How Medicaid Block Grants Would Affect Georgia Seniors

One federal budget proposal currently being promoted by House Republicans led by Paul Ryan calls for converting Mediciad funding to a block grant program.  This will cause another unfunded mandate which will ultimately hurt Georgia's senior citizens as well as our state and local governments.

Currently, the federal government sets the minimum financial eligiblity for Medicaid recipients and remiburses the state according to a formula for all of the healthcare services provided.  If there are more residents who qualify for services, reimbursement increases.  Under a block grant, the federal government would provide each state with a fixed dollar amount.  Becuase the amount of the grants would not change to reflect increased costs, if Mediciad is converted to a block grant program, the states will have less flexibility and more responsiblity for Medicaid costs.  At best, this will turn Medicaid into another unfunded mandate and at worst, it will deny funding for services needed by Georgia seniors who have nowhere else to turn.

According to the Kaiser Commission on Medicaid and the Uninsured, Medicaid is the primary long-term services provider for America's low income older adults.  Ten million Americans currently need these services.  The Administration on Aging projects that the number of adults age 65+ in the population will almost double between now and the year 2030.  The federal reimbursement rate is based partly on per capita income, so states with a poorer elderly population receive a larger percentage than wealthier states.  For this year, the enhanced formula for Georgia was 75.73% while New York, New Jersey and Maryland each received 65%.

Unlike the current system, with a block grant, the federal governement would only provide a fixed amount of funding, regardless of how much the program costs.  In an emergency, or if a state uses up federal funding, it will have to reduce services or increase its own funding.  Given Georgia's current budget concerns, local taxpayers will end up bearing this burden, which they already paid once in their income taxes, for their fellow citizens.

Medicaid's rising costs are a real problem, but block grants will do more harm than good.  There are other solutions being proposed like the savings tools provided in the health reform law, coordinating care for dual eligibles and reducing Mediciad prescription drug costs.

Block grants will not be good for Georgia seniors or Georgia citizens.  Contact your representative and ask them to vote to remove this feature from any budget proposal that comes before them.

7 Tips for Families with Special Needs

This post examines the unique planning requirements of families with children, grandchildren or other family members (such as parents) with special needs. There are numerous misconceptions in this area that can result in costly mistakes when planning for special needs beneficiaries.  Understanding the pitfalls associated with special needs planning is a must for all of us who assist families who have loved ones with special needs.

Tip #1: Avoid disinheriting the special needs beneficiary.  Many disabled persons receive Supplemental Security Income (“SSI”), Medicaid or other government benefits to provide food, shelter and/or medical care. The loved ones of the special needs beneficiaries may have been advised to disinherit them - beneficiaries who need their help most - to protect those beneficiaries' public benefits. But these benefits rarely provide more than basic needs. This solution (which normally involves leaving the inheritance to another sibling) does not allow loved ones to help their special needs beneficiaries after they themselves become incapacitated or die.  The best solution is for loved ones to create a special needs trust to hold the inheritance of a special needs beneficiary. 

Planning Note: It is unnecessary and, in fact, poor planning to disinherit special needs beneficiaries. Loved ones with special needs beneficiaries should consider a special needs trust to protect public benefits and care for those beneficiaries during their own incapacity or after their death.

Tip #2: Procrastinating can be costly for a special needs beneficiary.  None of us know when we may die or become incapacitated.  It is important for loved ones with a special needs beneficiary to plan early, just as they should for other dependents such as minor children. However, unlike most other beneficiaries, special needs beneficiaries may never be able to compensate for a failure to plan. Minor beneficiaries without special needs can obtain more resources as they reach adulthood and can work to meet essential needs, but special needs beneficiaries may never have that ability.

Planning Note: Parents, grandparents, or any other loved ones of a special needs beneficiary face unique planning challenges when it comes to that child. This is one area where families simply cannot afford to wait to plan.

Tip #3: Don’t ignore the special needs of the beneficiary when planning.  Planning that is not designed with the beneficiary's special needs in mind will probably render the beneficiary ineligible for essential government benefits. A properly designed special needs trust promotes the comfort and happiness of the special needs beneficiary without sacrificing eligibility.

Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment & appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses: the sorts of things families now provide to their child or other special needs beneficiary.

Planning Note: When planning for a beneficiary with special needs, it is critical that families utilize a properly drafted special needs trust as the vehicle to pass assets to that beneficiary. Otherwise, those assets may disqualify the beneficiary from public benefits and may be available to repay the state for the assistance provided.

Tip #4: A special needs trust does not have to be inflexible.  Some special needs trusts are unnecessarily inflexible and generic. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the beneficiary's public benefits, many trusts are not customized to the particular beneficiary's needs. Thus the beneficiary fails to receive the benefits that the parents or others provided when they were alive.

