I. OPTIONS FOR PAYING FOR LONG TERM CARE
The average cost of one month in a nursing home in Maine is around $12,000. There are four options open to families to pay these exorbitant costs.
A. Self Pay – The obvious first option is for your client to pay for his care from his own funds. If a client cannot qualify for State assistance through the MaineCare program; no longer qualifies or does not qualify for Medicare coverage; and has no long-term care insurance, then this may be the only option available.
B. Long-Term Care Insurance or Nursing Home Insurance – Long-term care insurance may cover both home health care, assisted living, and nursing home expenses. Nursing home insurance covers only nursing home expenses. Both long-term care and nursing home insurance are sold with: annual or periodic premiums; premiums based on age; cost per day coverage; initial waiting periods; specific lengths of coverage (by time or amount); and inflation protection options. Most policies provide that premium payments cease after the person is in the nursing home and benefits begin. Companies will take the insured’s medical condition into consideration before issuing a policy. Attorneys should review policies with clients, as some policies are notorious for putting such stringent medical eligibility conditions (or provider conditions) on coverage that the client could not possibly utilize benefit provided.
C. Medicare – Medicare is available for up to 20 days of coverage for nursing home care (or up to 100 days with wrap-around insurance coverage), but only if strict requirements are met. There must be a prior hospitalization of at least 3 days length. Also, admission to the nursing home must be within 3 days of discharge from the hospital and the same condition that necessitated the hospitalization. The care received in the nursing home must be SKILLED CARE. Generally, individuals needing rehabilitational services will meet these requirements.
D. Medicaid/MaineCare – MaineCare, known elsewhere as Medicaid, is the Federal and State funded program that pays for long term care expenses when individuals are unable to pay for their own care. It is an income and asset based program which allows individuals and couples to retain some income and assets while receiving benefits. Given that the cost of privately paying for nursing home care is so high, few people have the resources to pay longer than a few months for their own care and must look for assistance to government programs. A critical part of counseling senior citizens is understanding the eligibility for these programs.
II. MAINECARE PROGRAMS – IN GENERAL
MaineCare has numerous programs to provide medical coverage to impoverished individuals. Each program has its own set of financial criteria. To qualify for eligibility, an individual must demonstrate that he meets certain asset and income limitations. Essentially, he must prove to the State that he is poor enough to be eligible for coverage. Although many aspects of eligibility are similar for the various programs, it is essential to ascertain under which program your client seeks to obtain coverage. That way, you will be certain to structure your plan to meet the specific criteria for the program. In addition to financial eligibility criteria, many of the MaineCare programs carry medical criteria as well. A person must meet certain medical criteria to qualify.
Financial Eligibility. The determination as to whether an individual meets the financial eligibility criteria is determined by the local Department of Health and Human Services (“DHHS”) office. When an application is submitted, a caseworker is assigned to determine whether an individual meets the financial criteria for eligibility. Caseworkers are assigned a file based on the last name of the MaineCare applicant. Each caseworker is assigned to handle cases based on a section of the alphabet, and/or certain areas of the county the particular office services. There is a great deal of autonomy among various DHHS offices and even among caseworkers within an office. Some caseworkers require more documentation and will require the applicant to jump through many more hoops before finding eligibility than others.
Medical Eligibility. The determination as to whether an applicant meets the medical eligibility requirements for a program is made by Maximus. The State of Maine contracts with Maximus to complete medical assessments for people who may need long term care. Maximus assesses the level of care the individual requires and also processes the application for certain home care programs.
Various MaineCare programs. A brief description of some of the MaineCare programs follows:
Nursing home Maine Care – This program is for coverage for individuals who are cared for in a nursing home.
SSI related MaineCare – This program is provides MaineCare coverage for individuals who live in the community and who are disabled, under the Social Security criteria for disability. These individuals, although disabled, do not receive SSI benefits.
Automatic Eligibility through SSI – This program provides for automatic MaineCare coverage for individuals once they began receiving SSI payments from the Social Security Administration.
Katie Beckett – This program provides for MaineCare coverage for children who are very disabled and whose parents have too many assets and who income is too high for those children to qualify under other programs. Unlike other MaineCare programs, the parents’ assets are not deemed to the child and hence do not affect the child’s eligibility for coverage.
Medicaid Waiver Program – In addition to coverage for medical expenses paid by other MaineCare programs, this program provides for nursing home level home care services in an individual’s home.
Boarding Home/Assisted Living Coverage – This program provides coverage for individuals who are residing in assisted living facilities or boarding homes.
