Paul O. Dillon, Attorney at Law

What Should I Know About the MERP (Medicaid Estate Recovery Program?)

An adult child may get a bill from the state for his mother’s Medicaid nursing home care.

You’ll never get a notice that Medicaid (let’s say in the State of Texas) is calculating a bill for mom’s entire healthcare tab that Medicaid paid. However, you may get a notice that says the state wants mom’s house. That’s because Medicaid is asking to be reimbursed for over $125,000 that was spent for the mother’s care and her prescriptions.

The document may come from the Medicaid Estate Recovery Program (MERP) that says the state Medicaid program wants the money used for her care, because his mother owned the house.

The Houston Chronicle’s recent article, “Is Medicaid a good long-term care option?” emphasizes that we should all know about the MERP (Medicaid Estate Recovery Program), especially if it seems that our aging parents may need to apply for Medicaid for long-term care.

A Medicaid attorney can answer questions from adult children who are shocked when they find out the state has put a lien on their parent’s house because of long-term care health-care cost for which the specific state paid. Medicaid long-term care can be care can be provided at home, at an assisted living facility, or personal care at home or in a nursing home. It also doesn’t matter when the Medicaid system has paid for the mom’s care.

Medicaid can recover any and all medical expenses, which include any hospital services, prescription drugs and even Medicare cost sharing expenses which are Medicare premiums (Part A—hospital insurance, Part B—medical insurance), deductibles and coinsurance amounts that the state’s Medicaid has paid.

Any claims against an estate—including MERP claims—must be paid prior to the property being distributed to heirs or beneficiaries, as instructed in mom’s will. The state doesn’t require an heir to sell the deceased recipient’s house, if the Medicaid claim can be paid with other funds. However, if it can’t, then the adult child may have to sell the house, or the state will file a lien against the house. That may be the case, even if he’s still living there.

Talk to a Medicaid or elder law attorney for assistance with proper Medicaid planning.

Reference: Houston Chronicle (May 29, 2019) “Is Medicaid a good long-term care option?”

Should I Get a Divorce to Protect My Spouse from Medical Debt When I’m Dead?

It really depends based upon the facts of the specific situation.

nj.com’s article asks “Will getting a divorce protect my spouse from my medical debt when I’m dead?” According to the article, the factors to consider include details on the couple’s assets, income and debts, the existence of a will and/or other estate planning documents and the amount and nature of the medical expenses.

There are a few medical expenses of a deceased spouse, for which the other spouse may be liable. The nature of the medical debt is relevant, in addition to the amount, in the Garden State.

In addition, whether the would-be deceased spouse has a will and the extent of his or her estate is also an important factor. If the estate assets are insufficient to pay all debts of the estate in full, it is possible that medical debt may not be paid at all. For example, New Jersey’s applicable statute—N.J.S. 3B:22-2—states the debts in order of priority to be repaid when the estate assets are not enough to pay all claims in full:

• Reasonable funeral expenses;
• Costs and expenses of administration;
• Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults;
• Debts and taxes with preference under federal law or the laws of New Jersey;
• Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him;
• Judgments entered against the decedent according to the priorities of their entries respectively; and then,
• All other claims.

There are also some concerns as to whether this type of Medicaid (MaineCare in Maine) planning, or Medicaid divorce, may raise potential implications of fraud. Before acting, speak with a knowledgeable estate planning attorney who practices in this area.

Reference: nj.com (May 16, 2019) “Will getting a divorce protect my spouse from my medical debt when I’m dead?”

What Are Some of the Myths About Caregiving Costs?

The financial aspects of caring for an aging loved one can frequently be a gray area. It can be hard to predict upcoming health-related expenses and estimate how much assistance will be needed. However, the costs of caregiving tend to run high, and the value of family and friend caregiving amounts to about $470 billion each year, according to an AARP Public Policy Institute report.

U.S. News & World Report says, in “7 Myths About Caregiving Costs,” if you’re currently providing care for a senior or plan to do so in the future, sifting through the financial details as early as possible can save time and money in the long term. Let’s look at some common misconceptions concerning the costs of caregiving, as well as the realities to expect.

