September 20, 2018
Author: Bryon J. Will
Organization: Bryon J. Will, P.L.L.C.
The following is only an introduction guide for a practitioner to use in beginning to understanding Medicaid law and qualification. The text below contains cited legal authority and opinions of the drafting attorney. The opinions of the drafting attorney shall not be interpreted as legal authority. ALL CITED LEGAL AUTHORITY BELOW IS USED FOR INSTRUCTIONAL PURPOSES ONLY. SUCH CITED LEGAL AUTHOIRTY MAY NOT BE COMPLETE, AND NONE OF THE BELOW MATERIALS SHALL BE USED AS LEGAL AUTHORITY. THE COMPLETE VERSIONS OF SUCH CITED LEGAL AUTHORITY IS FOUND IN THE OKLAHOMA ADMINISTRATIVE CODE, TITLE 317. You may find the Oklahoma Administrative Code at the Oklahoma Secretary of State's website at https://www.sos.ok.gov/, or you may find Title 317 of the code at the Oklahoma Department of Human Services website at http://www.okdhs.org/library/policy/oac317/.
INTRODUCTION
In Oklahoma, the Medicaid program is administered by the Oklahoma Department of Human Services (ODHS). The Oklahoma Health Care Authority (OHCA) is the entity charged with interpreting the federal Medicaid rules and to promulgate the Medicaid rules for the state of Oklahoma. Even though the rules are interpreted and drawn by OHCA, qualification of a Medicaid applicant is determined by ODHS. SoonerCare is Oklahoma's provider of Medicaid benefits.
RESOURCES FOR MEDICAID LAWS AND RULES
- Title XIX of the Social Security Act of 1966
- As amended by Medicare Catastrophic Coverage Act of 1988
- As amended by Omnibus Reconciliation Act 1993 (OBRA '93)
- As amended by Deficit Reduction Action 2005 (DRA '05) (Note that DRA '05 was not effective until February 8, 2006)
- Oklahoma Administrative Code, Title 317 (http://www.okdhs.org/library/policy/oac317/)
Medicaid laws are drafted and passed by the United States Congress and do not change very often. Many people are under the impression that Medicaid laws often change and are therefore quite volatile. Medicaid laws, however, are adopted by the individual states and each state uses their own interpretation of the federal law when implementing the Medicaid laws. It is often times that it is the state's interpretation that changes rather than the Federal law itself.
COMMON TERMS USED IN PRACTICING WITH MEDICAID LAW
- Medicaid Applicant (MA)
- Medicaid Recipient (MR)
- Institutionalized Spouse (IS)
- Community Spouse (CS)
- Personal Needs Allowance
- Maximum Monthly Income Standard
- Community Spouse Resource Needs Allowance
- Snap Shot Date
- Look-Back Date
- Look-Back Period
- Spend Down
- Compensated Transfer
- Uncompensated Transfer
- Penalty Period
MEDICAID PLANNING
Medicaid is no longer health insurance for the poor. Federal law provides rules for the middle class to become Medicaid eligible without total impoverishment. To qualify, the individual must meet certain income and asset requirements and not exceed certain income and asset limits. If the individual's income or assets exceed the qualifying limits, they will not be eligible.
For an individual to be eligible for Medicaid, they must fall in a certain category of people. Such categories include 1.) pregnant women, 2.) persons under the age 19, 3.) needy families in need of medical benefits, and 4.) aged, blind, and disabled individual. For the purposes of this lesson, this text will only cover the category of aged, blind, and disabled for individuals entering into a nursing home facility.
Long-term care and nursing home funding has become an increasing concern lately, especially for the retiring Baby Boomers. There are multiple ways to pay for long-term care including long-term care insurance and/or private pay. However, many people have not taken out long-term care insurance due to the increasing costs of such policies, and many people believe that by the time they enter a nursing home they may run out of money to pay for longterm care. So if long-term care insurance and private pay are not options, then by default they may have to apply for Medicaid.
An individual or a couple may begin to plan for the possibility of needing to apply for Medicaid for their long-term care well before they have to enter into a nursing home. To do this they must position their estate so that their gross monthly income and value of their non-exempt assets comply with the Medicaid rules. They can convert non-exempt assets to exempt assets, sell their property and spend the cash, gift their assets to loved ones, or utilize certain trusts. If gifting and certain trusts are used, then they must be aware of any look-back period and other precautions before such transaction.
