Introduction

One of the greatest financial risks faced by elderly Texans is the prospect of long term care in a nursing home facility. vVhy? Because long-term care is expensive-very expensive.

Over the past few years, the cost of nursing home care has been steadily increasing.

\1/hen Genworth Financial began its annual Cost of Care Survey in 2004, the median cost for a private room in a nursing home nationwide was $65,185.1 By 2019, the cost had risen to $102,200.2 Meanwhile, the median annual cost of care in an assisted living facility in the United States in 2019 was $48,612, a 68.79% increase from the $28,800 figure in 2004.3 As regards in-home care, the median annual cost in the United States in 2019 was $51,480, up from $30,095 in 2004.’1 Texas is below the national average. In 2019, the median annual cost for a private nursing home room in Texas was $77,015; the median annual cost for care at an assisted living facility in the state was $45,000; the median care of in-home care-using the services of a home health aide-was

$47,476.5 However, like costs across the nation, the cost to Texans is expected to increase over time. Genworth projects that by 2029, the median annual cost of a pri vate room at a nursing home in Texas will be $103,502, the median cost of caring for a loved one at an assisted living facility will be $60,476, and the median cost of in-home care across the state when utilizing the services of a home health aide will be $64,572.⁶

How will Texans pay these exorbitant costs? In fact, how do Texans pay for long term care today? The fact is, paying for care requires careful planning. l11e attorney retained to assist a client in planning to pay for long-term care must understand the client’s options and limitations. The attorney must be aware that both private and gov ernment funding of long-term care is available, and that while both sources impose some limitations, both offer some significant opportunities. Whether the attorney devises a plan that utilizes solely piivate funding, one that utilizes solely government funding. or one that utilizes a combination of the two, a well-thought-out plan can save the client much heartache-and much money!

Elderly Texans have three options regarding payment for long-term care. The most popular and well known are the government programs-Medicare and Medicaid. l11e second option is private insurance. Third are people who either do not have or cannot afford health insurance and who are not covered by the Patient Protection and Afford able Care Act.7 who pay out of pocket or out of their own family’s pockets.

Government Programs

The government-state and federal-provides two main programs for funding long term care for the elderly: Medicare and Medicaid. The government also provides funding for the care of elders who are veterans of the country’s armed forces. This text will look at these veterans’ benefits as they relate to elders. But first we begin with Medicare.

6-2:1 Medicare

On July 30, 1965, President Lyndon B. Johnson signed the law that established the Medicare program.8 Simply stated, Medicare is a federal health insurance program that pays for a variety of health care expenses. It is administered by the Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services.9 Medicare beneficiaries are typically senior citizens aged 65 and older. Adults with certain approved conditions (such as Lou Gehrig’s disease) or qualifying permanent disabilities may also be eligible for Medicare benefits.

Prior to 1965, approximately half of all seniors lacked medical insurance; today, because of the Medicare program, practically all seniors have health insurance. Since the beginning of the Medicare program, the authorities have made an umber of changes geared to expand benefits, revise the way Medicare pays providers, modify beneficiary out-of-pocket costs for Medicare-covered services, improve access and coverage for low-income individuals, expand the role of private plans in providing Medicare-covered benefits, strengthen quality, and address the growth in program spending.

Today, the program helps to pay for many vital health care services, including hospi talizations, physician visits, and prescription drugs, along with post-acute care, skilled nursing facility (SNF) care, home health care, hospice, and preventive services.

On average, Medicare covers about half (48%) of the health care charges for those enrolled. The enrollees must then cover the remaining approved charges either with supplemental insurance or with another form of out-of-pocket coverage. Out-of-pocket costs can vary depending on the amount of health care a Medicare enrollee needs. These out-of-pocket costs might include uncovered services-such as long-term, den tal, hearing, and vision care-and the supplemental insurance.

TI1e program is funded through a government-imposed tax.10 People who are work ing contribute payro11 taxes to Medicare. Most people then become eligible for Medi care benefits when they reach age 65, regardless of income or health status.11

6-2:1.1 Medicare’s Programs

Now covering over 58 million Americans, Medicare plays a vital role in providing financial security to older people and persons with disabilities. The program is admin istered on the national level by the CMS, under the supervision of the U.S. Depart ment of Health and Human Services.

The Medicare program is rea11y made up of three parts-Parts A, B, and D. Parts A and Bare often referred to as “Original Medicare.” Part A provides hospital insurance benefits for the elderly and disabled.12 Part B provides supplemental health insurance benefits for the elderly and disabled individuals.13 Part D, also called the Medicare Prescription Drug Benefit, is a federal government program designed to subsidize the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries. It was enacted as part of the Medicare Modernization Act of 2003,1-1 which went into effect on January 1, 2006.

Today, a fourth leg in the Medicare program has come into being. Some people mis takenly believe it is a part of the program. In reality, it is not. Medicare Part C, often referred to as “Medicare Advantage,” is not a separate Medicare benefit Rather, it is that part of Medicare policy that a11ows private health insurance companies to provide Medicare benefits. TI1ese Medicare private health plans, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), are known as Medicare Advantage Plans. We sha11 discuss them-and Medicare Part C-later in this chapter.

