Personal Needs Allowance

Medicaid is a health payment plan for needy individuals.  If a person qualifies for Medicaid benefits, the program will pay for many of the costs associated with long-term care.  Medicaid will pay for care in a nursing facility, care in an assisted living residence, and long-term care at home, such as a home health aide.

Since Medicaid is for needy individuals, a qualified beneficiary must have very limited assets.  A Medicaid beneficiary can retain no more than $2,000 in countable assets.  Countable assets include all assets with the exception of certain, limited non-countable assets.  Non-countable assets are the home (if the beneficiary is living in the home), a car, a prepaid funeral, and personal goods.

A Medicaid beneficiary must also have very limited income.  The beneficiary’s income must be insufficient to pay for her care.  So, for instance, if a Medicaid beneficiary had $10,000 a month in income and the cost of her care were $9,500, she would not qualify for Medicaid, even if she had no assets.  Since most people do not have income sufficient to pay the costs of long-term care—which is very expense—very few people would have too much income to qualify for Medicaid.

When a person qualifies for Medicaid and if the person lives in a nursing home, she can only retain $35 of her income.  The remainder of her income is owed to the nursing home.  The payment of the beneficiary’s income to the nursing home simply reduces the amount of money that the Medicaid program will pay to the nursing home.

Typically, once a person qualifies for Medicaid, the Medicaid program will pay the nursing home approximately $6,500 a month.  Let’s assume that Mrs. Smith has $1,535 a month in income from Social Security.  When Mrs. Smith qualifies for Medicaid benefits, she will be entitled to retain $35 a month of her income for her personal needs, such as haircuts and clothing.  The remainder of her income, $1,500, will be owed to the nursing home.  The $1,500 that Mrs. Smith pays to the nursing home will reduce the amount the Medicaid program pays the nursing home from $6,500 to $5,000.

Some elderly individuals who require long-term care are eligible for a program administered by the United States Veterans Administration called Aid and Attendance.  Aid and Attendance will pay a certain amount of cash to an eligible individual in order to defray the cost of her long-term care.  Aid and attendance might pay a beneficiary anywhere from $1,100 to $2,100 per month.

Under the rules governing the Aid and Attendance program, once a beneficiary qualifies for Medicaid benefits and resides in a nursing home, her Aid and Attendance benefit will be reduced to $90 per month.  The question then becomes, does the beneficiary of Aid and Attendance retain the $90 plus the $35 that the Medicaid program allows her to retain or is the $90 payable to the nursing home, along with the Medicaid/Aid and Attendance beneficiary’s other income?

Even if most of your needs are being met by the Medicaid program, $35 per month isn’t much money, so being able to retain another $90 could go a long way.

As many elderly people as there are who receive Medicaid and Aid and Attendance, you would think the answer to this question is well known, but I can assure you that it is not well known, including by those who administer the Medicaid program. The answer is, the Medicaid beneficiary can retain the $35 and the $90.  A federal statute says this is the case. If you are a beneficiary of Aid and Attendance, you should remember this fact, because someday, you might have to fight for your right.

Public Policy

A New Jersey appellate division case addresses an interesting issue concerning a person’s last will and testament.  A Will is called a Will because it represents the free will of the decedent.  In other words, Mr. Smith makes his Will leaving his entire estate to his children.  This document, which we call a Will, represents the free choice/will of Mr. Smith to leave his estate to his children.

For the most part, a person can leave his estate in any manner that he chooses.  Mr. Smith, for instance, could disinherit one of his children if he wanted to disinherit a child.  Mr. Smith doesn’t even have to have a reason to disinherit one of his children.  He might chose to disinherit a child simply because he was mad at the child.

Maybe the child said something that angered Mr. Smith, so he decided to disinherit the child. That’s perfectly acceptable.  The assets that comprise Mr. Smith’s estate are his, and he can do what he wants with his assets.  If it is Mr. Smith’s desire (or will) to disinherit his son, then Mr. Smith can write his Will in this manner.