TRUSTS
Trusts are common tools used in planning for Medicaid. It is common for individuals to want to convey their assets to a trust in order to protect such assets from being considered countable/available resources. However what most individuals fail to realize is the Medicaid rules do account for individuals conveying their assets to trusts. In most instances if the individual conveys their assets to a revocable trust, such assets still retain their \"countable/available resource\" status do to the individual having the ability to revoke their trust or to remove the asset from the trust. In order for a trust to provide asset protection from assets being considered countable/available resources, the individual must follow the rules for the irrevocable trust.
OAC 317:35-5-41.6 Monies held in trust for an individual applying for or receiving SoonerCare must have the availability of the funds determined. Funds held in trust are considered available when they are under the direct control of the individual or his/her spouse, and disbursement is at their sole discretion.
OAC 317:35-5-41.6(2)(F) Irrevocable trust. Irrevocable trust means a trust in which the grantor has expressly not retained the right to terminate or revoke the trust and reclaim the trust principal and income.
OAC 317:35-5-41.6(2)(I) Revocable trust. Revocable trust means a trust in which the grantor has retained the right to terminate or revoke the trust and reclaim the trust principal and income. Unless a trust is specifically made irrevocable, it is revocable.
Even an irrevocable trust is revocable upon the written consent of all living persons with an interest in the trust. OAC 317:35-5-41.6(5) Trust accounts established after August 10, 1993. The rules found in (A) - (C) of this paragraph apply to trust accounts established after August 10, 1993.
OAC 317:35-5-41.6(5)(A) For purposes of this subparagraph, the term \"trust\" includes any legal document or device that is similar to a trust. An individual is considered to have established a trust if assets of the individual were used to form all or part of the principal of the trust and if the trust was established other than by will and by any of the following individuals:
(i) the individual;
(ii) the individual's spouse;
(iii) a person, including a court or administrative body, with legal authority to act in place of or on behalf of the individual or the individual's spouse; or
(iv) a person, including a court or administrative body, acting at the direction or upon the request of the individual or the individual's spouse.
OAC 317:35-5-41.6(5)(B) Where trust principal includes assets of an individual described in this subparagraph and assets of any other person(s), the provisions of this subparagraph apply to the portion of the trust attributable to the assets of the individual. This subparagraph applies without regard to the purposes for which the trust is established, whether the trustees have or exercise any discretion under the trust, and restrictions on when or whether distributions may be made from the trust, or any restrictions on the use of the distribution from the trust.
OAC 317:35-5-41.6(5)(C) There are two types of trusts, revocable trusts and irrevocable trusts.
(i) In the case of a revocable trust, the principal is considered an available resource to the individual. Home property in a revocable trust under the direct control of the individual, spouse or legal representative retains the exemption as outlined in OAC 317:35-5-41.8(a)(2). Payments from the trust to or for the benefit of the individual are considered income of the individual. Other payments from the trust are considered assets disposed of by the individual for purposes of the transfer of assets rule and are subject to the 60 months look back period.
(ii) In the case of an irrevocable trust, if there are any circumstances under which payments from the trust could be made to or for the benefit of the individual, the portion of the principal of the trust, or the income on the principal, from which payment to the individual could be made is considered available resources. Payments from the principal or income of the trust is considered income of the individual. Payments for any other purpose are considered a transfer of assets by the individual and are subject to the 60 months look back period. Any portion of the trust from which, or any income on the principal from which no payment could under any circumstances be made to the individual is considered as of the date of establishment of the trust (or if later, the date on which payment to the individual was foreclosed) to be assets disposed by the individual for purposes of the asset transfer rules and are subject to the 60 months look back period.
CAUTION TO ANY TRANSFERS OR DISPOSAL OF INDIVIDUAL'S PROPERTY FOR LESS THAN FAIR MARKET VALUE
In planning for the purposes of qualifying for Medicaid the individual and/or couple must bear caution as to how they either transfer their property to trusts or dispose of their property. As mentioned above, if property is conveyed to a revocable trust then such property is still considered as available assets and therefore there are no issues of transferring or disposing of such property for less than fair market value. In essence, the Medicaid rules indicate that the individual can still \"touch\" such property in a revocable trust. Nevertheless, if the individual and/or couple sell their property, convey their property to an irrevocable trust, or even gift their property, all for less than fair market value, then after the individual (Medicaid applicant) otherwise qualifies for Medicaid (OAC 317:35-19-20(5)(C)(ii)) they will be assessed a penalty for the difference of transfer price and the fair market value of the property (OAC 317:35-19- 20(5)(E)).
Look-back dates:
According to the Medicaid rules as a part of the application process for Medicaid benefits, the Medicaid applicant must submit financial statements and evidence of financial transactions for a certain period of time prior to the date the Medicaid applicant entered into long-term care, which is commonly referred to as the look-back date. The Medicaid rules set out the criteria for the look-back date. From these records a determination will be made if there were any transfers and as to whether such transfers were compensated or non-compensated transfers (whether the transfers were made for fair market value).