Another frequent mistake occurs when the special needs trust includes a pay-back provision rather than allowing the remainder of the trust to go to others upon the death of the special needs beneficiary. While these pay-back provisions are necessary in certain types of special needs trusts, an attorney who knows the difference can save family members and loved ones hundreds of thousand of dollars, or more.

Planning Note: A special needs trust should be customized to meet the unique circumstances of the special needs beneficiary and should be drafted by a lawyer familiar with this area of the law.

Tip #5: Use great caution in choosing a trustee.  Loved ones or family members can manage the special needs trust while alive and well if they are willing to serve and have proper training and guidance. Once the family member or loved one is no longer able to serve as trustee, they can choose who will serve according to the instructions provided in the trust. Families or loved ones who create a special needs trust may choose a team of advisors and/or a professional trustee to serve. Whomever they choose, it is crucial that the trustee is financially savvy, well-organized and of course, ethical.

Planning Note: The trustee of a special needs trust should understand the trustmaker’s objectives and be qualified to invest the assets in a manner most likely to meet those objectives.

Tip #6: Invite others to contribute to the special needs trust.  A key benefit of creating a special needs trust now is that the beneficiary's extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. For example, these family members and friends can name the special needs trust as the beneficiary of their own assets in their revocable trust or will, and they can also name the special needs trust as a beneficiary of life insurance or retirement benefits.  Unfortunately, many extended family members may not be aware that a trust exists, or that they could contribute money to the special needs trust now or as an inheritance later.

Planning Note: Creating a special needs trust now allows others, such as grandparents and other family members, to name the trust as the beneficiary of their own estate planning.

Tip #7: Relying on siblings to use their money for the benefit of a special needs child can have serious adverse effects.  Many family members rely on their other children to provide, from their own inheritances, for a child with special needs. This can be a temporary solution for a brief time, such as during a brief incapacity if their other children are financially secure and have money to spare. However, it is not a solution that will protect a child with special needs after the death of the parents or when siblings have their own expenses and financial priorities.

What if an inheriting sibling divorces or loses a lawsuit? His or her spouse (or a judgment creditor) may be entitled to half of it and will likely not care for the child with special needs. What if the sibling dies or becomes incapacitated while the child with special needs is still living? Will his or her heirs care for the child with special needs as thoughtfully and completely as the sibling did?

Siblings of a child with special needs often feel a great responsibility for that child and have felt so all of their lives. When parents provide clear instructions and a helpful structure, they lessen the burden on all their children and support a loving and involved relationship among them.

Planning Note: Relying on siblings to care for a special needs beneficiary is a short-term solution at best. A special needs trust ensures that the assets are available for the special needs beneficiary (and not the former spouse or judgment creditor of a sibling) in a manner intended by the parents.

Bonus Tip:  Stay up to date on changes in the law.  The rules applicable to special needs trusts are constantly changing.  Most recently, the Social Security Administration changed the rules on special needs trusts that are created using assets of the special needs beneficiary (called a “self-settled special needs trust”).  The new Social Security regulations require certain provisions to be present in any self-settled trust drafted after January 1, 2000 that allows for early termination of the trust (termination prior to the death of the special needs beneficiary). 

If these required provisions are not in the trust, the special needs beneficiary could lose SSI or Medicaid eligibility.  The new regulations go into effect October 1, 2010.   Please contact us if you have questions about the new regulations or if you would like more information on the changes.

Planning Note:  A recent change in the Social Security Administration regulations governing self-settled special needs trusts could render some existing trusts invalid for SSI or Medicaid purposes.  It is imperative to stay up to date on changes in the rules that apply to special needs trusts to ensure the benefits received by a special needs beneficiary are not jeopardized as a result of changes in the law.

Conclusion:  Planning for a special needs beneficiary requires particular care and knowledge on the part of the planning team.  A properly drafted and funded special needs trust can ensure that special needs beneficiary has sufficient assets to care for him or her, in a manner intended by loved ones, throughout the beneficiary's lifetime.  Please contact us if you have any questions or would like to discuss any information in this post further.

Helping Veterans Pay for Long Term Care

There are currently over 25 million Veterans alive in the United States. There are over 9 million surviving spouses of Veterans currently living in the United States. Many of these Veterans and surviving spouses are receiving long term care or will need some type of long term care in the near future, and there are funds available from the Veterans Administration ("VA") to help pay for that care. Unfortunately, many of those who are eligible have no idea that any type of benefits exist for them or that an accredited attorney can help them become eligible.

Benefits Available
There are three types of benefits available that provide a monthly cash payment to Veterans who have long term health care needs. Immediately below is an overview of the three benefits.  More detail will be provided on each benefit in the following paragraphs.

