What Is an Inaccessible Asset When Applying for MassHealth?

by: Brian E. Barreira, Esq.

An inaccessible asset is an asset to which the MassHealth applicant has no legal access.  This type of asset is considered to be non-countable until the applicant has legal access to the asset.

If for example, there are pending legal proceedings that affect the asset, such as divorce or probate, it can be deemed inaccessible.

If the applicant is not legally competent, an asset can be considered inaccessible for 6 months so that a Conservator can be appointed via a Probate Court proceeding.  The temporary inaccessibity is contingent on showing MassHealth that a good faith effort is being made to secure the appointment of a Conservator.

If the MassHealth applicant is the beneficiary of a trust and the appointment of a trustee is needed, the assets in the trust can be deemed inaccessible for 6 months while undergoing the process of appointing a trustee.  The showing of a good faith attempt is needed to allow the trust to be considered temporarily inaccessible.

March 30, 2012 – 8:12 am Categories: MassHealth Application Process | Comments (1)

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What Is Considered a Disqualifying Transfer When Applying for MassHealth?

by: Brian E. Barreira, Esq.

Under federal Medicaid law and MassHealth regulations, the past five (5) years of a MassHealth applicant’s assets are scrutinized to determine whether the applicant has made any disqualifying transfers.  As the term indicates, a disqualifying transfer makes the MassHealth applicant ineligible for MassHealth.

A disqualifying transfer is usually a gift (or something similar to a gift) that the MassHealth applicant made in the previous 5 years.   Any transfer that occurred more than 5 years ago (even just 5 years plus one day ago) is outside the Medicaid lookback period, and cannot be considered a disqualifying transfer.  A disqualifying transfer, however,  is not limited to gifts.  To put it as simply as possible, if the MassHealth applicant had ownership of anything on one day and did not have the same ownership the next day, a disqualifying transfer may have occurred.  Thus, any sale for less than fair market value can be a disqualifying transfer.  Paying a child or other relative for services, or even reimbursing them for expenses, can be treated by MassHealth as a disqualifying transfer.  Unrepaid loans can also be considered disqualifying transfers.

Sometimes the lawyers representing MassHealth make unfair stretches of the law.  For example, should a  bad investment be treated as a disqualifying transfer.  In one case that I handled that took 5 years to win, the MassHealth lawyers saw that a MassHealth’s applicant’s husband had made a risky investment that dropped in value.  Those lawyers attempted to convince a judge that he should have foreseen that the investment would drop in value, and therefore he had essentially made a disqualifying transfer.   Fortunately, a full 5 years after the MassHealth application had initially been filed, a Superior Court judge overturned the decision of a fair hearing officer who had sided with MassHeath’s silly argument.

March 12, 2012 – 11:51 am Categories: Gifts & Disqualifying Transfers, MassHealth Application Process, MassHealth Denials and Appeals | Comments (1)

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What Is the Excess Shelter Allowance When Filing a MassHealth Application?

by: Brian E. Barreira, Esq.

When applying for MassHealth, the at-home spouse, known as the community spouse, is allowed to keep all of the community spouse’s own income, no matter how much that is.  If the community spouse’s own income is below $1,838, the community spouse is allowed to divert income from the institutionalized spouse to get up to the $1,838 requirement of the current law.  (Note:  the $1,838 minimum monthly maintenance needs allowance —MMMNA— will increase to $1,891 on July 1, 2012, and remain at that higher figure through June 30, 2013.)

The $1,838 in income currently allowed for the community spouse can be increased if the community spouse’s housing expenses are high.  That increase is known as the Excess Shelter Allowance.   If the community spouse’s housing expenses are more than 30% of the MMMNA, (i.e., 30% of $1838, which comes to $551), then the additional income needed is referred to as the Excess Shelter Allowance, and ends up being an additional income allowance for the community spouse.  For some spouses, the increased income allowance can mean an increase in the community spouse resource allowance, which is the total amount of assets that the at-home spouse is allowed to keep.

March 9, 2012 – 8:50 am Categories: MassHealth Application Process, Preserving Assets & Income for the Spouse | Post a comment

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What Is Estate Recovery by MassHealth?

by: Brian E. Barreira, Esq.

