Settlement of Federal Suit Will Benefit Thousands

Last year, I filed a federal lawsuit against the state of New Jersey.  In the lawsuit, I demanded that the State use an accurate divisor number in calculating the penalty period for asset transfers that occur within the Medicaid lookback period.  I am happy to report that this past week, I was able to negotiate a settlement with the State.  The settlement I was able to reach with the State will have a significant impact on the Medicaid program in this State.

As an elder law attorney, clients frequently ask me to qualify them for Medicaid benefits.  Medicaid is a health insurance program for needy individuals; however, unlike most health insurance programs, Medicaid will pay for long-term care costs, such as nursing homes and assisted living residences.

In order to be “needy,” a person must have limited assets and income that is insufficient to pay for the cost of his care.  For instance, if Mr. Smith is residing in a nursing home that costs $12,000 a month and his income is only $1,000 a month, then his income is insufficient to pay for the cost of his care.  If his assets are below $2,000, then he is financially eligible for Medicaid.

Because Medicaid is only available to needy individuals, some people who are seeking to qualify for Medicaid benefits try and give their money away to family members.  The belief is, if Mr. Smith simply transfers his assets to his children, he will be financially eligible for Medicaid.

The people who wrote the Medicaid law thought about this basic human reaction and drafted provisions to the law to handle this contingency.  Essentially, the laws governing the Medicaid program provide that if an applicant for benefits gratuitously disposes of his assets during the five years that proceed the application for benefits, then he will be rendered ineligible for Medicaid benefits for a period of time commensurate with a period of time that the gifted assets would have paid for his care in a nursing home.  Stated otherwise, if you give away an asset, you will be ineligible for Medicaid for as long as that asset would have paid a nursing home.

The Medicaid Office reviews every applicant’s bank statements for the five-year period of time that proceeded the application.  This is called the “lookback period.”  If the applicant gave away assets (stocks, bonds, money, a bank account, a car, a house, etc.), then the Medicaid Office will aggregate the value of those gifts and divide the sum of the gifts by a divisor number.  That divisor number is supposed to equal the average statewide cost of a nursing home room in New Jersey.

For instance, assume that Mr. Smith applies for Medicaid on December 1, 2013.  The Medicaid Office will request bank statements for December 1, 2008, through December 1, 2013, or five years.  Assume that Mr. Smith gifted $10,000 on March 4, 2009, $15,000 on June 7, 2010, and $25,000 on September 9, 2012, or $50,000 in the aggregate within the lookback period.  The Medicaid Office will take that $50,000 figure and divide it by their divisor number, which is currently $7,787 and come up with a result of 6.4 ($50,000/$7,787 = 6.4).  The result, 6.4, is the number of months during which Mr. Smith is ineligible for Medicaid benefits, because according to Medicaid, he could have used the $50,000 he gave away to pay a nursing home for 6.4 months.

The divisor the State uses, currently $7,787, should be accurate; it should actually reflect the cost of a nursing home room in New Jersey.  I can assure you that a nursing home in New Jersey does not cost $7,787.

The settlement I was able to work out with the State compels the State to conduct a survey of every nursing home in New Jersey and calculate a divisor figure that is accurate.  This suit will help a large number of people who apply for Medicaid benefits and made gifts during the lookback period.

You Get What You Pay For

If I need to answer a question, one of the first places I look for that answer is the internet.  Before the internet, if you wanted an answer to a question, you had to drive to your local library and hope you could find a book on the subject.  Nowadays, you merely need to type your question into the computer and the answer, or more likely multiple answers, appears.

Of course, you have to wonder how accurate the answers you find are.  In life, you often get what you pay for, and when you don’t pay much, well, you often can’t expect much.

With the pervasive nature of the internet has come a number of companies selling various services to the masses, and legal services are no exception.  I have had clients come to see me who have said, “We thought about using the internet to draft our Wills, but we wanted it done right.”  For every person who tells me this, I’m sure there are more people who decided the cheap price on the internet was worth saving the few hundred dollars more that a lawyer would charge.

Obviously, I’m biased.  I would like everyone to come to see me to have their estate planning documents drafted.  And, yes, I do draft estate planning documents for the old and young alike, despite my being an “elder law attorney.”

The fact of the matter is, I actually do believe that the estate planning documents I draft are better than the estate planning documents you find on the internet.  I attended law school for three years and graduated with honors.  My entire career has been dedicated to elder law.  I have won more merit-based awards than any other lawyer I know.  I have worked six days a week for years in this one area of the law.