Your relative will stay at home and not have caregiving expenses. While your aging relative may never move to an assisted living facility, other care-related costs could still arise because many adult children take on the responsibilities for their aging parent gradually. You eventually may need to bring in skilled nursing support or arrange for in-home care. Even if your senior never lives outside of his own home, responsibilities like these define the role of a caregiver, and costs creep up over time.

All home help will be paid for by insurance. You may think that health insurance or Medicare will pay for all of the costs. However, in most instances, you'll need to find other funds for daily help at home. Health insurance and Medicare never pay for custodial care.

It’s easy to figure out how much assistance at home will cost. The precise amount your loved one or family will spend on bringing in home assistance can vary significantly. It really depends on the level of care needed, along with whether a patient has long-term care insurance or any other form of long-term insurance, where they live and if they qualify for Medicaid. (Medicaid is called MaineCare in Maine)  The cost can also vary based on the family situation where relatives are available to help on certain days, reducing the amount needed to pay for professional caregiving assistance.

The cost of caregiving is merely financial. If you’re taking hours every week of your days caring for a loved one, you may experience struggles in other areas of your life. This could mean you have little time for other family and friends, sleep or exercise. These can lead to non-financial costs like increased stress, your own health problems and the emotional strain of caring for an aging loved one.

You can’t afford a caregiver, so you're not going to get one. If your aging parent has few financial resources or other family members can’t help pay for professional care, you should look at what other resources may be available.

Caregiving won’t affect your own finances. Sorry, but helping a loved one may entail additional physical demands that can affect your career and your financial status. Caregivers often work less hours, forfeit promotions, change jobs and even leave the workforce.

A discussion about finances can wait until care is warranted. Not so. If your loved one is now in good health and living at home, it can still be a wise idea to plan, so that if a crisis such as an accident occurs, everyone is ready.

Start a financial discussion with your senior with a few simple questions, perhaps asking for guidance for your own retirement to set things in motion.

Reference: U.S. News & World Report (Dec. 12, 2018) “7 Myths About Caregiving Costs”

How Does the Medicaid Look-Back Work?

Say that an investment house in New Jersey worth $300,000 is passed from mother to daughter for sale of $1 today. Just two years later, the mother applies for Medicaid. (In Maine Medicaid is called MaineCare)  There’s a look-back penalty period that will apply, says nj.com in the recent article, “If mom sells her house for $1, what Medicaid penalty will apply?” The article explains that when someone applies for Medicaid, gifts create periods of Medicaid ineligibility.

A Medicaid applicant is required by the government to document all of her financial transactions during the "look-back period." That period is five years immediately prior to the date of application.

If the applicant’s financial records show a transfer of assets within that period, the Medicaid administrators will presume that the assets were transferred to promote eligibility for Medicaid benefits. This could be a check or withdrawal, for which there is no explanation other than a gift.

The value of the transfer will be divided by the statewide daily nursing home rate to get the number of months of the ineligibility, also known as the penalty period. In New Jersey, that rate is currently $343.85, or $10,459 per month.

The five-year year look-back period commences when the transfer is made. However, the penalty period of ineligibility starts on the date the applicant is otherwise eligible for medical assistance under the State plan, but for the application of the penalty period.

So, in our $1 house example, if the New Jersey Medicaid applicant transferred $300,000, the monthly penalty period of ineligibility for this transfer would be calculated by dividing $300,000 by $10,459, which equals 28.68 months of ineligibility. There is no rounding down, by the way.

The penalty period would start when the applicant medically needs an institutional level of care, has countable resources below $2,000 and has filed a Medicaid application to establish that she would have been otherwise eligible but for the asset transfer. Note: there’s no limit on the length of the penalty period.

Thus, assuming the applicant otherwise would have qualified for Medicaid but for the asset transfer, the applicant wouldn’t be eligible for Medicaid for an additional 28.68 months.

However, if the application was made more than 60 months after the transfer date, then the transfer would be outside of the 60-month lookback period and, if no other transfers were made, then no penalty period would be imposed, and the applicant would be eligible 61 months after the transfer date.

Contact an elder law attorney in your state to learn how the rules would apply under local law. There are a number of strategic asset protection tools available, but they must be completed in a timely fashion.

Reference: nj.com (December 25, 2018) “If mom sells her house for $1, what Medicaid penalty will apply?”