Service Pension. The VA provides a monthly cash payment to wartime Veterans who meet active duty and discharge requirements, who are either 65 or older or disabled, and who have limited income and assets. Service pension is also available to a surviving spouse of a wartime Veteran. An unmarried Veteran can receive up to $1,021 per month, a married Veteran can receive up to $1,337 per month, and a surviving spouse can receive up to $684 per month (with additional payments available if dependent children are present in the home).

Pension with Housebound Allowance. A slightly higher monthly payment is available to wartime Veterans (who meet the same service requirements as Service Pension) but who are confined to their home for medical reasons. An unmarried Veteran can receive up to $1,248 per month, a married Veteran can receive up to $1,564 per month, and a surviving spouse can receive up to $837 per month (with additional payments available if dependent children are present in the home).

Pension with Aid and Attendance. The highest monthly benefit is available when a wartime Veteran or surviving spouse requires the assistance of another person to perform activities of daily living, is blind or nearly so, or is a patient in a nursing home. This benefit, often referred to simply as "Aid and Attendance" is the most widely known and talked-about benefit as it offers the highest possible monthly payment. An unmarried Veteran can receive up to $1,703 per month, a married Veteran can receive up to $2,019 per month, and a surviving spouse can receive up to $1,094 per month (with additional payments available if dependent children are present in the home).


Prerequisite Benefits

Wartime Service. As noted above, a Veteran must first meet certain service and discharge requirements before being considered for any type of pension benefit. A Veteran must have served 90 days of active duty with at least one day beginning or ending during a period of war. After September 1, 1980, the active duty requirement increases to 180 days. In addition, the Veteran must have been discharged under circumstances other than dishonorable.

Disability. To qualify for any type of pension benefit, a claimant must also be 65 or older or be permanently and totally disabled. A claimant is the individual filing for benefits - either a Veteran or surviving spouse.

Permanent and total disability includes a claimant who is:

• In a nursing home;
• Determined disabled by the Social Security Administration;
• Unemployable and reasonably certain to continue so throughout life; or
• Suffering from a disability that makes it impossible for the average person to stay gainfully employed.

Asset and Income Requirements
The financial eligibility requirements of any pension benefit address a claimant's net worth and income. A married Veteran and spouse should have no more than $80,000 in countable assets (less for a single Veteran or surviving spouse), which includes retirement assets but excludes a home and vehicle. However, the $80,000 limit is a guideline only - it is not a rule set by the VA. The VA looks at a claimant's total net worth, life expectancy, income and medical expenses to determine whether the Veteran or surviving spouse is entitled to special monthly pension benefits.

Planning Note: Many times the most difficult task in this area is to reduce a claimant's assets down to the applicable level (or what one hopes will be acceptable to the VA). The assistance of legal counsel is important to ensure the right strategies are used with minimal impact on Medicaid in the future.

A Veteran or surviving spouse must have Income for VA Purposes ("IVAP") that is less than the benefit for which he or she is applying. IVAP is calculated by taking a claimant's gross income from all sources less countable medical expenses. Countable medical expenses are recurring out-of-pocket medical expenses that can be expected to continue throughout a claimant's lifetime. If a claimant's IVAP is equal to or greater than the annual benefit amount, the Veteran or surviving spouse is not eligible for benefits. Tables 2 and 3 below shows the applicable income and pension amounts for both Veterans and surviving spouses.


Is the Claimant Housebound?
If a claimant qualifies for regular pension and is housebound, the claimant's maximum allowable income increases (as does the annual benefit amount) to the special monthly pension. The VA defines housebound as being substantially confined to the home or immediate premises due to a disability that will likely remain throughout the claimant's lifetime. A Veteran with no dependents who is housebound is eligible for benefits of up to $14,457 in annual income.

Unreimbursed medical expenses will reduce a claimant's income dollar for dollar after a small co-pay (5% of the annual pension amount) is met.  Remember, though,, to be eligible for a special monthly pension for being housebound, the claimant's IVAP must be less than the annual income threshold.

To illustrate, a Veteran with exactly $14,976 in annual income would not be eligible for a special monthly pension for being housebound. However, if that Veteran was able to show annual income of $20,000 and unreimbursed medical expenses of $25,000, the Veteran would be eligible for $14,976 in special annual pension (paid on a monthly basis) because the Veteran has negative IVAP. A surviving spouse with no dependents who is housebound must have annual IVAP of less than $10,044.

Does the Claimant Require the Aid and Attendance of Another?
If a claimant can show, through medical evidence provided by a primary care physician or facility, that the claimant requires the aid and attendance of another person to perform activities of daily living, that Veteran or surviving spouse may qualify for an additional special monthly pension commonly referred to as aid and attendance pension benefits.

The VA defines the need for aid and attendance as:

• Requiring the aid of another person to perform at least two activities of daily living, such as eating, bathing, dressing or undressing;
• Being blind or nearly blind; or
• Being a patient in a nursing home.

Tables 2 and 3 below shows the applicable pension amounts for each type of VA pension.

