Saturday, February 25, 2012
Applying for Medicaid is Not a Do-It-Yourself Project
As an elder law attorney who assists seniors and their families with Medicaid eligibility, I am frequently called on to review Medicaid nursing home applications that have been denied. Since most people who need to move to a nursing home and apply for Medicaid are the frail elderly, often age 80 and over, these Medicaid applications were usually prepared by someone else for the nursing home resident, be it their spouse, who also may be quite elderly, or an adult child of the nursing home resident.
In Michigan, the spouse or adult child of a nursing home resident can be their “representative” before the Department of Human Services without having to take any formal action to be appointed as representative. Because almost any family member can prepare and file a Medicaid application for another and because the application form is handed out by people who are seemingly in a position of authority, such as a social workers in a nursing home or the nursing home admissions director, people tend to think they should just fill out the application and submit it. However, applying for Medicaid is not a do-it-yourself project and if the application is not done correctly, it will result in a Medicaid denial. This denial can result in a large nursing home bill without a source of funds to pay it.
A major mistake I see with do-it-yourself Medicaid applications is the failure to realize that qualifying for Medicaid nursing home coverage is not based on fairness or equity. Often, an adult child will fill out the application and submit it thinking it’s like applying for a grant or scholarship where some committee will review the application to see if it is fair to grant Medicaid eligibility. After all, Dad worked for all those years, always paid taxes and, now that he needs to live in a nursing home, he should be entitled to something right? Wrong; Medicaid eligibility is never decided on fairness. The application is simply reviewed to determine whether the asset situation meets the black letter language of Michigan’s Medicaid regulations. What do I mean by this?
Consider the hypothetical case of Susan, who applied for Medicaid on behalf of her father Ralph. Ralph owned a home that he titled in his living trust, as part of his estate plan, many years ago. Before moving to the nursing home, he had about $85,000 in funds deposited in his checking account and a few certificates of deposit. Susan had been paying Ralph’s bills for a year and half before he moved to the nursing home, so, after he moved to the nursing home she dutifully paid the $6,800 bill every month out of his income and the $85,000 in the bank. She did this until his bank balance was down to $2,000 because that’s what she was told she had to do before Ralph would qualify for Medicaid by a volunteer at the area agency on aging.
Susan then got a copy of the Michigan Medicaid application online, filled it out, disclosing Ralph owned his home and the checking account with less than $2,000 in it. She filed the application in the last week of November. Two months after submitting the application, the caseworker at the Department of Human Services requested a copy of the deed to the home and copies of the last three months of Ralph’s bank statement. Susan got a copy of the deed from the register of deeds and the bank statements and then sent them to the caseworker. Everything was in order with the bank account, because it only had $1,600 in it. However, the caseworker denied the application, because Ralph’s home was titled in his living trust. The Notice of Case action Susan received at the end of February said Ralph was denied Medicaid because his assets exceeded the $2,000 countable asset limit. Then Susan received a bill from the nursing home for $20,448 for Ralph’s care in December, January, and February. In addition to being extremely anxious about how she was going to pay the $20,448 nursing home bill, Susan was confused how Medicaid could deny Ralph for having excess countable assets when he only had $1,600 in his checking account. What a mess. How did this happen?
Michigan has a detailed set of regulations for the caseworkers who process the applications. The main set is about 52 pages and then there is another set just on trusts and annuities that is an additional 14 pages. These regulations detail whether someone will meet the Medicaid requirements based on the combination of assets they own. Susan’s problem is just one example where noncompliance with the regulations results in Medicaid denials. In Michigan, a nursing home resident can qualify for Medicaid and still own their home so long as the equity in the home is $506,000 or less. With today’s real estate market, that’s not a problem for most people. The home is considered an “excluded” or non-countable asset, which simply means it’s an asset you can own and qualify for Medicaid. The $506,000 equity limit does not apply if the nursing home resident’s spouse is living in the home or if they have a blind or disabled child living in the home.
Many people have a revocable living trust and have their home titled in the trust. That can be an excellent estate planning idea, but it’s a problem for Medicaid, particularly for a single Medicaid applicant. The problem is that if your home is titled in a living trust when you apply for Medicaid, you will never qualify, even if you only have $1.00 to your name. Why is this? Michigan’s Medicaid regulations provide a nursing home resident only qualifies for Medicaid if they have $2,000 or less of “countable assets” in their name. If your home is titled in a living trust, the rules provide that the home is then considered a countable asset, counting toward that $2,000 limit, instead of being an excluded asset, as the home would be if it was just titled in your name. However, Susan did not know that and none of the helpers she consulted with were aware that Ralph’s home was titled in the living trust. Simply because of the way Ralph’s home was titled, he was disqualified for Medicaid. If Susan had consulted with an elder law attorney and let them do the application, the lawyer would have told her that the home had to be retitled out of the trust into Ralph’s name before the application was submitted. Since the house was titled in the living trust in December, January and February, this problem cannot be fixed retroactively, so the $20,448 nursing home bill will not be going away and will have to be paid some other way. Otherwise, the nursing home can evict Ralph.
This is why I say applying for Medicaid is not a do-it-yourself project. The whole area of Elder law developed in the last twenty years due to the increased complexity of the laws and regulations that impact seniors. This is a complicated field that most people deal with only once in their lives. Tens of thousands of dollars or more are at stake. It is penny wise and pound foolish not to consult with experts who make their living guiding clients through the process.
A few other problematic assets that cause Medicaid denials, even when people have $2,000 or less in the bank, include funeral plans, small life insurance policies, and jointly owned accounts. Susan’s story is but one example.
If you or your parent’s home is in a living trust, you should not go and remove it from the trust based on reading this article. Living trusts remain an excellent estate planning vehicle and for married couples, having the home titled in the living trust on certain key dates can result in the community spouse (the spouse not living in a nursing home) being able to keep more assets. The point is, due to the complexity of the regulations, each person’s situation must be looked at individually.
If you are acting on behalf of a frail, elderly person who needs nursing home care, please be careful. We’re all allowed to screw up our own lives, but if you are acting on behalf of another person, especially if you are their trustee or agent under a power of attorney, you have a legal duty to act prudently. Don’t just fill out forms and submit them before investigating the rules and legal process. Never apply for Medicaid until you know that the person qualifies.