Earlier this fall, Michigan legislators considered a new proposal calling for a 3% tax on physicians’ gross revenues, a move which would allow Michigan to raise its low Medicaid re-imbursement rates by 4% across the board. The proposal, as it turns out, ignited a firestorm of opposition, with several hundred doctors and others in the medical community organizing in protest at the Capitol in Lansing. The bill was quickly killed in the Michigan Senate by a 32-4 vote following earlier passage in the House.

In the wake of that bill’s defeat came a sucker punch for those providers who accept Medicaid payments: an 8% reduction in the already-low rates.

The cut comes on the heels of a 4% rate reduction in July, making Michigan Medicaid re-imbursement rates just 55% of private insurance rates, and 50% of Medicare rates. Readers can find a synopsis of the rate changes on the AMA’s American Medical News website, as well as budget changes discussed here, here and here.

So how does this impact consumers?

Unfortunately, Michigan residents already face difficulty finding quality medical care that Medicaid will cover. Now fewer and fewer physicians will be able to serve patients receiving Medicaid coverage without going out of business. In short, this added rate reduction will further intensify the problem of access to quality care and scarcity of providers.

Those receiving long-term care Medicaid should not notice significant changes to their care, but Michigan’s 400 or so nursing homes will surely feel the sting of major revenue reductions (after all, a full 69% of nursing home residents rely on long-term care Medicaid to cover their nursing home expenses for some portion of their care). This means that placement in a quality facility will become more and more challenging as nursing homes throughout the state struggle to stay in the black. That makes working for a quality placement with an elder care team of professionals – an elder law attorney, geriatric care manager and/or social worker – more important than ever.

It also remains to be seen whether nursing homes adjust their private pay rates to help offset Medicaid losses. If they do – and it’s difficult to imagine how they can avoid doing so – planning ahead will be increasingly important as private pay rates consume family resources that much more quickly.

Many people develop and execute a tax plan between now and the end of the year. With just about seven weeks remaining in the year, it is time to move quickly.

But very few people need to plan their gifting for tax purposes anymore. With the estate tax being eliminated in 2010 and the estate tax exemption at $3.5 Million in 2009, there is very little tax planning to do anymore. The current $13,000.00 per person per year gift exclusion actually impacts very few people.

What is much more likely to be an issue is the 5 year look back period on all gifts for Medicaid purposes. What that means is that any gifts to family members can be reviewed in the event of needing long term care for up to five years. End of year planning should really be focused on protecting both an estate and gifts from the estate from the cost of long term care.

Think about the situation this way: gifts that you give now can be reviewed for up to five year in the event that you need long term care. If it is found that you have given a gift, your beneficiary could be asked to return that money in order to pay for your long term care. That is because Medicaid will not cover your expenses for a period time equal to the gifts you have given away within five years of qualifying for Medicaid divided by the average monthly cost of care. For Michigan residents, the monthly cost of care is $6,326.00 according to the state. That means that a gift of $31,810.00 will result in six months of ineligibility for Medicaid.

One way to avoid this problem is to create a family trust in advance of needing care. A properly drafted trust can help to protect assets, provide you with control of those assets, and avoid the concerns of penalties and look-back periods.

I would like to take a moment to address what I believe to be a huge misconception – if not deception – by some in the elder care industry: that the ranks of seniors today are on the brink of exploding due to Baby Boomers crossing the threshold to the elder world of significant physical and mental decline, limited mobility and difficulty with the tasks of daily living. Let’s be honest: There is no such boom! It is really a wonderful bit of news that Americans are living longer and longer, with life expectancies now hitting unprecedented highs of upper 70’s or even 80’s in the case of some demographic groups. But, truth be told, this means that the Boomers – allegedly on the cusp of their twilight years – are really decades away from their final days. That is a great blessing and a product of our countless advances in science – pharmaceutical advances, early screenings and therapies, and lifestyle adjustments. In my own practice I see day in and day out that the Baby Boomers who reach out to me are contacting regarding their aging parents who are now in their 70’s, 80’s and 90’s. They are the children, not the seniors!

In his insightful book, The Age Curve, Kenneth Gronbach demonstrates that the elder care world is mistaken in believing that a tidal wave of newly baptized seniors is just around the corner. In fact, he argues, the whole industry is a couple of decades ahead of schedule in scrambling to build assisted living facilities and making similar preparations for the imminent onslaught. One only need be 50 to join AARP, the American Association of Retired Persons –a rather outdated age given the climbing life expectancy and increased quality of life we are seeing for seniors well into their seventies, eighties and nineties. A 50-year-old these days might easily still be taking care of a beloved grandparent! So much for talking points on the “sandwich generation” – it’s not quite that simple!