Estate recovery is the process whereby MassHealth gets reimbursed for its expenditures on behalf of a MassHealth recipient.  In effect, MassHealth is a loan if the MassHealth recipient has any assets that are held in a form that can be attacked by MassHealth.  If there is a lien on a MassHealth recipient’s home and it is sold during the MassHealth recipient’s lifetime, MassHealth will assert a claim for reimbursement at the real estate closing.

All of the estate recovery claims occur after the MassHealth recipient’s death, and at present only against the deceased recipient’s probate estate.  (During the first two years of Mitt Romney’s term as Governor of Massachusetts, the Massachusetts legislature gave his administration unbridled power to change the Medicaid laws in Massachusetts and he expanded estate recovery greatly, but once the members of the legislature woke up and learned what they had voted for, they almost unanimously repealed the expanded estate recovery law).  

The federal law continues to give states the option to expand estate recovery laws, so it is possible that estate recovery will be expanded in Massachusetts in the near future.

March 7, 2012 – 9:46 pm Categories: Estate Recovery, MassHealth Application Process, Protecting the Home, Real Estate Liens | Comments (3)

A Primer on Nursing Home Residents Rights under Medicaid Law

by: Brian E. Barreira, Esq.

Approximately 20% of all persons who die every year are residents of nursing homes.  Since a nursing home is the last place of residence for such a large percentage of our population, it is very important that all of the rights of nursing home residents be upheld.

A person who lives is a nursing home is known as a “resident,” not a patient, and it is important to note that the resident is in a nursing “home,” not a nursing “institution.”  Federal law requires that a nursing facility provide “services and activities to attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident.”  Federal law also requires that a facility must ensure that a resident’s “abilities in activities of daily living do not diminish unless circumstances of the individual’s clinical condition demonstrate that diminution was unavoidable.”  Thus, maintaining a condition, or moderating the rate of decline, should always be a goal of therapy services, even if the resident is not making progress.

Federal Medicaid law requires that a nursing facility “must establish and maintain identical policies and practices regarding transfer, discharge, and the provision of services required under the state plan for all individuals regardless of source of payment.”  Thus, a resident should never be denied the continuation of physical therapy based on the excuse that Medicare will no longer cover it.

Nursing facility residents often are susceptible to transfer trauma in being moved from place to place.  Federal law gives every resident the right to veto any intra-facility transfer.  Medicare certification of a room does not prevent that room from being used for the care of a resident who pays privately or has payment through the MassHealth (i.e., Medicaid) program.

Immediate family or other relatives are not subject to visiting hour limitations or other restrictions unless imposed by the resident.  Federal law requires that a resident’s “immediate family or other relatives” have the right to visit at any time if the resident consents to the visit.  Under federal law, non-family visitors must also be granted “immediate access” to the resident.

Federal law requires that a nursing facility must care for its residents in such a manner and in such an environment as will promote maintenance or enhancement of the quality of life of each resident.”  Federal law also requires that a resident has the right “to reside and receive services with reasonable accommodation of individual needs and preferences, except where the health or safety of the individual or other residents would be endangered.”  A resident has the right to choose activities, schedules, and health care consistent with his or her interests, assessments, and plans of care.

August 8, 2011 – 3:44 pm Categories: Nursing Home Residents Rights | Comments (6)

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How Does MassHealth Treat a Sale of a Life Estate?

by: Brian E. Barreira, Esq.

When a person who has a life estate wants to sell the real estate, the life tenant is legally entitled to a share of the proceeds.  The amount of the proceeds that the life tenant is supposed to receive is based on his/her life expectancy and interest rates at the time of sale.

To calculate the value of the life estate, you must first determine what the applicable interest rate is.  The interest rate in the month of the sale can be found at http://www.tigertables.com/7520.htm.  Once you have this figure, you then go to http://www.unclefed.com/IRS-Forms/2001/p1457.pdf and look in Table S for the page displaying tables with that interest rate.  Looking up the life tenant’s age on that page will get you the breakdown between the life tenant’s percentage interest in the proceeds and the other parties, who on that page are referred to as the “Remainder.”  For further explanation, including an example, see MassHealth Eligibility Operations Memo 07-18.