The date the Medicaid applicant entered into long-term care is commonly referred to as the \"snap-shot date.\"
Transfer of assets on or after August 11, 1993 but before February 8, 2006:
OAC 317:35-19-20(4) An institutionalized individual, an institutionalized individual's spouse, the guardian or legal representative of the individual or individual's spouse who disposes of assets on or after August 11, 1993 but before February 8, 2006 for less than fair market value on or after the look-back date specified in (A) of this paragraph subjects the individual to a penalty period for the disposal of such assets.
OAC 317:35-19-20(4)(A) For an institutionalized individual, the look-back date is 36 months before the first day the individual is both institutionalized and has applied for medical assistance. However, in the case of payments from a trust or portions of a trust that are treated as transfers of assets, the look back date is 60 months.
OAC 317:35-19-20(4)(B) For purposes of this paragraph, an \"institutionalized\" individual is one who is residing in a [nursing facility].
OAC 317:35-19-20(4)(C) The penalty period begins the first day of the first month during which assets have been transferred and which does not occur in any other period of ineligibility due to an asset transfer. When there have been multiple transfers, all transferred assets are added together to determine the penalty.
POST DRA'05 RULE
Transfer of assets on or after February 8, 2006
OAC 317:35-19-20(5) An institutionalized individual, an institutionalized individual's spouse, the guardian or legal representative of the individual or individual's spouse who disposes of assets on or after February 8, 2006 for less than fair market value on or after the look-back date specified in (A) of this paragraph subjects the individual to a penalty period for the disposal of such assets.
OAC 317:35-19-20(5)(A) For an institutionalized individual, the look-back date is 60 months before the first day the individual is both institutionalized and has applied for medical assistance. However, individuals that have purchased an Oklahoma Long-Term Care Partnership Program approved policy may be completely or partially exempted from this Section depending on the monetary extent of the insurance benefits paid.
OAC 317:35-19-20(5)(B) For purposes of this paragraph, an \"institutionalized\" individual is one who is residing in an [nursing facility].
OAC 317:35-19-20(5)(C) The penalty period will begin with the later of:
(i) the first day of a month during which assets have been transferred for less than fair market value; or
(ii) the date on which the individual is:
(I) eligible for medical assistance; and
(II) receiving institutional level of care services that, were it not for the imposition of the penalty period, would be covered by SoonerCare.
OAC 317:35-19-20(5)(D) The penalty period:
(i) cannot begin until the expiration of any existing period of ineligibility;
(ii) will not be interrupted or temporarily suspended once it is imposed;
(iii) When there have been multiple transfers, all transferred assets are added together to determine the penalty.
OAC 317:35-19-20(5)(E) The penalty period consists of a period of ineligibility determined by dividing the total uncompensated value of the asset by the average cost to a private patient in a nursing facility in Oklahoma shown on OKDHS Appendix C-1. In this calculation, the penalty must include a partial month disqualification based upon the relationship between that fractional amount and the average cost to a private patient in a nursing facility in Oklahoma. There is no limit to the length of the penalty period for these transfers. Uncompensated value is defined as the difference between the fair market value at the time of transfer less encumbrances and the amount received for the resource.
The average cost to a private patent in a nursing facility in Oklahoma is found in Appendix C-1, Schedule VIII(B). Currently the average daily cost of nursing home care is $143.52.
OAC 317:35-19-20(5)(H) A penalty would not apply if:
(i) the title to the individual's home was transferred to:
(I) the spouse;
(II) the individual's child under age 21 or who is blind or totally disabled as determined by Social Security;
(III) a sibling who has equity interest in the home and resided in the home for at least one year immediately prior to the institutionalization of the individual; or (IV) the individual's son or daughter who resided in the home and provided care for at least two years immediately prior to the individual's institutionalization.
(ii) the individual can show satisfactorily that the intent was to dispose of assets at fair market value or that the transfer was exclusively for a purpose other than eligibility. It is presumed that any transfer of assets made for less than fair market value was made in order to qualify the individual for SoonerCare. In order to rebut this presumption, the individual must present compelling evidence that a transfer was made for reasons other than to qualify for SoonerCare. It is not sufficient for an individual to claim that assets were transferred solely for the purposes of allowing another to have them with ostensibly no thought of SoonerCare if the individual qualifies for SoonerCare as a result of the transfer.
Curing the uncompensated transfer or transfer for less than fair market value:
OAC 317:35-19-20(5)(J) The penalty period can be ended by either all assets being
restored or commensurate return being made to the individual.