Discriminating Against Medicaid Beneficiaries

“Won’t the nursing home treat my mother differently when she goes on Medicaid?”  I hear this question quite frequently.  A different variant of the question that I also often hear is, “I don’t want my mom to have to go to a Medicaid nursing home.”

People have this notion that there are two different types of long-term care facilities, those for privately-paying patients and those for Medicaid beneficiaries.  If it weren’t for federal and state laws, I’m sure there would be two types of facilities, but thankfully for nursing home residents, there are laws against nursing facilities discriminating against Medicaid beneficiaries.

Most nursing homes in New Jersey are privately-owned facilities.  In Monmouth County, for instance, there are only two county-run facilities, and quite frankly, if you visited these facilities, you wouldn’t know that they are owned by a governmental entity.

Because nursing homes are most often private facilities, the people who own those facilities want to turn a profit.  Even non-profit facilities like to make money to pay the salaries of those who work at the facility, often paying those in upper management very generous salaries.  In my opinion, companies are “non-profit” because upper management makes sure that they suck all the money out of the company in the form of salaries.

About two-thirds of all patients in nursing homes are also Medicaid beneficiaries.  Nursing homes derive approximately 50% of their revenues from the Medicaid program.

In New Jersey, nursing homes charge private-pay residents anywhere from $8,000 a month to $12,000 a month.  The average cost of a nursing home in our state is $9,000 a month.  The Medicaid program will pay these nursing homes somewhere in the range of $6,500 a month for a Medicaid beneficiary.

Given the above, it is easy to see why the owners of nursing homes prefer private-paying residents; they make about 33% more from a private-paying resident than they do from a Medicaid beneficiary.  But, given the above, it is also easy to see that nursing homes could not survive without the Medicaid program.

With two-thirds of their residents receiving Medicaid and with 50% of their revenues being derived from the Medicaid program, nursing homes need the Medicaid program.  Moreover, although they receive less from Medicaid than they do from private-paying residents, another benefit of Medicaid is that the Medicaid program pays every month, on time.  If you own a nursing home, you don’t have to worry about the state of New Jersey running out of Medicaid money and not being able to pay you.  You can count on receiving payment for each of your Medicaid residents.

I have never seen or heard of an incident in which a nursing home discriminated against a nursing home resident because the resident was a Medicaid beneficiary.  No client has ever raised this as an actual and factual issue to me.  As I tell my clients, “Since most people who live in nursing homes receive Medicaid benefits, if the nursing home treated Medicaid residents differently, they’d be treating everyone one who lived in the facility the same.”

If, however, you have a concern about a family member being discriminated against because he is a Medicaid beneficiary, rest assured that there are laws against that discrimination.  Since 1987 when the Nursing Home Reform Act was signed into law, nursing homes are prohibited from discriminating against residents because of the method with which they pay the facility.  In short, a nursing home cannot discriminate against Medicaid beneficiaries.

A nursing home that does discriminate against Medicaid beneficiaries runs the risk of losing its Medicaid certification.  The nursing home would not be eligible to receive payment from the Medicaid program.  The nursing home would not receive monthly payment for two-thirds of its residents and would lose 50% of its revenue.  In short, the nursing home would go out of business, in a hurry.

Choosing Others To Decide for Us

No one wants to think of a day when someone else will have to make decisions for them, but for many people, particularly those lucky enough to grow old, that day may come.  A fairly common attribute of aging is some form of dementia.  Even for those who do not develop dementia, aging can bring physical infirmities that prevent a person from fully carrying out their daily tasks.

And it’s not just the old who are incapable of handling their own affairs.  Any one of us can suffer a debilitating injury at any time.  A car accident, a heart attack, a stroke—any of these types of events can cause the strongest among us to require the assistance of others.

Legally, if you are over the age of eighteen and if you cannot make decisions for yourself, no one else can make decisions for you, not your spouse, not your children, not your parents.  Many people think their spouse or children can simply step in and make decisions for them, but this is not the case.  No one else can make decisions for you, no one.

