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The government is getting ready to "lawfully mug" you or someone you know, perhaps a parent or grandparent, and take nearly everything you or they may own, including life-time savings, and the home or farm.

Life Care Planning, Estate Protection, Disability,
VA & Medicaid Assistance Lawyers

New Medicaid Rules may "Lawfully Mug" You

The government is getting ready to "lawfully mug" you or someone you know, perhaps a parent or grandparent, and take nearly everything you or they may own.  First, you need to understand what all the hullabaloo is about.

 

Its about you and your loved ones.

 

Many seniors plan for death, but few plan for the alternative. Many people create estate plans with last wills, trusts and other documents.  But few take the necessary steps to protect themselves in the event they live . . . in the event they do not die prematurely.

 

What life planning have you done? That is, what planning have you done to protect yourself for the rest of your life, the period between today and the day your last will springs into effect at your death.

 

The cold hard facts are that forty-three percent of us will not die prematurely, that we will need nursing home care at some point in our lives.  As we age  -  as we live  -  this percentage increases to fifty-five percent.

 

In southern Illinois, care in a nursing home currently costs approximately $4,000 or more per month. That's $48,000 per year!  Who among us can afford to privately pay for care at that level for more than a few months?

 

If you think the cost of staying at home would be less expensive, think again. You either impose on your adult children or other family members (without compensating them for their toil and disruption of their lives) or you shell out as much as $12,000 per month paying someone else for assistance.  (Until my elder law firm got involved, an elderly couple had been paying a home care agency $12,000 each month for more than one year.)

 

Indeed, the greatest threat to the financial security of middle-Americans is not taxes, it is the cost of long-term convalescent care.

 

There are only five ways to pay for nursing home or other long-term care.

(1)       Privately paying out of your resources, perhaps "spending down" all savings to the point you are out of money and out of options  -  leaving nothing to your heirs.

(2)       Long-term care insurance, which generally will only cover part of the cost of care during your remaining life.

(3)       Veterans' benefits, provided you are a war-time veteran or the widow of a war-time veteran and have limited resources . . . or you or someone on your behalf has taken the initiative to re-arrange your finances and savings to obtain these valuable VA benefits.

(4)       Medicare, but the benefit is limited to a maximum of 100 days of skilled care for rehabilitation to improve your condition so that you can return home.  If you cannot improve, Medicare will not pay for your care. (That is why the average number of days covered by Medicare is only 34 days.)

(5)       Medicaid, provided you have limited resources . . . or you or someone on your behalf has taken the right steps to re-arrange your finances and savings to protect what you have so that (like tax planning) you can keep the government out of your wallet or pocket-book.

 

So, what is Medicaid and why should you care?

 

Medicaid is a federal-state program authorized by Title 19 of the Social Security Act. Specifically, it is the primary way middle-Americans finance long-term care for themselves and their elderly parents.  However, like tax planning, if you are not already a person of limited means, you must take action to rearrange your financial affairs in order to meet income and asset limitations.

 

Illinois is about to adopt a set of new Medicaid rules to implement a federal mandate contained in the federal Deficit Reduction Act of 2005 (DRA), which became effective February 8, 2006.

 

This author has often been heard to refer to the DRA as "draconian."  In fact, that word is too nice. The DRA is worse than draconian; it is evil and a governmental mugging of seniors orchestrated by industry lobbyists in a malicious effort to get federal and state governments to balance their budgets on the backs of those who can least afford it.  As I said in an article that appeared in the August edition of the Southern Business Journal:

 

"[The DRA] and the new Illinois rules will lawfully rob many seniors of their life savings, legally steal the homes and farms of many others, prevent untold numbers from qualifying for governmental benefits, wreak untold suffering on thousands and impose tremendous havoc on the medical and long-term care delivery systems in Southern Illinois."

 

Under the current Illinois Medicaid rules, there is a three year "look-back" period during which the government has the right to look at all of your financial transactions during that three year period.  The new Illinois DRA rules will push the "look-back" period to five years. To learn more about the "look-back" period go to http://sbj.biz/, scroll down and click on the September 2010 issue.

 

Bad as it is, the increased "look-back" period of the new DRA-compliant Medicaid rules is not the greatest threat to the financial security of seniors.  Rather, it is the new method that will be used by Illinois Medicaid to calculate the starting date of the "penalty" period that results from ill-advised transfers.

 

Under both the current Medicaid rules and the forthcoming new DRA-compliant Medicaid rules, the "penalty" period is calculated the same way. So, for example, if Sue gave her daughter Susan $40,000 on September 15, 2009 and twelve months later Sue entered a nursing home costing $4,000 per month, there is a ten month "penalty" during which Sue does not qualify for Medicaid benefits to help pay for her care in the nursing home.

 

At this point in the calculation the two sets of rules diverge.  Under the current Medicaid rules, the ten month "penalty" began to run the first day of the month in which the gift was made (September 2009) and ended the last day of the tenth month following the gift (June 30, 2010).

 

Under the forthcoming DRA-compliant Medicaid rules, the 10 month "penalty" period cannot begin to run until Sue:

      •           Is a resident in a nursing home;

      •           Has spent down to the asset limit of $2,000;

      •           Has filed an application for Medicaid; and

      •           Is otherwise eligible for Medicaid benefits  -  but for the penalty period.

 

In other words, if Sue made the gift in September 2010 and the DRA-compliant Medicaid rules are in effect as of June 2011 after Sue has entered a nursing home, her ten month penalty period will not begin to run until she is essentially out of money.  The challenge for Sue and her nursing home is:  how is she going to pay her care at her nursing home for ten months when she has no money . . . and how is her nursing home going to remain in business if it has no income from Sue and all others who have made ill-advised gifts.

 

Hopefully, everyone within the reach of this column will see the danger just around the corner. Hopefully, you  -  the interested reader  -   will take immediate action to protect yourself and your loved ones by consulting with an elder law attorney  -  one who has the  knowledge and experience to help you avoid or reduce the "penalty".

 

PS       To nursing homes (and all others in the health care delivery field):  When you become aware of someone who may have made gifts or other transfers, do not delay.  Get your resident to an elder law attorney who can help the resident re-frame the issues so that the "penalty", which after all is being imposed on you as well as your resident, can be reduced or eliminated.

 

Richard Habiger is the author of the Illinois edition of How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets and is an elder law attorney, who focuses on asset protection, Medicaid and VA benefits. You may contact him at 618-549-4529 or info@HabigerElderLaw.com.

This article is scheduled to appear in the October, 2010 issue of the Southern Business Journal