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Start Planning With Professionals Early!

This week in Crisis Corner, why it is more important than ever to start early and get professional help in planning for your long term care needs.

I recently had the opportunity to be a guest on Rajiv’s Aging Options radio show. During our conversation he asked me about changes to Medicaid in 2021 and, for the first time, I really put all of the changes I have been seeing together in my mind.

The good news, if you want to call it that, is that the amount of money a well spouse can have at the time of the application, the personal needs allowance that the Medicaid recipient gets to keep, the allowable home equity, and all of those sorts of things increased by a tiny percentage, as they do every year. In fact a person receiving benefits outside of their home gets to keep a full $1.12 per month more of their money in January 2021 than they did in December 2020. Needless to say, the increased benefits from the State are not significant.

The bad news is that the way that the State enforces rules is changing, whether officially or not, and the way care providers accept Medicaid is also changing. One of these sets of changes increases the need for seeking professional help and the other increases the need to start the process early.

The biggest change the State has made, its automated asset verification process (AAVP), is not really new to 2021 but it has been an increasing issue as 2020 progressed. Before the system was implemented, we would send three to six months of bank statements along with the Medicaid application and explain any unclear deposits or withdrawals. On rare occasions the case worker assigned to the application would see a red flag and ask for more bank statements, sometimes (twice that I recall from hundreds of applications) they asked for all statements from the five years leading up to the application. When the AAVP was first rolled out I did not see much change and it seemed that they only used it if they saw a red flag and wanted to get more information, or to look for bank accounts that were not reported at all. Then things changed. Now, as far as I can tell, the case worker prints out a report of every deposit or withdrawal over a specified amount (about $350 I think) that has occurred in the last five years. The good caseworkers sort through and eliminate the items such as transfers from checking to savings, automatic payments to a mortgage, or other similar items that are self-explanatory. Other case workers send a seven page letter requesting an explanation for each and every transaction, most of which I can simply note as self-explanatory. The problem lies with the ones that are not self-explanatory. If I show you a bank statement from January of 2016 and ask why you made a cash withdrawal of $400.00 on the 5th would you remember what the money was for? This becomes even more of an issue when the person applying for benefits managed their own finances until two or three years ago and now have no capacity to recall what they did, so their agent is trying to explain transactions that they had no part in. I spend more time trying to explain bank transactions that should not even be the subject of scrutiny than I do explaining the really complicated transactions that used to be the reason people came to me for help.

The other big change I have seen from the State is how they enforce old rules that have not changed. A good example is home equity. In the past if a single person was living at home or intended to return home and the equity was too high, the State would approve benefits and place a TEFRA lien on the home right away (a lien for all Medicaid benefits that normally is not placed until the recipient passes). Similarly, I had several married couples where the well spouse kept the home but rented an apartment near the care facility of the spouse applying for benefits, sometimes renting the house until they were able to move back in. Now, on several occasions, the single applicants are being forced to go through formal hardship waiver applications and the State is applying the equity limit to the married couples (normally a well spouse can own a home of any value) and requiring a hardship waiver application if the house has too much equity. The hardship waiver application is not overly difficult in and of itself, especially with help from an attorney; however, by the time the State informs you of the requirement, you prepare the application, and it gets reviewed by all the levels of supervisors that are mandated by the application, the approval can be delayed for several extra months. This is not the only rule that is seeing much harsher interpretations. I have had children pay large amounts of money to cover repairs to a parent’s home so that it can be sold and then get paid back after the sale and the State’s case worker insisted that the child made a gift and then received a gift because there was no paperwork to prove it was a loan. They wanted to impose a gifting penalty for something that was clearly not a gift (I eventually won that fight). That is only one extreme example of an increasing unwillingness to admit transfers that are not for Medicaid qualifying purposes as excluded. A few years ago I had a client who gave $10,000.00 to her youngest daughter, just before applying, because she had paid that much towards the other daughters’ weddings and did not want her youngest to miss out just because she was applying for Medicaid… and it was approved without a single extra question asked!

That brings me to the changes I am seeing in care providers, both in home and in communities. A year ago I could call one of the geriatric care managers that I regularly work with and tell them I need an adult family home (AFH) or assisted living facility (ALF) in a certain part of the state and I need them to accept Medicaid in no more than 6-12 months. They might have grumbled at me, but in most cases they had three to five possible communities for the families to look at within a week or two. Today, if I make the same request, the families might get a list of 3-5 facilities within 25 miles of the part of the state they want after a month or two (assuming they want a quality facility and not just one that accepts Medicaid). The demand for beds in quality communities is higher than ever and the amount that Medicaid is asking them to accept for care provided is not increasing with the increase in private pay rates. For example, when I started this six years ago, an AFH might get $4-5K per month private pay and $3-3.5K from Medicaid, so they would often take Medicaid after 6-24 months of private pay. Now the private pay is often $6-9K per month and the Medicaid rate is $3.5-4K so they all want 2-5 years of private pay or they have stopped accepting Medicaid all together. What used to be the high end of private pay periods has become the starting point for most communities. We always advocate for trying to keep your loved ones at home, but that is not always realistic, especially if you wait to start planning until the money is mostly gone and the needs are at their highest. Recognizing that a care community might be required and transitioning early, while care needs are relatively low, can save tens of thousands of dollars. Think of it like this, you can pay privately for three years while care needs are low and the rate is $5,500 per month or you can pay privately for three years when assistance is needed for nearly every activity of daily living and the rate is $8,000 per month.

People receiving care at home are not immune to this change in care givers or, more accurately, this lack of change in benefits. Clients often have care providers that have been working with them for some time and, when Medicaid starts, they want to keep that care provider. However, a care provider who is being paid $20-35 per hour may not want to accept $16.50 from Medicaid. Not only are Medicaid rates very low, they only look at experience related to State approved work. A recent client had a care provider with the training and experience to warrant over $20 per hour from the State, but it was not work performed for the State so she was only offered $16.75 per hour to stay on as a Medicaid provider. The only saving grace for finding willing providers is that the State approves very few hours for most elderly recipients and the families can pay a higher rate for the extra hours that they cover privately (please note that you cannot simply pay the provider more for the hours that Medicaid already pays for or the provider and you can face severe repercussions). For example, the state may pay $16.50 per hour for the first 100 hours of care each month and the family might opt to pay for an additional 20 hours of care at $30 per hour that the State does not cover. This brings the average pay per hour up to $18.75, which may be at least a little more palatable to the care provider.

My long-winded point is this: between changes to how Medicaid rules are enforced and a lack of change to how care providers are compensated, it is very important that you start planning for your long term care needs sooner than later and that you work with a professional to minimize the snags along the way. If you are fortunate enough that Medicaid and care providers are something that is in your distant future, if at all, then talk to one of our Life Planners and get a really early start. If things are starting to get shaky but you think you can hold it together a little longer before you spring for a professional, call me and start now. Starting early is the single best thing you can do to provide yourself and your loved ones the best possible outcome.