MaineCare Expansion Coverage / Family Related Coverage – These programs provide coverage for individuals who are living in the community and lack the household income to pay for healthcare.
MaineCare Eligibility Manual. All of the financial criteria for each program is set out in the MaineCare eligibility manual. The manual is divided into 17 parts. The information in the revised manual is now more easily accessible and set forth in a more logical progression. The community MaineCare program is covered under Part 6; boarding home/assisted living in Part 12; nursing homes in Part 14; asset transfers Part 15; assets in Part 16; and Home Based Waiver Programs in Part 13; and Katie Beckett in Part 7. The MaineCare Eligibility Manual can be purchased or can be found on the web site at: http://www.maine.gov/dhhs/index.shtml.
III. MAINECARE COVERAGE: NURSING HOME
A. In General
Basic Requirements. An individual must be aged 65 or older, blind or disabled. Also, the individual must be a resident of Maine and a citizen of the United States or a lawfully admitted for permanent residence. Residency does not mandate a period of time that an individual must live in the State but is instead dependent on intent. The individual must live in the State voluntarily with the intent of establishing a home in Maine.
Medical Eligibility. An individual must be must be found to be in medical need of care in a nursing home. Again, the State of Maine contracts with Maximus to complete medical assessments for people who may need long term care. Goold assesses the level of care the individual requires and also processes the application for certain home care programs.
A person meets the medical eligibility requirements for admission to a nursing facility if he requires extensive assistance or total assistance with three of the following five activities of daily living: bed mobility; transfer; locomotion; eating; and toilet use. Each of the listed activities, as well as what qualifies as extensive assistance or total dependence, are defined in the MaineCare Benefits Manual. This is different manual than the manual that sets out the financial criteria for eligibility. The section of the MaineCare Benefits manual that covers medical eligibility is DHHS Rules Chapter 101, Section 67.02-3(B). As a general rule, an assessment is triggered when an application for nursing home benefits is submitted. The State has taken the position that eligibility will not began until the assessment has been conducted and the individual has been found to meet the financial criteria for eligibility. This means that if a MaineCare application is submitted on May 1, but the medical assessment is not actually conducted until June 1, for example, then the individual cannot receive coverage until after June 1. We have appealed the State’s position on the agency level and won, but the finding of the hearing officer is not binding on the State in other cases at this time. There is support in the rules that the Department can override a Maximus determination, or make an independent determination for eligibility prior to the assessment date. This is not a strategy to be relied upon.
Income Limitation. The income of the institutionalized spouse must be less than the cost of privately paying for care at the nursing home. Given that nursing homes cost close to $10,000 a month in the State, this is rarely a problem. There is no income limit for the Community Spouse. Any income received only in the name of the COMMUNITY SPOUSE never has to be spent on the nursing home expenses of the institutionalized spouse. The income of the INSTITUTIONALIZED SPOUSE is then divided. Some income is kept for the patient’s personal use. Some income, if necessary to maintain the community spouse comfortably in the community, is transferred to the community spouse, and some of the patient’s income is paid to the nursing home. Once the patient is eligible for MaineCare, then MaineCare supplements the patient’s payment to the nursing home up to the MaineCare approved rate for that nursing home.
B. Asset Limits
All assets must be disclosed to the DEPARTMENT OF HEALTH AND HUMAN SERVICES when MaineCare benefits are sought. If married, it is immaterial in whose name assets are held. All of the assets are aggregated and then certain assets are excluded from consideration.
1. The Institutionalized Spouse
The institutionalized spouse may retain $2,000 in countable assets. Countable assets are assets that are not specifically excluded from consideration. Those specifically excluded are discussed, extensively, below. In addition, the institutionalized spouse may retain $8,000 in savings. Savings are defined as an account which earns interest or dividends, except that a checking account does not need to earn interest/dividends. “Savings” is defined in the manual to include: savings or checking accounts; IRA; Keogh, available cash value in an annuity, stocks, bonds, mutual funds and the cash surrender value of life insurance. Note that an asset, such as money in the bank, can be considered both an investment and a countable asset. Therefore, an individual can have $10,000 in the bank and qualify for benefits. However, other assets do not meet both definitions.
2. The Community Spouse
For 2021, the Community Spouse may retain $130,380, under what is known as the Community Spouse Resource Allowance. The amount increases every year.
3. Excluded Assets
Certain assets are excluded from consideration and do not affect eligibility. Although the institutionalized spouse may retain these excluded assets, it is often prudent to place even excluded assets in the name of the community spouse before the application is submitted, because of the Estate Recovery Act. The following assets are excluded from consideration and will not affect eligibility.