The life tenant’s share of the proceeds can be eligible for the $250,000 capital gains exclusion under Internal Revenue Code Section 121, but often the persons receiving the remainder do not live there and their proceeds are subject to capital gains taxation without the ability to use that exclusion.  Thus, it can often be advisable to wait until the life tenant’s death before selling real estate.

Note that the failure of the life tenant to receive the life tenant’s full share of the proceeds is considered a disqualifying transfer of assets under federal Medicaid law and MassHealth regulations, and is subject to the 5-year lookback period.

March 29, 2011 – 9:21 pm Categories: Gifts & Disqualifying Transfers, MassHealth Application Process, Protecting the Home, Real Estate Liens, Tax Issues | Comments (3)

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In Medicaid Planning, Some Trusts Can Put Elderly Persons in a Worse Position Than If They Had Taken No Action At All

by: Brian E. Barreira, Esq.

In trust law, there is no such thing as “one-size-fits-all.”  Trusts must be designed to meet the particular concerns of the person whose assets will be placed there.  Two of the major non-tax concerns of many elderly persons in Massachusetts are probate avoidance and Medicaid (known in Massachusetts as MassHealth).  It is important to note that probate avoidance is not the same as MassHealth planning, and if assets can be given back to or taken back by the original owner, the assets of a trust are not protected for MassHealth purposes if a nursing home stay becomes necessary.

Revocable Trusts

Although the assets of just about any revocable trust will avoid probate, the assets of these trusts are never preserved for Medicaid purposes if a nursing home stay eventually becomes necessary and a MassHealth (i.e., Medicaid) application is filed.  All of the assets of a revocable trust are deemed countable, which in MassHealth jargon means the assets must be spent for the care of the nursing home resident.

The home of a MassHealth applicant is usually considered noncountable, but if it is in a revocable trust, in Massachusetts it is treated the same as any other asset.  The home of a MassHealth applicant that is in a revocable trust must be sold and the proceeds spent on the care of the nursing home resident.  Any exemptions that the home might have received, such as for the MassHealth applicant’s spouse and certain children or siblings, is lost by having the home in a revocable trust.

Many elderly persons go to free living trust seminars, and are “sold” the benefits of probate avoidance. In my opinion, what goes on at those seminars (and the free hour with the lawyer afterwards) is nothing more than a sale.  The sale is often a reddish binder that contains documents that include a revocable trust. In my recent experience, both spouses are co-Trustees of each other’s revocable trusts. The problem is that if one of them becomes mentally incapacitated, we’re stuck with 2 trusts that each have an incompetent co-Trustee, and have to go through extensive steps to get the incompetent Trustee removed from the position.  In my experience, the married couple was not informed during the “sale” process about what would happen if one of the spouses eventually needed nursing home care.

The bottom line is that revocable “living” trusts are easy sales to be made to elderly persons by inept, one-size-fits-all planners or online document banks, but often do not meet the MassHealth concerns of the elderly persons who cannot afford or qualify for long-term care insurance.

Irrevocable Trusts

Although the assets of just about any irrevocable trust will avoid probate, the assets of these trusts are often not preserved for MassHealth purposes in Massachusetts if a nursing home stay eventually becomes necessary and a MassHealth application is filed.

Since April 1, 1990, MassHealth regulations have provided that if a Trustee of an irrevocable trust can give assets back to the original owner, and if a MassHealth application is filed by or on behalf of the original owner, the assets of the trust are deemed available to the nursing home resident, and render the elderly person ineligible for MassHealth. This law applies retroactively to irrevocable trusts created before the Massachusetts regulation was adopted. The impact of this law on irrevocable trusts means that many older irrevocable trusts do not meet the MassHealth concerns of the elderly persons who cannot afford or qualify for long-term care insurance.

Fixing Bad Trusts

In attempting to fix any MassHealth problem caused by a trust, a transfer of the assets causes a 5-year MassHealth lookback period unless the transfer of the assets goes back to the original owner.  It can be fairly simple to fix the problem if a revocable trust is the cause of MassHealth ineligibility, since the original owner can revoke the trust and get the assets placed back into his/her name, but if the original owner is mentally incapacitated at that time, revoking the trust might not be so easy.