If you have failed to plan ahead by putting in place financial powers of attorney and advanced healthcare directives, then someone will have to become your legal guardian.  To become a person’s legal guardian, the proposed guardian must retain the services of two doctors who must opine that the proposed ward cannot handle his affairs.  Once the guardianship action is filed in the court, the court appoints a lawyer to represent the ward’s interest.  In all, the guardianship will probably take three months to accomplish and will cost the ward’s estate around $5,000.

To have an elder law attorney draft a financial power of attorney and advanced healthcare directive drafted for you would cost you about $350.  The difference between $5,000 and $350 is obvious.  Furthermore, with a well-drafted financial power of attorney and advanced healthcare directive, the person you name to make decisions for you, called your agent, can make broader decisions for you than your guardian can.

A guardian may have to go back to court to ask the court’s permission to engage in certain types of transactions, such as selling the ward’s real estate or gifting the ward’s assets for purposes of Medicaid planning.

So, there is little doubt that having a well-drafted financial power of attorney and advanced healthcare directive is important.  In short, you should have these documents somewhere in your house.  The question is, who should you name to make financial or healthcare decisions for you in the event that you cannot?

Most people name a family member.  In the absence of family members, a trusted friend may be a good choice.  In the absence of family and friends, a professional, such as an attorney or an accountant, may be appropriate.

With a healthcare directive, you cannot name your physician as your agent for obvious reasons.  You cannot have the person performing the medical procedure making decisions about whether or not the medical procedure should be performed in the first place.  You also cannot name the people who witnessed the healthcare directive act as the agent.

You also can only name one agent to serve at a time.  In other words, you cannot name co-agents, for instance, “my two children.”  You would have to name one child then the other child to serve if the first child cannot serve.

With a financial power of attorney, you can name co-agents.  You can name co-agents that have to make decisions together or you can name co-agents who can act separate and apart from one another.  Either co-agent plan has its own potential problems.  For instance, what if the agents have to agree and don’t agree?  Or what if the co-agents do not have to agree and they make opposite decisions on the same issue?  For this reason, I typically recommend that clients name one agent to serve at a time, just as they must with the healthcare directive.

The most important thing is that you have a power of attorney and advanced healthcare directive.  Once you’ve made the wise decision to have these documents, an experience elder law attorney can ensure that the documents are drafted properly.

The Drawbacks of a Trust

What is a trust?  Most of us have heard the word “trust” and most of us have a basic understanding of what a trust is, but few people seem to really understand what a trust is and how a trust functions.

A trust is a contract.  It is a contract between the parties to the trust agreement—the grantor, the trustee, and the beneficiary.  The grantor is the person who creates the trust, and typically, the person who deposits money into the trust.  The trustee is the person who handles the money in the trust, the person who invests the money in the trust.  The beneficiary is the person for whom the trust benefits.

There are several different types of trusts.  There are revocable and irrevocable trusts.  There are testamentary and living trusts.  A revocable trust is a trust the terms of which can be changed.  An irrevocable trust is a trust the terms of which cannot be changed.  A testamentary trust is a trust found in a last will and testament.  A living trust is a trust that can exist while the grantor is still living and, therefore, not in the last will and testament of the grantor.

A testamentary trust is revocable while the grantor is living and becomes irrevocable when the grantor dies, because once the grantor dies, his Will cannot be changed and, therefore, the trust in the Will cannot be changed.  A living trust can be revocable or irrevocable, depending upon the purpose the grantor is attempting to achieve.

There are multitudes of reasons why a person may create a trust.  A person might create a trust for a minor beneficiary, for a disabled beneficiary, for a beneficiary with a drug or alcohol problem, or for a beneficiary with a spending problem.

A trust can be drafted to address any of these issues.  The terms of the trust are up to the grantor.  The grantor can draft the trust with any terms he wants to put into the trust.  For instance, if the grantor wants to say that the trustee can only give the beneficiary money on October 1st of any given year if the moon is full, he can say that.  It’s the grantor’s trust, so the grantor is entitled to put any terms he wishes into the trust agreement.

The biggest problem with a trust is that trusts scare people.  Because people don’t understand trusts, they typically heap all types of misconceptions onto trusts.