The only person whom a person cannot effectively disinherit is a spouse. A spouse always has the right to file a claim against the estate of the deceased spouse.  For instance, if Mr. Smith disinherited his wife, then after Mr. Smith’s death, his wife could file a claim against his estate.

This claim is called the “elective share.” Very roughly speaking, an elective share claim is worth one-third of the estate.  So, if Mr. Smith disinherited Mrs. Smith, Mrs. Smith could file a claim against Mr. Smith’s estate.  Mrs. Smith would receive one-third of the Smith’s total estate in satisfaction of her elective share claim.

There is one exception to the statement that a person can leave his estate any way in which he chooses. An inheritance cannot be contingent on a requirement that violates public policy.  Our courts do not review the motivation behind a decedent taking an action in his Will, but our courts will not enforce a provision in a Will that requires a violation of public policy.

This distinction can best be explained by an example. Mr. Smith could disinherit a child because the child converted to a religion that Mr. Smith did not support.  Mr. Smith cannot condition an inheritance on a child converting to a specific religion.

Disinheriting the child because Mr. Smith was a bigot is perfectly acceptable. As stated, it’s Mr. Smith’s money, so he can do what he wants with his money.  But Mr. Smith cannot make someone else do something that violates public policy in order to receive an inheritance.

In the appellate division case, it was alleged that a daughter was disinherited because she had a relationship with a Jewish man. The Court said, maybe that is why she was disinherited, but that bigoted motive is irrelevant.

A Question of Due Process

I read an interesting decision in a litigated case involving a denial of Medicaid benefits. Medicaid is a health payment plan for needy individuals.

In order to qualify for Medicaid, an applicant’s assets must have a value less than $2,000 and his income must be insufficient to pay for his care.  Once qualified for Medicaid benefits, Medicaid will pay for many of the costs associated with long-term care, such as care in a nursing home or assisted living residence.

When a person files an application for Medicaid benefits, he files his application with the county board of social services for the county in which he resides.  The County will request a significant amount of financial information from the applicant.  A nurse from the state will come out to assess the applicant’s clinical eligibility for the Medicaid program; the nurse will determine whether or not the applicant requires sufficient assistance with his basic activities of daily living so as to warrant Medicaid paying for the costs of his care.

After all of this is completed, the County will issue a determination letter.  The County’s determination letter will accept the applicant into the Medicaid program or deny the applicant eligibility into the program.

If an applicant receives a denial notice, the notice is supposed to fully apprise him as to the reason he was denied benefits.  The problem is, the notices frequently fail to fully apprise the applicant of the reason for the denial.

It’s a basic litigation tactic—tell your adversary as little as possible.  The hope when employing this tactic is that your adversary will sputter out some reason they believe they were denied when you might not have even been thinking about that reason.

But fair is fair, so the federal law governing Medicaid denials says that the denial notice must give factual reasons for the denial and must cite to the laws governing the Medicaid program that form the basis of the denial.  In this way, the applicant can prepare his defenses to the denial should he choose to appeal.

Once an applicant is denied, he is given the opportunity to file for what is called a “fair hearing.”  (In many cases, the applicant could sue in federal court, as well, since an extensive array of federal laws govern the Medicaid program.)  At the fair hearing, an administrative law judge will review the facts and the law and render a decision.  Administrative law judges work for the Office of Administrative Law, which is a separate state agency that adjudicates appeals of administrative decisions.

If the applicant is properly apprised of the reason his Medicaid application was denied, then he can properly prepare for the fair hearing.  If the applicant is not properly apprised of the reason for the denial, then he has no way to prepare for the hearing.

But what is the recourse if the applicant is not properly apprised of the reason his Medicaid benefits were denied?  In such a case, the Medicaid agency would be forced to issue a new denial notice with a proper reason for the denial.  A new date will be set for a fair hearing.

Notice is really a question of due process.  Without proper notice, a litigant cannot prepare to defend himself, and without preparation, there is no “fair hearing.”

Proper notice also serves to narrow the scope of the issues at the hearing.  Once the Medicaid agency has been forced to commit to the reason for the denial, the agency cannot then throw out other reasons at the hearing for the denial.  It’s a “speak now or forever hold your peace” sort of thing.