This is going to be off topic.

Walking into work this morning, I could not help but notice that the air was crisp and the sky was beautiful. Yesterday, temperatures were in the high forties and just a few miles to our south, there is not any snow on the ground. Even though we are anticipating 4-8 inches of snow this evening here, the sunrise this morning brought this poem to my mind by Emily Dickinson:

A Light exists in Spring
Not present on the Year
At any other period –
When March is scarcely here

A Color stands abroad
On Solitary Fields
That Science cannot overtake
But Human Nature feels.

It waits upon the Lawn,
It shows the furthest Tree
Upon the furthest Slope you know
It almost speaks to you.

Then as Horizons step
Or Noons report away
Without the Formula of sound
It passes and we stay –

A quality of loss
Affecting our Content
As Trade had suddenly encroached
Upon a Sacrament.

I will admit that I only recalled the first two lines with any precision (literature classes are suddenly so long ago!) and upon looking the poem up, I was delighted to find the line “When March is scarcely here”. This is the kind of wonderful coincidence one finds in life and great art. What a beautiful thing that this poem should so perfectly capture early March that it should come to mind today after a passing glance to the sky.

Recognition of Spring’s soon arrival only comes with having lived through many Winters. And for this reason we cannot see the distinctive light of Spring without feeling the weight of many years. Question: what does it mean exactly that Spring passes and we stay? It seems to me at once both a very hopeful and melancholy observation, but I invite your thoughts.

One interesting side-effect of the planned economic stimulus package is that retirees and others who have not filed taxes in years should do so this year. That is because the IRS cannot issue a refund without a determination of tax liability for 2007. Even if there are no taxes due, a tax return should still be filed in order to show that the filer has at least $3,000.00 in earned income–the threshold for receiving a “rebate” under the stimulus package. This article has all the details. As the author notes:

[S]ome low-income workers, Social Security beneficiaries, certain railroad retirees and those who receive certain Veterans Affairs benefits normally are not required to file a tax return but may qualify for the stimulus payment. They should file this year if they have at least $3,000 in qualifying income.

It is important to note that there are many organizations providing free assistance to seniors on tax preparation.

When President Bush signed the Deficit Reduction Act of 2006, the states began to implement that law through a steady patchwork of regulations. Michigan issued revisions to Medicaid qualification rules on a quarterly basis throughout 2007 and there is no reason to think that this pace will slow down in 2008. I will be posting on a regular basis on the many recent changes that have been introduced here in Michigan, including those with retroactive effect and those pertaining to estate recovery.

This article highlights the reality that more changes in Medicaid law are forthcoming.

CMS has proposed new rules that would give states more latitude in designing their Medicaid programs. The rules, which address provisions of the Deficit Reduction Act of 2005 and the Tax Relief and Health Care Act of 2006, would give states the ability to build Medicaid programs that work more like their local private health plans. CMS also has issued proposed regs, based on DRA provisions that will allow states to change premiums and cost-sharing rules.

CMS (The Center for Medicare and Medicaid Services) is a federal agency that oversees the states’ implementation of Medicare and Medicaid. For instance, Michigan is supposed to be in the process of submitting its recently passed estate recovery program to CMS for approval. Whether Michigan will be allowed to use the comparatively mild form of estate recovery it has proposed remains to be seen.

The bottom line with all these changes is, well, the bottom line. Medicare and Medicaid are hugely expensive programs and with the average cost of care in a nursing home at about $6,500.00 month in Michigan, long term care Medicaid is a particularly expensive program. It is generally encouraging that CMS is allowing states to develop programs more tailored to their particular circumstances. This may allow some states to stretch their already strained budgets a bit further. But eligibility rules for long term care Medicaid will become ever more restrictive in the near future, and, I would suggest, that if the Deficit Reduction Act is not enough to limit access to Medicaid, that further reform will be coming. This highlights the need for both pre-planning and long term care insurance.

States have begun to encourage all citizens to obtain long term care insurance as part of the Deficit Reduction Act. No one likes paying premiums on insurance, but for those of modest means, the premiums are especially burdensome and the benefits, considering that Medicaid is available when the assets run out, negligible. According to this article from the Wall Street Journal, “States Draw Fire for Pitching Citizens on Long Term Care Insurance,” the broad encouragement to obtain long term care insurance is generating profits for the insurance industry at the expense of people who cannot afford it:

The state endorsements are “the single best thing that has happened to the long-term care industry,” says Jesse Slome, executive director of the American Association of Long-Term Care Insurance. Total premiums collected for long-term care, or LTC, policies were $10 billion in 2007, up 21% from $8.2 billion in 2004.

Critics are sounding alarm bells. They argue that the financial benefits of LTC insurance for many target customers are negligible to nonexistent. Their income and assets are so low that they would quickly qualify for free care under Medicaid.

I have seen people with long term care insurance who had little to gain from having it, and I did not ask how much the premiums were–money that had been squandered. It is certainly common to see premiums of more than $3,000.00 per year.

My view is that long term care insurance can certainly be a good idea, but that decision cannot be made without the a thorough consultation with an elder law attorney. Why? Qualification for Medicaid is a specialty in of itself. The law is nuanced and subject to change. Whether one should have long term care insurance is a fact sensitive determination that should be made in the context of an overall estate plan with clearly defined goals. I can tell a client how soon they can qualify for Medicaid (which will be sooner than you think) and what value long term care insurance will have. A one hour consultation can easily save tens of thousands of dollars–by protecting assets or avoiding unnecessary insurance.

The key is to match estate planning goals with the best means available to achieve those goals. Frequently, a combination of long term care insurance along with an asset protection plan will make the most sense for people who are pre-planning their long term care needs. But if one cannot afford or cannot obtain long term care insurance, an asset protection plan is an excellent substitute and generally, a comparative bargain.

When a single person goes for long term care (or both spouses), there are several obstacles to overcome in order to preserve the homestead. First of all, the patient(s) will be limited to just $2,000.00 in non-exempt assets (each). Secondly, the homestead will be at risk for estate recovery–a program by which the state can seek repayment of Medicaid benefits against the estate of a Medicaid recipient.

But perhaps the most dangerous aspect of this scenario is the qualification rules will not allow any money beyond the $2,000.00 limit to be set aside for maintenance of the homestead without some fairly complex asset protection techniques. Gifting assets will result in a period of ineligibility that will not be served. Personal care contracts are now reviewed by such exacting standards that few will pass muster. Crisis planning becomes a necessity if the homestead is going to be preserved without imposing a hardship on other family members. Pre-planning can avoid these problems altogether.
People in this situation are often forced to rent the homestead in order to meet the expenses of utilities and insurance. But renting a home for a person on Medicaid has exacting requirements of its own and the net profits will go to nursing home care. Moreover, renting a home can compromise the primary residence exemption for property tax purposes. This can cause the property taxes on the home to increase significantly, a particular harsh result in light of the limited resources that will be available to meet homestead expenses. And assuming these problems are successfully resolved, the home must still be protected from estate recovery.

I recently helped a family with a crisis plan for an individual with a significant homestead. One problem was that the homestead had a home equity loan on it, so that it was necessary not only to pay the utilities and the property taxes, but also to pay on the home equity line order to avoid foreclosure. This situation is only complicated further by the poor housing market in Michigan, which makes liquidation of the home extremely difficult.

Situations like this point toward the need to pre-plan, or, at the very least, consult with an attorney upon entry to the nursing home.