Primary Residence. The home, which the individual or couple considers to be their primary residence and the land and all buildings on that land are exempt. This exemption also applies to any adjoining land as long as it is not separated by real property owned by others. The home is also an excluded asset if it is offered for sale at fair market value. During periods of temporary absences of the individual or spouse, the home will still be considered to be an exempt assets as long as the individual indicates, on paper, his intent to return home. If the client is not able to make this statement, then someone acting on the individual’s behalf, such as the individual’s guardian or agent, may sign such a statement.
The individual’s equity interest in the primary residence may not exceed $750,000. If the equity interest exceeds that amount, then the amount of equity over the $750,000 will be considered a countable asset.
To determine the fair market value, the State will review a statement of fair market value, such as an appraisal conducted by a certified appraiser;
The amount of the individual’s equity interest is equal to the current market value of the home minus any encumbrances;
A reverse mortgage may decrease the equity value of the property, but must be structured so that no transfer of assets has occurred;
DHHS will insist on seeing “loan documentation to verify it is a valid transaction.”
Regulations provide that “this rule does not apply if the spouse of the individual, or dependent, or a disabled child of the individual is residing in the home.”
Real estate that is not the primary residence is excluded if:
It is up for sale at fair market value;
Two different, knowledgeable sources in a geographic area agree that the property cannot be sold due to a specific condition;
It is held in joint tenancy and the other owners sign a statement showing that they refuse to sell the property or documented evidence that such a statement was requested but not provided.
Life insurance. All term life insurance policies are excluded assets. With regard to whole life policies, they are excluded only if the combined face value of all whole life policies owned by the individual is less than $1,500. Otherwise, the cash value of the whole life policies are includible.
Annuities. For annuities purchased on or after February 8, 2006, no transfer penalty will be assessed if:
The annuity was purchased with proceeds from a retirement plan; or
The annuity is irrevocable; is not assignable; is actuarially sound as determined the Social Security Life Expectancy Table (www.ssa.gov/OACT/STATS/table4c6.html);and the annuity provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments.
Furthermore, the annuity must name the State of Maine as the first remainder beneficiary.
If the annuity does not meet these criteria, then the current cash value (minus any penalty fees for withdrawal) is considered to be a countable asset.
Life Estates. If a client owns a life estate, the value of the life estate is a countable asset unless it is exempted with an “intent to return home” statement. The value of the life estate is determined by using the life estate tables in the MaineCare eligibility manual.
If an applicant purchases a life estate (for example a life interest in a child’s home) after February 8, 2006, the funds used to purchase the life estate are considered to be a transfer of assets unless the applicant resides in the other individual’s home for at least one full and consecutive year beginning with the date of purchase. Transferring real estate and retaining a life estate is considered to be a transfer of assets and will result in a penalty period. The amount of penalty will be determined by using the value of the remainder interest pursuant to the life estate table in the MaineCare eligibility Manual.
Mortgages/ promissory notes. If a client is owed funds under a note, this is a countable asset. The value of the asset is considered to be the principal to be repaid minus any repayments on principal that have been made. A client can reduce the amount of the countable asset by obtaining from two sources in the business of buying notes, stating the amount the source would pay for the note. If a client, however, chooses to use the open market value of the note, which undoubtedly would be discounted, the State will impose a penalty. The amount of the transfer is the amount by which the presumed value exceeds the current sale value. The date of the transfer is the date the note was signed by the debtor.
As of February 8, 2006, funds used to purchase a promissory note, loan or mortgage will be considered a transfer of assets unless the repayment term is actuarially sound (as determined the Social Security Life Expectancy Table – www.ssa.gov/OACT/STATS/table4c6.html); as long as the note provides for payments to be made in equal monthly amounts during the term of the loan with no deferral and no balloon payments; and so long as the note prohibits cancellation of the balance upon death of the lender.
Rental Real Estate. Real estate that is used as rental property is an excluded asset. However, with eligibility decisions effective March 1, 2006, income producing property can be excluded only if after three years of operation, the property produces countable income that equals or exceeds 4.04%. Fortunately, the test for income producing property to be an excluded asset is applied only after the property has three years of operation. If the property is purchased right around the time of the MaineCare application, it will not need to meet the three year income rule for three years.
Prepaid funeral and burial: Prepaid burial contracts purchased on or after March 1, 2006 are excluded as an asset if the contract is equal to or less than $12,000, regardless of who is named as a remainder beneficiary. If the burial contract is more than $12,000, the estate of the MaineCare recipient must be named as beneficiary of any remaining funds, after payment is made for funeral and burial charges.
