the House bill. As a spouse, child or caregiver of a nursing home resident and as a voter, your voice could make a significant difference in the life of this resident. Please sign the attached letter, print your address beneath your signature and fax or mail it to our legislators before December 15, 2005. Our office will be happy to mail or fax these letters for you or to assist with this process in any way that we can.

Legislative Alert! Legislative Alert! Legislative Alert!

The Honorable Richard Burr
U.S. Senate
217 Russell Senate Office Bldg.
Washington, D.C. 20510

The Honorable Elizabeth Dole
US Senate
555 Dirksen Office Bldg.
Washington, DC 20510

The Honorable Charles H. Taylor
US House of Representatives
339 Cannon HOB
Washington, DC 20515

Dear Senators Burr and Dole and Representative Taylor:

As a caregiver of a senior citizen requiring nursing home care and as one of your constituents, I am writing to strongly request that you oppose three proposals to change Medicaid eligibility rules that would severely harm our state’s vulnerable older adults and individuals with disabilities who need long-term care. These proposals, which are under consideration as part of budget reconciliation bill approved by the House of Representatives on November 18, 2005, would:

Impose a penalty period beginning on the date when the applicant is otherwise eligible for Medicaid coverage, i.e., when the individual needs long-term care (nursing home or home care) and lacks the income or resources to pay for that care;
Mandate a five-year lookback period for transfers, from the current three years.
Permit continuing care retirement communities to contractually deny residents the right to qualify for Medicaid benefits for long-term care.

I know firsthand the importance of Medicaid to so many of your older and disabled constituents, who depend on its services for long-term care. As a caregiver, I see in nursing homes, in our church and in our community hundreds of older and disabled persons in our state that will be hurt by these proposals.

A few of the likely victims of such measures are: the grandparent caring for a grandchild who provides savings to help pay for the grandchild’s education; the devoted church supporter who donates personal assets to the church; the family farmer or small business owner who passes on the farm or business to the next generation; the widow who lacks records of her now deceased husband’s spending; the caring sister who uses savings to help a needy sister remain in her home; the spouse of nursing home patient when both spouses are residents of a continuing care retirement community. Under the proposals to tighten transfer of asset rules, each of these individuals will be denied Medicaid if they subsequently get sick and need long-term care.

In the recent past, more than 36 aging advocacy organizations representing tens of millions of Americans opposed the state of Connecticut’s waiver request to CMS to impose a change in the start date for the penalty period and to increase the lookback period to five years. Earlier this year, Governor Rell withdrew the state’s request. Those opposing included: AARP, Alzheimer’s Association, National Committee to Preserve Social Security and Medicare, Catholic Heath Association of the United States, National Association for Home Care, Older Women’s League, and The Retired Officers Association. In addition, in testimony provided to the Finance Committee on June 15th, the nursing home industry specifically opposed changing the start date of the penalty period. Further, studies have indicated that asset transfers are not responsible for the growth of the Medicaid budgets. Such studies have also concluded that transfer restrictions will produce little or no savings for the Medicaid program.

My opposition to these proposals arises from our concern about the likely negative effects on older Americans living out their lives with no intent to “game the system.” Problems with the proposal include:

All of those affected by these proposals will unquestionably need long-term nursing home or home health care, yet be unable to pay for that care, placing them in serious jeopardy.
Those who need nursing home care would not be able to gain entry. State law allows facilities to deny admission when there is no payment source.
In cases where nursing home admission has already occurred and the penalty is applied, nursing homes will be required to provide uncompensated care for the duration of the penalty period or until hospitalization.
Those in a hospital at the time of denial would be unable to leave since nursing homes and home care agencies will deny admission if there is no payment source. Hospitals will become the default providers as access to nursing homes is barred during the penalty period.
These proposals suggest that the elderly can predict their medical and financial circumstances five years into the future. It punishes unwitting elders who have helped their families with commonly made gifts and then experience unforeseeable medical events.
Some incorrectly claim that these changes will expand the use of long-term care insurance. The cost of long-term care insurance is not affordable for many elders. It is definitely not available for many individuals who already have serious chronic illnesses.
The harsh penalty would be applied to all those who are unable to immediately recover the funds or the value of property alleged to have been “improperly” transferred up to five years prior to the Medicaid application. Most transferees will have no legal obligation to refund the transfer (e.g., charitable and religious donations, campaign contributions, etc.).
These proposals will create unacceptable new obstacles to nursing home admission for vulnerable, frail elderly and disabled persons to get care, by requiring record keeping and documentation that is far beyond the normal practices of the elderly, especially the poor and chronically ill, and those with Alzheimer’s disease.
The proposals will generate unintended consequences. Rather than stopping asset transfers and encouraging the purchase of long-term care insurance, the proposal will encourage earlier and larger asset transfers by the elderly, and discourage responsible decision-making.

If it is true that you can judge the morality of a nation by its treatment of its elderly, a stroll through America’s nursing homes should give us all pause. The “abuse” of the Medicaid program is not in asset transfers, lookback periods and spend-downs to eligibility, but in the failure of the budget process to value the lives and human dignity that the Medicaid program protects. I respectfully request that you reject the House proposals that would most certainly harm our elderly population. Instead, I encourage you and your congressional colleagues to consider the Senate’s alternate proposals to address “loopholes” and save money for the Medicaid program without harming the very people who so badly need it.

Please let me know your position on these ill-advised proposals. Thank you very much for your consideration of these comments.

Sincerely,

Wendy A. Craig, P.A.

Notes from Wendy A. Craig, P.A. December 2005

Notes from Wendy A. Craig, P.A.

December 2005