It is often difficult to fix the problem if an irrevocable trust is the cause of MassHealth ineligibility. The MassHealth problem caused by any irrevocable trust is completely dependent on the provisions of the trust, and the method of fixing the problem varies from trust to trust. Usually the elderly person is not the sole Trustee, and neither the Trustee nor the elderly person has the power to get the assets placed back into the elderly person’s name. In many cases, a Massachusetts Probate Court proceeding known as a trust reformation is needed, and in other cases, a Probate Court petition to terminate the trust due to frustration of purpose is the better procedural move.

March 7, 2011 – 7:22 am Categories: Irrevocable Trusts, Long-Term Care Insurance, MassHealth Application Process, Permissible Transfers, Preserving Assets & Income for the Spouse, Protecting the Home, Revocable Trusts | Comments (1)

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Applying and Appealing to Receive Retroactive Medicaid Benefits in Massachusetts

by: Brian E. Barreira, Esq.

In Massachusetts, Medicaid coverage of nursing home costs is obtained by filing a MassHealth long-term care application.

Any MassHealth application can be retroactive to the first day of the third month prior to the application. Based on the date that MassHealth is needed, in many cases you must keep the original application alive. If an applicant receives a denial due to missing verifications and mails in missing verifications within thirty (30) days after the denial, that action is treated as a new application, causing a new application date, which affects the maximum time period that MassHealth can be retroactive. A later application date can also cause the date of payments of medical or nursing home bills to become important to whether retroactive MassHealth benefits will be allowed.

For example, suppose Jane applies for MassHealth on December 19, needing coverage as of September 20. Under this application, MassHealth can be retroactive to as early as September 1. Only the original application, however, will obtain the needed retroactivity. If Jane receives a denial on February 5 due to missing verifications and submits one or more of them during February, a new application is deemed to exist, and its maximum retroactive date would be November 1.

The treatment of previously-paid expenses can be affected by the timing of the MassHealth application. Medical and nursing home expenses that are less than ninety (90) days in the past are allowed as part of the spenddown process whenever they are paid, but if those expenses precede the MassHealth application by more than ninety (90) days, then a different rule can apply. If we also suppose in the example in the previous paragraph that Jane sold stock and received the proceeds on December 3 and immediately paid the nursing home at its private pay rate for the September 1-September 20 period, that action would have no impact on the effective retroactive date of MassHealth coverage for the original application. The result would be difficult if the denial of the original application were not appealed. Under a new application, that action could change the maximum retroactive date of the later application to December 3.

There is a MassHealth regulation which allows a successful appeal of a denial to keep the original application alive. If Jane appeals the denial instead of just sending in the missing verifications, a new application would not be deemed to exist, and the original application would be preserved, thereby allowing MassHealth coverage retroactive to the earliest possible date.

When these procedures are not followed, the result can be that the nursing home will not be paid far enough retroactively by MassHealth and the MassHealth applicant will be responsible for the unpaid amount. As a last resort, the only possible way to cover the shortfall could be to make a request to MassHealth that the unpaid nursing home bill be paid over time via deductions from Jane’s monthly income. Although MassHealth would have been required to cover the bill if the appeal process had been correctly followed, there would be no guarantee that MassHealth would help Jane and the nursing home on previously-disallowed nursing home bills.

February 19, 2011 – 9:27 pm Categories: MassHealth Application Process, MassHealth Denials and Appeals | Comments (2)

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Are You Personally Responsible for Your Spouse’s Nursing Home Bills in Massachusetts?

by: Brian E. Barreira, Esq.

It may come as a surprise to some people, but you can be held personally responsible for your spouse’s bills if they are for payment of necessaries.  In the case of East Longmeadow Management Systems v. Wilson, the nursing home resident’s wife, Judith Wilson, was successfully sued for $45,243.24 in unpaid nursing home bills of her husband, Robert Wilson.  This case serves as a stern warning to older married persons that they need to obtain legal advice from an elder law attorney when their spouse enters a nursing home.  If she had done so, all of her husband’s nursing home bills could have been covered.