Americans continue to age, of course; it’s simply that we are not seeing tangible declines in well-being, health and overall quality of life until much later than the common wisdom – or the industry – might suggest. In some ways, this doesn’t make anything easier for families. There may be a larger network of family members to care for the aging loved one, since grandchildren may more easily be available as adults to care for an elder. But that doesn’t make it any less stressful for the family or the elder, especially in light of the disconnectedness that characterizes so many American families in our age. Furthermore, extended lifetimes can mean extended costs, especially where debilitating diseases such as Alzheimer’s or Parkinson’s impact the extent and duration of caregiving. Critical end-of-life conversations and financial preparations still need to take place, and are perhaps more important than ever. We just need to be honest about the timetable.

The Centers for Medicare and Medicaid Services (CMS) has published their long-anticipated 5 star rating system for nursing homes. The breadth of the new rating system is astounding: in Michigan alone, complete information can be found on 425 nursing homes. The system offers information on the number of beds available, the types of payment accepted and, most importantly, several indices of nursing home quality. Each nursing home is given an overall rating, as well as ratings on health inspections, staffing, and quality measures.

One quickly wonders how accurate the system really is. Given how much information is in the system, and how many people collected data, it seems difficult to believe that the system will be completely fair, objective and accurate. And indeed, several ratings for facilities that I know well have lower ratings than I would expect. CMS provides this Note to Nursing Homes to explain their methodology in collecting information. It is also helpful to note CMS’s policy that:

Each nursing home is also required by law to have the latest survey results on hand for the public to review. For the most recent survey results, contact the State Survey Agency. Their phone number is in the Helpful Contacts section of this website.

CMS also provides a number of useful publications related to nursing homes and care of the elderly generally. For instance, there is Medicare’s Guide to Choosing a Nursing Home, the Nursing Home Checklist, and a guide to Your Rights as a Nursing Home Resident.

And for those families seeking to avoid nursing home care, CMS has published resources on alternatives to nursing home care.

Private resources are also available to families seeking assistance with care management, financing, nursing home selection and other related issues. For instance, www.wheretofindcare.com is an extensive resource where patients and their families can both locate and comment on a wide variety of medical care providers. As an attorney who works with the elderly regularly, I publish several guides to Nursing Home Care, Hospice Care, and Medicaid Planning. Families with aging members can quickly become overwhelmed with the stress of caring for an aging person and our maze of a health care system. These resources are intended to help families find the information they need as quickly as possible.

The Center for Medicare and Medicaid Services (CMS) has apparently rejected Michigan’s proposed estate recovery program. Michigan’s proposed legislation was unique not only for being last in the union to be enacted, but also for being exceptionally lenient. It is therefore reasonable to assume that Michigan will be required to enact a more aggressive approach to estate recovery.

This issue has been appealed by the state of Michigan with a hearing set for January. There will be much more to say on this issue as it develops.

Medicaid qualification is full of its own jargon that can make the process a mystery to almost anyone. One key concept to understand is the “community spouse resource allowance.” To speak in the jargon of Medicaid for a moment, the community spouse resource allowance is the value of non-exempt assets that a married couple is permitted to keep and still qualify for Medicaid long-term care assistance. That definition is quite a mouthful, so I will break it all down and put it into context.

When one member of a married couple requires long-term care for more than 30 days, an inventory of the couple’s assets as of the day the institutionalized spouse first entered the hospital or nursing home must be prepared. This is done using form DHS 4574-B, the Asset Declaration. This form must accurately describe a couple’s assets, under penalty of law. From this form, a determination is made of how much the couple will be permitted to keep and qualify for Medicaid. Eventually, assets that are retained by the couple will have to be separately titled in the name of the spouse who is not institutionalized. That spouse is called the community spouse. Therefore, the amount the couple can keep is called the community spouse resource allowance. “Resource” means basically the same thing as “asset” for most purposes. The process of dividing assets between what must be spent down and what the community spouse may keep is referred to as the division of assets. Generally speaking, the community spouse will be permitted to keep one half of all countable assets, but no less than $20,800.00 and no more than $104,400.00.

To take an example, let’s suppose that Bob and Mary have a house worth $150,000.00 and a car worth $8,000.00 and $150,000.00 in the bank on the day that Bob goes into the nursing home. Bob and Mary’s asset declaration might look like this:

House                    $150,000.00

Car                    $8,000.00

Bank Account                $150,000.00

Total:                    $308,000.00

At first glance, it appears that this couple is entitled to take retain the full $104,400.00 since they have $308,000.00 in net worth. But remember that the community spouse resource allowance only concerns non-exempt assets. The car and the house are exempt assets and so they do not count in the determination of what the couple may keep. But by the same token, the car and the house are not subject to spend-down. Here, the couple will only be entitled to keep $75,000.00 of the $150,000.00 in money that they have in the bank. The remaining $75,000.00 is the amount that is subject to spend-down. This money must be devoted to specific purposes under law, most commonly the cost of nursing home care. However, there are significant ways to put this money to the best use for the sake of the community spouse that will help to secure a retirement, care for the community spouse, or meet a number of other needs that the family may be facing. This is one area where consultation with an experienced elder law attorney can be particularly helpful.

