LTC Bullet: What Have You Done for Me Lately?

LTC Bullet: They're Baaack, Part II: Frank Comments

Tuesday July 3, 2001

Seattle—

Several weeks ago, we brought you an LTC Bullet titled "They're Baaack . . . Medicaid Planners Rise Again" about the resurgence of Medicaid estate planning since the Justice Department declined to enforce the "Throw Granny's Lawyer in Jail" law (the Balanced Budget Act of 1997). We received a lot of positive feedback on this Bullet including requests to republish it in other venues. Lately, national media interest in Medicaid planning has increased as evidenced by Jane Bryant Quinn's recent column, Ann Davis' Wall Street Journal article, other print media coverage and recent inquiries to the Center from a network nightly news show.

Given the obvious concern about this subject, we've decided to present several additional LTC Bullets designed to clarify what Medicaid planning is, how and by whom it is practiced, and the lasting damage it causes. These Bullets will summarize and quote from Medicaid planning training sessions conducted at the National Academy of Elder Law Attorneys' (NAELA's) 2001 Elder Law Symposium held April 18 to 21, 2001 in Vancouver, British Columbia. NAELA is the Medicaid planners' trade association; its conferences emphasize training members in the arcane techniques of Medicaid estate planning.

Medicaid planning is the lucrative legal art and science of artificially impoverishing prosperous seniors to qualify them for Medicaid nursing home benefits. Medicaid planning is problematical because (1) it condemns incapacitated elders to welfare-financed nursing home care who could have paid privately for quality home care or assisted living, (2) it overburdens Medicaid with recipients it was never intended to serve, thus reducing access to quality long-term care for the needy, (3) it undercuts the financial viability of nursing homes by overloading them with Medicaid residents for whom reimbursement is often less than the cost of providing the care, and (4) it reduces the public's sense of urgency about long-term care, thus inhibiting the market for privately financed home and community-based services and the private financing alternatives, such as home equity conversion and private long-term care insurance, to pay for them.

Some people believe that Medicaid planning is relatively uncommon and that it is usually practiced by questionable characters representing fly-by-night firms. The truth is very different. Medicaid planning, defined broadly to include any divestiture or shelter of income or assets to qualify for Medicaid, is almost universal and is frequently practiced by ostensibly upstanding legal and/or financial planning professionals.

The following quote is excerpted from a program titled "Advocacy and Planning Opportunities: The Maryland Experience with the Medicaid Home and Community Based Services Waiver" delivered at the NAELA conference referenced above by Attorney Jason Frank. According to his introduction "Jason Frank is a graduate of the New York University School of Law. He practices law in Lutherville, Maryland. He previously was the County Attorney for the Baltimore County Department of Aging. He has been co-founder and past Chair of the Maryland State Bar Association Elder Law Section. He has been active in NAELA. He is currently Chairman of the Maryland/DC chapter. He also teaches as an adjunct at Johns Hopkins University, the University of Maryland Law School and the Maryland Institute of Continuing Professional Education of Lawyers." Most of Mr. Frank's presentation discussed his successful efforts in Maryland to expand Medicaid financing to include home and community-based services. Here's what he had to say in conclusion, followed by our translation and analysis:

"All right, this is what we advocated for, this is what we got, now what? Well, this is a Medicaid eligible population. What do we do with people who come to us seeking Medicaid in nursing homes? WE HELP THEM PLAN FOR ELIGIBILITY. This is the same population. We're just not making them go into nursing homes. So the planning opportunities are substantially the same. Because all of the financial eligibility rules were included in this program, all of the EXEMPT TRANSFERS, all of the EXEMPT TRUSTS, the use of ANNUITIES, all of these are viable in the waiver program just like for nursing homes. HALF-A-LOAF . . . still effective. Spousal impoverishment rules . . . still in effect, though I want to point out because of the potential issues where you have what would otherwise be an institutionalized spouse going into an assisted living facility where we do have the issue of the income cap you may need to be cognizant of that particular issue so you may want to focus on reducing the institutionalized spouse's income below the 300 percent to avoid the income cap effect which means maybe using BALLOON ANNUITIES rather than normal annuities. You may want to look at purchasing better health insurance to reduce income below the 300 percent cap. I mean these are just some things that pop up as you're going through it. The snapshot for home care, when we can finally figure out when it's taken, you're going to still want to make sure that the assets are maximized at the time of the snapshot so if the clients want to buy a car, you tell them to BUY WITH A NOTE that you pay off after the snapshot not before in cash even though that's the way they've always paid for things all their lives. You still want to do, if you are in a state as Maryland is where there is very active recovery, liens and recoveries, but only off of probate assets, you want to make sure that the community spouse's assets will avoid probate, will AVOID [MEDICAID ESTATE RECOVERY] CLAIMS. And . . . you want to make sure that the community spouses are aware of and avail themselves of POST-ELIGIBILITY GIFTING. . . . I urge all of you to get out there and advocate for these programs. I can tell you flatly as it comes to Medicaid waivers and our clients, God is on our side." (Emphasis added.)

CLTCF Comment: Reasonable people can disagree about the advisability of expanding Medicaid financing of home care and assisted living. Proponents say it would be more cost-effective and cover more people than paying for nursing homes. Opponents say it would cause program expenditures to explode by bringing new recipients out of the "woodwork." One thing is for sure, however, Medicaid financing of home and community-based services would be a bonanza for Medicaid estate planners. That's the lesson in Attorney Frank's statement. The market for Medicaid planning is limited today by the fact that all it gets you is free or subsidized residency in a nursing home on welfare. As soon as getting on Medicaid will pay for home care and assisted living, the demand for Medicaid planning will leap off the charts. Of course, so will the cost of Medicaid and that's why the state and federal Medicaid programs are very reluctant to expand HCBS and why they put cost and utilization caps on all waiver programs. It goes almost without saying that any increased demand for Medicaid planning constitutes a concomitant decrease in demand for private long-term care insurance. In the long run, the only hope for most people to afford quality long-term care at the most appropriate level is to reduce the burden on Medicaid so it can help the poor, and to empower everyone else to pay privately through savings, investment and insurance. If Medicaid eligibility were properly delimited and enforced, the program would have more than enough resources to finance home care and assisted living for the genuinely needy. And with eligibility properly controlled and enforced, most Americans would recognize the need to plan early and save, invest or insure for the risk of long-term care. The only winners in the current system, and in the new one proposed by Attorney Frank, are the Medicaid estate planners.