So, do I think I can draft estate planning documents for you better than you can using a computer program … well, yes, I do.  And I think I have some substantive basis for my thoughts.  To use an analogy, a person could perform surgery on himself, but I wouldn’t advise it.

The thing with estate planning documents is, when someone goes to use those documents, you won’t be around to make corrections or to fill in the gaps.  For instance, if you make a mistake in your last will and testament, you simply won’t be around to correct your mistake.  If you leave something out of your power of attorney document, when someone goes to use the power of attorney, you probably won’t have sufficient mental capacity to make changes to your power of attorney document.

Omissions and mistakes can be very costly to correct.  While omissions and mistakes can be corrected in many instances, those corrections often involve petitioning a court in one way or another asking the court to correct your mistake.  By the time you get to court, you will almost certainly have hired a lawyer and the cost of the procedure will far outstrip the cost of having your estate planning documents professionally drafted in the first instance.

Moreover, when you have your estate planning documents professionally drafted, you have a third-party, the attorney, who can attest to your intentions.  So, even if something does need to be correct, the attorney is there to assist with the correction.  When you draft your documents on a website, that company probably won’t exist when the problem with your documents is discovered ten or more years from now, and that internet company certainly won’t have any background information surrounding your documents.  All that company knows is what you plugged into their computer program in response to their generic, pre-programmed questions.

In life, I find that you get what you pay for.  If you are paying next to nothing for something, you probably aren’t getting much more than that.

The Interplay of Government Benefits

There are several government benefits for which an individual who requires long-term care can qualify.  Caution should be exercised when seeking to qualify for these benefits, as qualification for one benefit may disqualify you from another benefit.

Assisted living residences in New Jersey may cost anywhere from $3,500 to $8,500 a month, with the average being somewhere around $6,500.  Most people cannot afford to pay $6,500 a month for very long without bankrupting themselves.

Medicaid is a government health insurance program for needy individuals.  In order to qualify for Medicaid, an individual must have a limited amount of assets, typically less than $2,000.  In New Jersey, if the individual is seeking to qualify for Medicaid in an assisted living residence, he must also have gross income less than $2,130.

The $2,130 monthly income figure is a gross figure, so you need to add back any deductions that may be taken from the applicant’s income, such as deductions for taxes and health insurance, including the deductions for Medicare premiums.  The Medicaid program in New Jersey also includes any benefit the applicant may be receiving from the Veterans Administration as an income item.

A common benefit that many veterans or their spouses receive is called Aid and Attendance.  Aid and Attendance or A&A is a cash benefit given to veterans or the spouse of a deceased veteran if the veteran’s assets are low and if the veteran’s medical expenses exceed his income.  The A&A benefit can be anywhere from approximately $1,100 a month for the spouse of a deceased veteran to $2,100 a month for the veteran.

While A&A sounds great, the benefit can impact the veteran’s eligibility for the Medicaid program in an assisted living residence.  For instance, if the veteran has Social Security income of $1,500 a month and assets of $1,000 a month, he would qualify for Medicaid; Medicaid would pay for the costs of his care in the assisted living residence.  So, if this veteran had a monthly assisted living residence bill of $6,500, he would only owe his income to the facility if he qualified for Medicaid.

Now, if that same veteran received an A&A benefit of $2,100 a month, his total income with A&A and Social Security would be $3,600, far in excess of the $2,130 limit for him to qualify for Medicaid.  While $3,600 sounds like a good amount of monthly income, it is insufficient to pay the veteran’s $6,500 monthly assisted living residence bill.

In reality, the Medicaid program is supposed to disregard the A&A benefit.  The laws governing the Medicaid program state that A&A is a non-countable income item that should be disregarded when processing a Medicaid application.  In fact, the A&A benefit is greatly reduced after the veteran, or his spouse, qualifies for Medicaid benefits.

But what should happen and what does happen are often two different things.  Currently, a group of lawyers is suing the State in federal court over this issue.  These lawyers have filed a class action lawsuit asking the federal court to enjoin the State from treating A&A as income when the Medicaid applicant’s unreimbursed medical expenses exceed his income, as those expenses would in the example that I provided above.

Until then, beware.  While logic would say a person should qualify for as many benefits as he can, logic sometimes has no place in the real world.