Even though Robert had no assets and even though Judith had not signed any contract or agreement accepting financial responsibility for his nursing home bills, she was successfully sued because she did not file for and obtain MassHealth (i.e. Medicaid) benefits for him on a timely basis.  On a motion for summary judgment, the Court found that under Massachusetts General Laws, Chapter 209, Section 1, she was liable as his wife for the full cost of necessaries furnished to Robert during his life.

This case highlights why anybody concerned about the costs of nursing home care should be sure to obtain legal advice about MassHealth.  If Judith had obtained legal advice from a Certified Elder Law Attorney promptly after Robert entered a nursing home, she would have learned how to apply for MassHealth for him on a timely basis.  MassHealth coverage could have been applied for as long as three months after his health insurance had stopped paying for his care.

For some basic information about the at-home spouse’s ability to retain assets under MassHealth (i.e., Medicaid) law, see http://elderlawblog.info/2010/04/05/preserving-all-assets-and-maximum-income-for-the-community-spouse-when-the-other-spouse-enters-a-nursing-home/

February 7, 2011 – 11:25 am Categories: MassHealth Application Process, Preserving Assets & Income for the Spouse | Post a comment

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Doherty v. MassHealth–Overview

Thursday, Feb. 3, 2011. Author: Peter M. Macy, Esq.

The Doherty case (Doherty v. Director of the Office of Medicaid, 74 Mass. App. Ct. 439 (2009)) sent shock waves through the elder-law bar in Massachusetts in 2009, with its holding that funds in an irrevocable trust could be treated as countable assets for the donors, despite express language in the trust that prohibited distributions of principal to the donors. em>Doherty has been construed as a signal that irrevocable, income-only trusts simply are ineffective as vehicles for gifting of assets in the Medicaid context.

A careful reading of the case, however, suggests a less draconian interpretation. Doherty does tilt the playing field a little further against asset-protection vehicles, but it does not take the law completely off the rails. The rule seems to be that language of a trust will be tortured, but not abrogated, in order to derive an interpretation that defeats Medicaid planning. I think this is just the hand we are dealt in this area of practice, now more than ever.

Some of the drafting decisions that the court points to could have been spotted as risky when the instrument was created. Putting a personal residence in the trust with a provision that it cannot be sold without the consent of the donor is risky. So is providing an early-termination clause that is within the discretion of the trustee. Most of us for many years have inserted requirements that a non-trustee, third-party opinion be obtained before the trustee would have discretion to terminate the trust.

And no one should ever allow a termination clause to be non-specific about who gets the property if the trust is terminated. The trust in Doherty simply referred to “the beneficiaries.” In a context where public policy supports the greatest deterrence to Medicaid planning that the court plausibly can muster, I think we simply have to expect that stretching the meaning of “beneficiaries” to include the donor in a clause as non-specific as that is what the courts will do.

I’m also struck by the court’s willingness to acknowledge that some of the other interpretations by MassHealth were so fanciful that they would not fly, even on an uneven playing field: “We doubt, for example, that the trustees may, willy-nilly, simply characterize a trust asset as ‘income’ and thereby, free of fiduciary fault, convey that asset to [the plaintiff] free of trust.” The court clearly acknowledges a line over which it will not cross. But I think it shows us that any barely-plausible reading of the instrument may be picked up and used to defeat the trust. That’s something we’ve known ever since the Cohen case in 1996.

Finally, it is interesting to note the absence of one argument often discussed by elder-law attorneys, namely the idea that the early termination clause would be construed per se to establish discretion to return principal to the donor, even if the donor is not a recipient of the final distribution. This fear rests on the theory that a right to principal can be attributed to the donors, whether reasonable or not, because the recipients (the children) could be expected to return the funds to the donors if asked. I don’t know whether the state made such an argument to the court, but I would be surprised if it didn’t. And in any event, I think it is significant that the court does not use such an argument in finding the assets to be countable.

In short, Doherty does not mean that an air-tight IOIT cannot be drafted anymore, and it does not mean that pure speculation has become the standard for interpreting trusts in the Medicaid context. It does mean, however, that language will continue to be construed unfavorably to our clients. It means that we have to screen every trust for the kinds of provisions that leave too much control in the hands of the donor, either severally or as a cumulative effect of many provisions that together create too much control for the donor.

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February 3, 2011 – 10:21 pm Categories: Irrevocable Trusts | Post a comment

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