Notes from Wendy A. Craig, P.A.
Recent speaking engagements:
Recent conferences attended:
- 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
- Medicare Part D entitlement and enrollment issues presented
by the Center for Medicare Advocacy
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
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
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:
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!
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
- 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
Legislative Alert! Legislative Alert!
The Honorable Richard Burr
217 Russell Senate Office Bldg.
Washington, D.C. 20510
The Honorable Elizabeth Dole
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.
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
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.
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
- 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.
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.
Wendy A. Craig, P.A.
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page NC Elder Law Attorney
A. Craig, P.A.
in Elder Law for Western North Carolina
East State Street, Black Mountain, NC 28711
828-669-0799 (Voice) 828-669-0055 (Fax)
2006 - Wendy A. Craig, P.A.
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