Obamacare and Medicaid
By Alan Polack
For those of you who attended the Probate Bar’s seminar earlier this year, you know that Obamacare has expanded Medicaid coverage by instituting the Modified Adjusted Gross Income (MAGI) eligibility rules.
Individuals whose Medicaid eligibility is determined using MAGI rules are not subject to an assets or resources test for purposes of determining Medicaid eligibility.
As a result, states have been asking Centers for Medicare and Medicaid Services (CMS) whether various Medicaid long-term services and support (LTSS) rules, including estate recovery rules, apply to MAGI individuals who are eligible for LTSS coverage.
On February 21, 2014, CMS responded to those inquiries with a six-page letter directed to all state Medicaid Directors.
I have read the letter and am now attempting to decipher it.
Pursuant to pre-existing law, states must seek recovery from the estates of individuals who are 55 years and older who receive medical assistance for amounts at least equal to medical assistance paid on their behalf for nursing facility services, home and community based services and related hospital and prescription drug services.
Therefore an individual who enrolls in the MAGI program and subsequently enters a nursing home and receives Medicaid payments for their nursing home care will be subject to future estate recovery.
The letter goes on to state that CMS intends to thoroughly explore options and to use any available authority to eliminate estate recovery of Medicaid benefits, items and services other than long term care and related services in the case of individuals who are determined eligible for Medicaid benefits using the MAGI methodology.
We already know that individuals who are seeking Medicaid coverage for LTSS are penalized for transferring assets for less than fair market value on or after the individual’s look back date.
In Michigan, the DHS computes the penalty period by dividing the amount of the transfer by the average monthly private pay cost in a nursing home (currently 7867).
The DHS applies the transfer rules only to individuals who are nursing home residents or who are receiving in-home services through the state’s waiver program.
CMS concludes that the transfer rules should apply to MAGI individuals who receive Medicaid funding for LTSS.
The letter goes on to state that the rules that individual states apply to annuities, promissory notes, life estate interests and trusts should be applied to MAGI individuals in the same way that they are applied to non-MAGI individuals who get Medicaid coverage for LTSS.
States must also deny LTSS coverage to a MAGI individual whose home equity exceeds the current limit identified in the Medicaid state plan ($536,000 in 2013).
Therefore it seems that MAGI individuals (whose assets are not counted for initial eligibility) have the same asset eligibility requirements for LTSS coverage as non-MAGI individuals.
Finally, the letter concludes that the rules that determine patient pay amount to nursing homes post Medicaid eligibility for LTSS does not apply to MAGI individuals.
CMS believes that it has statutory authority to expand the reach of post-eligibility regulations to include MAGI individuals who receive LTSS coverage.
So now we wait to see how the Michigan Department of Community Health writes the rules and go from there.
It should be interesting.
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Alan F. Polack specializes in elder and probate law and practices out of Shelby Township. He is a former president of the Macomb County Probate Bar Association.