The maximum pension for a married Veteran is $2,019 per month ($24,228 per year), while the maximum pension for a Veteran's widow is $1,094 per month ($13,128 per year). The VA pays this pension directly to the claimant regardless of where the claimant is living.

Qualification
As stated above, the VA looks at a claimant's total net worth, life expectancy, income, and expenses to determine whether the claimant should qualify for special monthly pension benefits. Unlike Medicaid, there is no look-back period and no penalty for giving assets away.  However, one must use caution when considering a gifting strategy to qualify a Veteran or surviving spouse for special monthly pension benefits as this will cause a period of ineligibility for Medicaid which could be as long as five years. Other Medicaid planning strategies may apply when trying to qualify a Veteran or surviving spouse for special pension with aid and attendance.

An Illustration:  Robert, age 82, is a World War II Veteran whose spouse has passed away.  Robert's total monthly income consists of Social Security income of $1500 per month.  Robert was diagnosed last year with dementia and now lives in an assisted living facility as he needs help bathing, dressing and taking his medication. The assisted living facility costs $3000 per month. Robert has liquid assets totaling $100,000.

Robert's IVAP:
Income $1500
Unreimbursed recurring medical expenses $3000
Total IVAP ($1500)

The maximum monthly benefit that Robert could qualify for is $1,703 of pension with an allowance for aid and attendance. Since Robert has a negative IVAP of $1500, he is eligible for the full pension with aid and attendance benefit. However, his assets are too high. However, because Robert has negative income of $1500, one option may be to take a portion of his liquid assets and convert them into an income stream through the use of an immediate annuity or promissory note. As long as Robert's IVAP remains a negative number or $0, he can qualify for the full pension at the aid and attendance level..

The Application Process
While the application process for special monthly pension can be agonizingly slow - some applications take over a year before the VA makes a decision - the benefit is retroactive to the month after application submission. Having the proper documentation in place at the time of application (for example, discharge papers, medical evidence, proof of medical expenses, death certificate, marriage certificate and a properly completed application) can cut the processing time in half.

Planning Note: Benefits are retroactive to the month after application submission. Therefore, it is imperative for potential claimants to seek legal help immediately to become eligible and to apply as quickly as possible.

Conclusion
Time is of the essence for Veterans or surviving spouses who may be eligible for pension benefits. It is imperative for those who work with Veterans or surviving spouses of Veterans to be aware of these benefits and to help potential claimants obtain legal help to qualify for pension benefits. If you know of someone who may be eligible, please give us a call at 912-352-3999 for more information..

Table 1:  Wartime Periods

World War I	April 6, 1917 through November 11, 1918, inclusive. If the Veteran served with the United States military forces in Russia, the ending date is April 1, 1920. Service after November 11, 1918 and before July 12, 1921 is considered World War I service if the Veteran served in the active military, naval, or air service after April 5, 1917 and before November 12, 1918.
World War II	December 7, 1941, through December 13, 1946, inclusive. If the Veteran was in service on December 31, 1946, continuous service before July 26, 1947, is considered World War II service.
Korean Conflict	June 27, 1950, through January 31, 1955, inclusive.
Vietnam Era	The period beginning on February 28, 1961, and ending on May 7, 1975, inclusive, in the case of a Veteran who served in the Republic of Vietnam during that period. The period beginning on August 5, 1964, and ending on May 7, 1975, inclusive, in all other cases.
Future Dates	The period beginning on the date of any future declaration of war by the Congress and ending on a date prescribed by the Presidential proclamation or concurrent resolution of the Congress.
Mexican Border Period	May 9, 1916, through April 5, 1917, in case of a Veteran who during such period served in Mexico, on the borders thereof, or in the waters adjacent thereto.
Persian Gulf War	August 2, 1990, through date to be prescribed by Presidential proclamation or law.

Table 2:  2012 Pension Benefit Figures - Wartime Veteran

Type of Benefit	Maximum Annual Pension Rate (Income Limit)	Maximum Monthly Pension Rate (Income Limit)
Service Pension	$11,830	$1,021
- One dependent	$16,051	$1,337
Housebound	$14,976	$1,248
- One dependent	$18,768	$1,564
Aid and Attendance	$20,436	$1,703
- One dependent	$24,228	$2,019
- Each add'l dependent child	$2,093	$174

Table 3:  2012 Pension Benefit Figures - Surviving Spouse

Type of Benefit	Maximum Annual Pension Rate (Income Limit)	Maximum Monthly Pension Rate (Income Limit)
Death Pension	$8,208	$684
- One dependent child	$10,752	$896
Housebound	$10,044	$837
- One dependent child	$12,576	$1,048
Aid and Attendance	$13,128	$1,094
- One dependent child	$15,660	$1,305
- Each add'l dependent child	$2,088	$174