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• Michigan Medicaid Rules Subject to Change.
• April 1, 2011 they change again
• Advance planning is required.
• Advance planning is required.
Michigan Medicaid Changes Again
1. Michigan Medicaid Rules Change and Change Again April 1, 2011
Change is always part of Medicaid. I’m often surprised by prospective clients who tell me that they know somebody whose mother applied for Medicaid years ago and all they had to do was . . . When it comes to Michigan Medicaid one cannot presume to know the policy interpretation of any office at any one time let alone presuming things are the same as they were years ago. In proof of that proposition here we go with the latest Medicaid changes.
The biggest change is interpretation of joint ownership of real property. It is effective April 1, 2011. The new rule raises questions - as always. The rule continues the real property law recognition that if property is jointly owned, then any one owner cannot sell without another owner’s consent. The change in the rule is addition of : “Jointly owned real property is only excludable if it creates a hardship for the other owners, see hardship in this item.” The new rule explains its meaning and hardship further:
“For jointly owned real property count the individual’s share unless sale of the property would cause undue hardship. Undue hardship for this item is defined as: a co-owner uses the property as his or her principal place of residence and they would have to move if the property were sold and there is no other readily available housing.”
So, if a son lived in the cottage as his primary residence then he would have to prove “there is no readily available housing.” That would be difficult to impossible. What is the limit of “readily available”? Does that mean in the neighborhood? Or, anywhere in Michigan?
A plain reading informs us that jointly property, such as a cabin up north is a countable asset unless the applicant proves that the selling would create a hardship for a co-owner. Unlikely at best.
We might note further that the rule has finally caught up to Michigan property law in recognizing fractional shares of real estate. In other words Lion-Cub deeds, where the original owner takes a smaller fraction (the cub) of ownership, can still work to divest a future applicant of assets and yet retain the property tax limitation. Of course, this would have to be done more than five years before application.
In the mean time it looks like quite a few Michigan Medicaid applications will be denied due to excess assets.
As the above shows it is good to keep well informed about Medicaid. In 2007 we had dramatic and sweeping changes. These were the result of the Congress passed federal law known as DRA 2005. It was designed to ensure more elders' savings would be spent on nursing home bills. However, the rules continue to be unpredictable for the average consumer. A review of Michigan's 2007 implementation of DRA 2005 serves as a cautionary tale to any person who would think that applying for Medicaid to pay the nursing home is a simple, straightforward matter.
2. Protection for Spouses and Disabled Children Remain
Unless spouses have engaged in divestment the 2007 rules had no effect on spouses. It remains true that Medicaid community spouses can protect all of their life-savings by hiring a Michigan elder law attorney. The attorney can go to probate court for an order increasing the community spouse asset allowance. Or the attorney may draft a Michigan Medicaid asset protection for the community spouse. The official name of the trust is a “sole benefit trust.” Michigan Medicaid does not count the property in the trust as an asset. All life-savings may be protected this way. Similarly, transfers may be made to or for a disabled child without divestment penalty. If the disabled child receives SSI then the gift must be protected by a special needs trust.
3. Michigan Medicaid Rules Allow Broad Spend Down
The Medicaid applicant or spouse, or agent may still spend their money on anything. That includes prepaid funerals, burial goods for the family, new cars, home repairs and improvements, new appliances and other items for patient, spouse, disabled child, and maintenance of all property including homestead and vacation property.
4. The Rules Focus On Medicaid Divestment
DRA 2005 did three things to attempt to eliminate divestment of assets so that all of the elder's money will be spent on the nursing home rather than stay in the family.
- DRA 2005 imposed a five year lookback. The prior lookback was three years. Note, that the three year rule of lookback still applies to transfers before February 8, 2006. The new rules follow the law.
- Michigan Medicaid aggregates all transfers during the lookback period and brings all transfers forward to the date of application for Medicaid. The worker will have to determine the total amount transferred during the lookback period and then impose a “penalty period” for the total of all transfers.
- The “penalty period” for all transfers begins after the Medicaid application and when the person is “otherwise eligible.” Medicaid will not pay for nursing home during a penalty period. The length of the period approximates how many days of nursing home care the applicant could have paid with the property divested. Recently the Michigan Department of Human Services added an irrational and cruel spin on the penalty period rule. Penalty periods stop if the person leaves the nursing home. For example, suppose Mr. Smith gave away enough money to his children to cause a three month penalty period. One might think his children would have to take him home for three months and then bring him back after the penalty period ends. That will not work. Mr. Smith would have to stay in the nursing home with the bills unpaid. A strange rule indeed.
- Penalty periods are no longer “rounded down.” The prior law called for dropping of fractions of months and imposing a penalty period of whole months only.
Example: Within five years of applying for Medicaid, Mrs. King “loaned” her son $10,000 for purchase of a new home and gave two grandchildren a gift of $1,000 on their graduation for education; and gave the church $500 each year. Result: Total “transfers” of $14,500. Penalty period 2.2 months that will begin after she has spent down her remaining funds to $2,000 and applied for Medicaid. How she will pay for the 2.2 months is unknown. Note that the new Medicaid rules do claim to allow transfers for reasons other than Medicaid eligibility. There was a similar old rule that was very narrowly interpreted. The new and old rules contain the example of a young man transferring property and then having an incident that resulted in Medicaid application to pay for long term care in the nursing home. The rule advised that the transfer was not in consideration of application for Medicaid. The Medicaid department has never applied this logic to an older person on the presumption - one would suppose - that old people plan on going to nursing homes. Everybody but the Michigan Medicaid department knows that is false.
5. The Penalty Period Runs Only After Application
This creates a problem for those who apply for “retroactive benefits.” For example, what if Mrs. King, above, applied for Medicaid after she recuperated for two months in the nursing home? Though she may have been otherwise eligible during those two months, the penalty period will not run till after she applies. That means her Medicaid would not cover the prior months plus 2.2 months after she applied. How will she pay for the 4.2 months?
6. Annuities Must Make the State a Beneficiary
Under DRA 2005, when a person applies for Medicaid and has an annuity, the company must name the State of Michigan as a primary beneficiary upon death of the Medicaid recipient. Only spouses and disabled children may be given higher priority than the state. In that case the state is the secondary beneficiary.
7. Homestead Equity Limit is $500,000
Under DRA 2005, the exempt homestead is limited in equity value to $500,000. That will not be a problem for the vast majority of Michigan Medicaid applicants. It will be a big problem for those who have farms or have homes on multi-acre parcels. It simply means that if the applicant's equity is over $500,000 the applicant is not eligible. Period. Note, the limit does not apply if there is a spouse or disabled child living in the homestead.
Changes Continue Years Later
Change continues to be the operative word when speaking of Michigan Medicaid policy. Many changes are of questionable legality, however finding a person who wishes to contest them in court is not simple. For example, the policy proclaims home care and personal care contracts to be divestment if a person is in a nursing home or in some assisted living residences, or eligible for Medicaid waiver services in-home. Now payments under these contracts are divestment without a doctor's letter finding the services necessary. These changes seem designed to move a person into a nursing home, rather than using funds to stay out of the nursing home. The irrational policy now penalizes giving away an unused car, meaning it will just have to sit unused, rusting away, somewhere.
Advance planning is required and opportunities to avoid the harsh consequences of the five year rule are missed by those who do not plan well in advance of placement. Call us at 248-356-3500 today for an appointment.