Personal and household items. Personal and household items of any value, that are held by the MaineCare applicant, or their spouse, are excluded.
Motor Vehicles. One vehicle is excluded so long as it is used to provide transportation for the household. This includes vechiels that are unregistered, inoperable or in need of repair. A second vehicle may be excluded if it is necessary for employment and/or to secure medical treatment. If the applicant, however, resides in an assisted living facility or nursing home, the second vehicle cannot be excluded for use to secure medical treatment. The manual provides that because facilities must provide a medicaid eligible individual with transportation to secure medical treatment, the second vehicle cannot be excluded for the resident of a facility. The individual also must be able to show a need for a second vehicle.
IV. TRANSFER PENALTIES: NURSING HOME PROGRAM
A period of ineligibility is imposed on an individual who applies for MaineCare coverage for care in a nursing home if the MaineCare applicant or his spouse has transferred an asset for less than fair market value. With a penalty is imposed, the MaineCare applicant is ineligible for care for long term care services for that period of time. It should be noted that the transfer penalties for coverage for individuals applying for care in assisted living/residential care facilities,are calculated the same but involve deductibles. Transfer penalties that have run under the assisted living program do not count under the nursing home program.
A. Exempt Transfers
The following may be transferred without penalty:
The home if transferred to a disabled child; a sibling with an equity interest in the home who was residing in the home for at least one year before the MaineCare application; and a caretaker child, who resided in the parent’s home for at least two years before institutionalization and whose care enabled the parent to stay out of an institution.
Any asset transferred to a disabled child or to a trust for a disabled child. The child must meet the criteria for disability under the Social Security Administration.
Assets transferred to a trust solely for the benefit of a disabled individual.
Transfers between spouses may be made without any penalty.
B. Penalties for Transfers
Any transfer (either made in trust or outright) that was made more than five years before the MaineCare application will not have any effect on eligibility. The look back period is five years.
To determine the penalty period for transfers made within 5 years of a MaineCare application, one must accumulate all of the transfers that have been made in the five year period before the MaineCare application. Divide the total amount of transfers by the state’s number for the average monthly private pay rate at the time of application for a semi private room in a nursing facility. Currently the state uses $8,476 and this number has not been updated in years.
The transfer penalty begins to run from the later of:
The first day of a month during or after which the transfer for less than fair market value occurred; or
The first day of the month the individual would be eligible for medical assistance, but for the transfer penalty.
If both spouses are in facilities, then they may split the penalty period in effect for either spouse. The remaining penalty period can be divided between the spouses into any combination of full months.
If, when calculating the penalty period, there is a fraction left over after dividing the amount transferred by $8,476, then you must convert the remaining partial month into a dollar amount. This is done by multiplying the number of whole months by the monthly private rate used in calculating the penalty period, and subtracting this from the total amount of the transfer. The remainder is added to the cost of care for the first month of eligibility after imposing the penalty period.
For example, a $50,000 transfer will result in 5.89 months of penalty. So you multiply 5 by $8,476 to get $42,380. You then subtract $42,380 from $50,000, which is $7,620. This amount is added to the cost of care for the first month of eligibility for MaineCare coverage.
C. Curing Penalty Periods
Penalty periods may be cured by returning assets to the individual. There is no penalty as of the month in which all of the assets are returned to the individual. When only part of an asset or its equivalent is returned, a penalty period can be modified but not eliminated. A penalty will remain in effect for the period of time during which the asset had been transferred.
Thus, individuals may make partial cures to stop penalty periods. Because partial cures are permitted planners may utilize a reverse half loaf cure technique, whereby all assets are transferred from the MaineCare recipient and then returned in increments to cure outstanding penalty periods.
D. Care giver Agreements
DHHS views all payments to relatives for caregiving services skeptically and as a means for circumventing the transfer penalty rules. For this reason, the State has imposed strict requirements on caregiver agreements. If these parameters are not met, then the payments to the caregiver relative will be considered a gift. The following criteria must be met:
The payment for services provided must take place at the time the service is rendered;
The services must be performed after written agreement has been executed between the applicant and provider;
At the time of receiving the services, the applicant may not be residing in a facility;
At the time of the services, the services must have been recommended, in writing and signed by the applicant’s physician, as necessary to prevent the applicant from residing in an assisted living facility or nursing home; and
The agreement must show the type, frequency and duration of the services being provided and the amount of consideration (money or property) being received by the provider/relative.