For a free guide to Medicaid Planning and Division of Assets, send an email to Jerrold Bartholomew.

Estate recovery has been permitted under the Federal law since 1965. In 1993, the Federal law was changed to require states to have some form of estate recovery. Since that time, many different kinds of estate recovery programs have been enacted in different states. Michigan became the last state in the union to enact estate recovery when it passed an estate recovery law in September of 2007. Despite being tremendously unpopular, the estate recovery law passed in Michigan during the state’s budget crisis in the fall of 2007.

There are probably two reasons why Michigan adopted estate recovery. First, with the state budget showing severe deficits, law-makers were interested in any possibility of increased revenues. Second, the Federal government was threatening to deny money to fund Michigan’s Medicaid program because Michigan had failed to comply with the 1993 mandate to enact some form of estate recovery. The loss of matching funds from the Federal government would have been a catastrophic blow to Michigan’s already ailing budget.

Whether estate recovery will do anything to balance Michigan’s budget is far from clear at this point. Estate recovery programs are costly to administer and the recovery is often meager. It is hard to say whether recovering an estimated 5% will be worth the trouble:

The Mackinac Center for Public Policy has estimated that Michigan could actually see a savings of up to $85 million per year if it implemented an estate recovery system, which was based on collections nationally from 2004 that totaled $362 million out of the $45.8 billion spent on nursing home Medicaid recipients.

“Oregon had the second highest rate of collection at 5.8 percent, or $13 million of its $238 million Medicaid nursing home care bill. Given the $1.7 billion Michigan spent on Medicaid nursing home care, a 5 percent recovery rate would save taxpayers $85 million,” wrote TaraLynn Velting, an estate attorney with Garan Lucow Miller in Grand Rapids and an adjunct scholar with the Mackinac Center.

There are always unintended consequences to laws that seek to increase revenues. The enactment of estate recovery is likely to contribute to anxiety among seniors and may actually result in more extensive Medicaid planning. Protecting a home from estate recovery often requires a combination of strategies that are only available to families who are proactive and begin the planning process sooner to avoid risk to the home. The net impact of estate recovery could therefore be an increase in the number of people receiving long-term care Medicaid.

Estate recovery is a state program created to recoup the costs of providing care to Medicaid long-term care recipients. Once a Medicaid recipient passes away, the state uses a variety of legal processes to take the remaining assets of that Medicaid recipient to the extent of Medicaid benefits provided. The state’s ability to take assets is not unlimited and may be subject to a variety of allowances provided in other parts of the state law. For most people, the biggest worry regarding estate recovery is that the state will take the family home.

Only 35 percent of Americans over age 65 are online, according to data from April and May compiled by the Pew Internet Project at the Pew Research Center.

But when you account for factors like race, wealth and education, the picture changes dramatically. “About three-quarters of white, college-educated men age over 65 use the Internet,” says Susannah Fox, director of the project.

I recently received a letter offering a “Certified Copy” of the deed to my home. The offer explains that the Federal Citizen Information Center recommends that every home owner have a certified deed and that the National Deed Service could provide a deed for just $59.95. There actually is an article at the Federal Citizen Information Center recommending that everyone have a copy of the deed to their home, which can be found here. And indeed, for estate planning, medicaid planning, or asset protection planning, it is a good idea to have a copy of the recorded deed to your home on hand. As the Federal Citizen Information Center article notes:

When was the last time you couldn’t find an important paper you knew you had carefully put away? How do people decide where to store and keep such records? And how do they know what to keep, what to throw away, and when? Do you have an easy to figure out system you or a loved one can refer to in case of an emergency?

If you take a look at the Medicaid Checklist, you will see that gathering important information can be a big job.

But the National Deed Service price of $59.95 for a copy of your deed is outrageous. Even the Federal Citizen Information Center has a warning about the problem. A copy of your recorded deed is available at your local register of deeds for $1.00 per page or less. In most cases, that is going to be just $2.00. Melissa Devaugh of the Lapeer County Register of Deeds echoes the warning about this deed scam here:

This company is not affiliated with Lapeer County Government in any way. This company is using tactics to persuade you to pay an outrageous fee (a whopping $69.50) to them and in return they will provide you with a copy of your deed. Please understand this company MUST obtain the Certified Copy from the Lapeer County Register of Deeds. Once they receive the certified document from US, they in turn provide it to you for the $69.50! Don’t be fooled! If you need a copy of your deed, please call the Lapeer County Register of Deeds. We will be happy to provide you a certified copy at a low cost of $1.00 per page plus $1.00 for the certification…A MUCH LOWER COST THAN WHAT THIS COMPANY IS ASKING!

It is unfortunately the case that scams like the National Deed Service take place every day. And indeed, the scams are often much more damaging than $59.95. Many of the victims of the scams are the elderly who cannot afford the unnecessary loss. Asset protection planning can help seniors to avoid falling victims to this and other more serious scams.