MassHealth For Long-Term Care

At the June CRC Information Session Jeff Bloom, Partner with Margolis & Associates, spoke on MassHealth Long-Term Care since the Deficit Reduction Act of 2005.

Income:
Special MassHealth eligibility rules and application procedures apply to those seeking coverage of long-term care (i.e., a nursing home). MassHealth for long-term care in effect has no income limit except if your income exceeds the Medicaid reimbursement rate. People with relatively high income may cycle through periods of Medicaid eligibility and ineligibility- they spend-down their income and then become eligible until the next eligibility period when the process begins again. A “community spouse’s” income is not counted.

Assets:
Though MassHealth doesn’t consider assets for community-based care for those under 65, it does consider assets for those 65 and over and those applying for coverage of long-term care. An individual can qualify for MassHealth LTC with a maximum of $2000 in countable assets. When the individual is married there are protections for the “community spouse”. At this time the couple can keep in the neighborhood of $100,000 of countable assets ( $101,640 in 2007). Assets in either spouse’s name are considered available to the couple for the purposes of MassHealth LTC coverage.

If the community spouse has a low income and/or high expenses there is a way to request that she retain additional assets to generate additional income. Attorney Bloom reported that he’s seen cases where up to $1 million has been protected in this manner such as when the “community spouse” lives in an assisted living program (considered a community residence for this purpose) or receives extensive homecare services. This request can only be granted during an appeal – the Medicaid hearing officer has the ability to grant such an increase. Typically this is a 4-6 month process, but if granted MassHealth may pay the facility retroactively so that the spouse may be reimbursed.

Assets may be “spent-down” to qualify for MassHealth as long as they are used for the needs of the couple. Giving away assets to others though can cause a period of ineligibility for MassHealth for LTC. The federal Deficit Reduction Act (DRA) of 2005 made some significant changes to the Medicaid asset rules particularly around this issue.

Gifts:
Many elders with the means to do so want some of their life savings to assist loved ones either during the elder’s lifetime or as a bequest. There have always been limits on an elders’ ability to make such gifts and still qualify for MassHealth LTC, but these rules were toughened under the federal Deficit Reduction Act of 2005 (DRA).

• Look-Back Period:
  To avoid applicants intentionally impoverishing themselves for the purposes of MassHealth eligibility, when one applies for MassHealth LTC they are required to report on all financial transactions for a period of time previous to the application. Prior to the DRA, this time period (called the “look-back period”) for most transactions was 3 years. The look-back period has now been extended to 5 years for all types of transactions. *To contact The Commonwealth Health Insurance Connector Authority (The Connector) call 1-877-623-6765 or 1-877-MA-ENROLL.

• Penalty Period:
  If an elder gifts assets during the look-back period to anyone other than a spouse this triggers a MassHealth “penalty period” during which MassHealth will not pay for care in a nursing facility. MassHealth determines the length of this penalty period by dividing the total transferred by an amount they say reflects the average daily cost of care in a Massachusetts nursing facility. The result of that computation reflects the number of days they will not pay for care in an a nursing facility. Under the old rules one could determine a safe amount to transfer such that they would keep adequate funds to cover this penalty period. This was feasible because the penalty period began on the date of the transfer. Under the new rules, this penalty period begins only when one is actually receiving care in a nursing facility, has exhausted other forms of payment and the nursing facility would otherwise be receiving payment from MassHealth (“when otherwise eligible for Medicaid but for the gift”). In other words, they have closed this “loophole”. In this situation it is unclear what will happen as the facility would not receive payment for this time period unless the gift recipient returns the funds. If the money is returned the penalty is erased.

  There is a process available to apply for a hardship waiver if the funds are not available to the applicant and his/her health is in jeopardy. But it is not in the state’s financial interest to grant these easily, so it is expected these waivers will be granted rarely if at all.

  The federal law is less strict than the Massachusetts regulations currently in effect. It is too early to have a lot of experience with what will happen in these situations as the funds are gone. Will families return the gifts? Will other loved-ones chip in? Will nursing facilities take a loss? If the facilities face extended periods of non-payment will they attempt to evict the resident and/or require families to sign documents of support at admission? This remains to be seen as these disputes arise and work themselves through the courts.

Annuities:
Annuities have traditionally been an acceptable Medicaid-planning tool. Annuities convert assets into income and do not incur a MassHealth penalty. They work by investing assets in exchange for a guaranteed monthly income. If the owner dies during the “guarantee period” (before they are repaid a prearranged amount), the funds are given to a name beneficiary. So in the past this served as a tool to leave assets to children or grand-children for instance. Now for annuities to avoid a MassHealth penalty, the state has to be the first named beneficiary. Other survivors will only benefit if there are additional funds after the state has been repaid. Given the other rules summarized above, this remains one of the few remaining planning tools and may be particularly useful for the “community spouse”.

The Home:
The primary residence is not considered an available asset if a spouse or other qualified dependent (minor child, disabled adult child, “caretaker” relative who lived in home for previous two years and provided care that the homeowner would otherwise have received in a nursing facility) lives in it. Though the state may place a lien on the home such that if/when it is sold, they will take repayment of the nursing facility costs out of proceeds of the sale. Note: see section below on Long-Term Care Insurance.

An individual applicant’s primary residence previously was exempt from consideration as an available asset if one was expected to return to living in the community. Now, however, for an individual, only the first $750,000 in equity is exempt from consideration. Given housing costs in parts of Massachusetts this could come into play for individuals with otherwise relatively modest means. Again it is too early to have reliable experience to say how this will work out, but basically it seems that an individual in this situation would need to sell the home to access the equity over $750,000 that MassHealth considers an available asset.

• Long-Term Care Insurance and the Home:
If the applicant has a qualified Long-Term Care Insurance (LTCI) policy in place, MassHealth will not place a lien on the house regardless of its value. To qualify as adequate LTCI coverage, the policy currently must cover at least $125/day of long-term care services for a minimum of 2 years. Current federal law, however, only allows waiving a lien for the actual dollar amount paid by the insurance and therefore saved by Medicaid. So any Medicaid expenditures would still be subject to a lien. It remains to be seen if the Massachusetts version of the law will remain in effect or will be successfully challenged.

A general word about the advisability of purchasing LTCI though, the possible protections to the house aside, LTCI does offer significantly greater home-care and assisted living benefits than MassHealth. This too should be considered in deciding whether to purchase such coverage.

-Special thanks to Jeff Bloom and Julie Dyer of Margolis & Associates for their help with this article.

6/07