For one thing, people don’t understand how trusts own and can invest assets.  A trust, I always tell people, is just like a person when it comes to owning and investing assets.  A trust can own any asset that a person can own and can invest any place a person can invest.  A person can own bank accounts, stocks, bonds, mutual funds, annuities, and real estate.  So can a trust.  A person can have multiple bank and brokerage accounts.  So can a trust.

But people don’t understand this, even after you tell them.  People think a trust is a place, and that once you put money in a trust the money goes to some particular place, trust-land.  People think of a trust as a type of investment instead of simply being a vehicle for investing.

The other problem with trusts is that beneficiaries of trusts typically come to resent the trust.  For instance, if mom dies and leave her estate equally to her four children but leaves one child’s share in a trust because the child has problems spending money, the spendthrift child will come to resent the trust.  Why can’t I have my money when my brother and sisters get to have their money?

Worse yet, if mom named one of her other children to be the trustee of the trust for the spendthrift child, the spendthrift child may grow to resent his sibling trustee.  Years after mom’s death, the spendthrift child certainly won’t understand why his siblings got their money, but he has to wait to get his money.

So, a trust can serve very important purposes, but there are also drawbacks to trusts that should be taken into consideration.  No one should create a trust without an important purpose to accomplish and without understanding the drawbacks of the trust.

No Will, No Way

If you die without having made out a Will, what happens?  Does your property just pass to the State of New Jersey, leaving your spouse and children destitute?

A good number of people have told me that they believe their money will go to the State, if they don’t have a Will in place at the time of their death.  While this isn’t necessary true—in fact, it’s probably untrue in, at least, 95% of the cases—a Will does allow you to have a far greater say in who is to receive your money, and in what manner, than does not having a Will.

But before I tell you how your money will pass if you fail to sign a Will, I’ll have to provide you with some basic estate planning terminology.  When a person dies with a Will, they are said to have died “testate.”  If they die without a will, they die “intestate.”  If a person dies testate, the terms of the Will determine how their property passes: who gets it, how they get it, when they get it.  If a person dies without a Will, the State of New Jersey, essentially, writes a Will for them.

For those that die intestate, their Will is found at New Jersey Statute 3B:5-1 to 5-14, which is entitled “Intestate Succession.”  If you currently don’t have a Will, perhaps you should peruse these sections of the New Jersey Statutes, because that is your Will for all intents and purposes.

While it is a very good thing that the State provides a statutory scheme for how the property of intestate persons passes, it is not necessarily a good thing that people simply rely upon that statutory scheme for purposes of their own Will.  I believe that to be true, because in many cases, the statutory intestate scheme differs significantly from the manner in which most people would want to leave their estate.

For instance, if you are married with children and you die without a Will, your spouse receives the first $50,000 of your estate, then your spouse and children divide the remainder of your estate.  Now, I have never had anyone come into my office and ask me to draft a Will that provided for such a disposition of their estate.  If they did, I’d probably advise them against such a course of action.

Using just this one example, let’s explore what could happen to this estate in its administration.  Dad died intestate.  He had a Wife and two children.  After Dad died, the Wife went to the Surrogate’s Office and was appointed the Administrator of Dad’s intestate estate.  Mom is now in my office and is asking for help in administering Dad’s estate.

Let’s say Dad’s estate total $250,000, of which $180,000 is a house that was solely in Dad’s name, in which Mom and Dad lived together.  The remaining $70,000 is in a brokerage account.  Let’s also assume that Dad has $20,000 in debts:  funeral bills, medical bills, etc.

In short, I would tell Mom that the debts had to be paid, that she could retain the remainder of the brokerage account, or $50,000, and that the house would have to be divided between her and her children.

But what if the children want their share of the house in cash?  After all, Mom lives in the house, they don’t.  They want their money now.  Do you see the problem?

There are so many problems that could result from not having a Will that’s it’s impossible for me to explore them all in the short amount of space I’m given to write my article.  It would take a book.  But it takes very little space to tell you that it is better to plan than to simply leave things up to chance, or the State.