As a final matter, we note that beginning with the passage of the Affordable Care Act (ACA) of 2010,15 a number of provisions affecting Medicare-including benefit improvements, spending reductions affecting providers and Medicare Advantage Plans, delivery system reforms, premium increases for higher-income beneficiaries, and a payro]] tax on earnings for higher-income individuals-have come into being. These changes are being phased in over time. As we go to press, however, the future of the ACA and these provisions faces some measure of uncertainty. Notwithstanding this uncertainty, the ACA is stil1 good law, and the holding of the Federal District

Court in Texas v. Uuited State,s16 that the entire ACA is unconstitutional has not yet been implemented as the case goes through the appeals process. Meanwhile, the Medicare program continues to be a part of the Texas landscape.

6-2:l. la Medicare Part A

Medicare covers services Oike lab tests, surgeries, and doctor visits) and supplies Oike wheelchairs and walkers) considered medically necessary to treat a disease or condition.17

Medicare Part A is a hospital insurance plan that provides benefits for qualified individuals in hospitals, SNFs, or hospice care, or receiving long-term home health care services.16 An elderly person receiving benefits pursuant to a Medicare Advan tage Plan may be subject to different rules; however, regardless of the plan the indi vidual has, his or her plan must offer some basic services. In general, then, Medicare Part A covers:

hospital care;
SNF care;
nursing home care (as long as custodial care is not the only care the person needs);
hospice; and
home health services.¹⁹

Like other hospital insurance plans, Medicare Part A benefits are subject to a deductible and co-insurance.20

6-2:1.lb Medicare Part B

Essentially, Medicare Part B is a medical insurance plan.21 It covers “medically nec essary services”-that is, services that are needed to diagnose or treat someone’s medical condition and that meet accepted standards of medical practice.n Part B also covers “preventative services”-health care designed to prevent illness (like the flu)

or to detect it at an early stage when treatment is most likely to work best.²³ Patients pay nothing for most preventive services if they get them from a health care provider who accepts assignment (an agreement by the healthcare provider to accept payment from Medicare and to seek no other payment).24

Medicare Part B covers services such as:

clinical research;
ambulance services;
durable medical equipment (DME);
mental health services including inpatient, outpatient, and partial hospitaliza tion services;
getting a second opinion before surgery; and
limited outpatient drugs.25

What Medicare covers

What Part A covers

Medicare Part A hospital insurance covers inpatient hospital care, skilled nursing facility, hospice, lab tests, surgery, home health care.

What Part B covers

Learn about what Medicare Part B (Medical Insurance) covers, including doctor and other health care providers’ services and outpatient care. Part B also covers durable medical equipment, home health care, and some preventive services.

6-2:1.1 c Medicare Part D

Medicare Part D is optional prescription drug coverage.26 It is available as a stand alone prescription drug plan through private insurance companies. The monthly fee varies among insurers. The enrollee will share in the costs of the prescription drugs according to the specific plan in which he or she is enrolled. Those costs can include a deductible, a flat co-payment amou.nt, or a percentage of the full drug cost (called “co-insurance”).27

In actuality, someone who wants a prescription drug plan can obtain it througr Medicare Plan D or through the Medicare Advantage program.

6-2:1. ld Medicare Part C-Medicare Advantage

Medicare Part C, also known as the Medicare Advantage program, is not a part of tht Medicare program. It is actually a health insurance program wherein private health insurance companies offer health insurance in a government-run program. Essen tially, private insurance compaF1ies are contracted through CMS to provide Medicare

benefits packages to individuals already enrolled in Medicare Part A or B.²⁸ Enrolling into a ledicare Advantage Plan is optional for any senior individual, so long as he or she is current on his or her premium payments.²⁹

\\nile Medicare Advantage Plans are required to provide all Medicare Part A and

:\ledica.re Pa.rt B benefits (except hospice care) to their enrollees, plans can also include additional benefits that may vary among the individual insurers. including benefits not offered by Parts A and B.30 Plans may also charge different out-of-pocket costs and have different rules for delivering their services.³¹

In actuality, someone who wants a prescription drug plan can obtain it through

:\1edicare Plan D or through the Medicare Advantage program.

Because this book is about Elder Law and focuses on issues of the elderly in Texas, we now turn our attention to three aspects of Medicare’s coverage that would help tJ1e elderly pay for their long-term care: SNF care coverage, home health care coverage, and hospice and respite care coverage.

6-2:1.2 Medicare’s Skilled Nursing Facility Care Coverage

In this subsection, we begin a study of three aspects of Medicare’s coverage that have the potential to benefit elderly Texans: SNF care coverage, home health care cover age, and hospice and respite care coverage.

Medicare Part A covers skilled nursing care provided in an SNF under certain conditions for a limited time. Essentially, Medicare pays for 20 days of skilled care or rehabilitation in a nursing home or in an SNF-but only after the patient has been discharged from an acute care hospital.31

To qualify for Medicare’s SNF care coverage, the patient must first spend at least 3 days in an acute care hospital (not including the day of discharge) .:i.1111e patient must also be sent to the SNF on doctor’s orders within 30 days of the day he or she leaves

Things to know about Medicare Advantage Plans

Medicare Part C: Everything You Need to Know (Medicare Part C Is Another Name for Medicare Advantage)

Skilled nursing facility (SNF) care

the hospital.3•1 This move from hospital to SNF enables the Medicare Part A benefit hospitalization-to cover the SNF’s fees in full for the first 20 days.35

After the first 20 days, the patient must contribute $176 (2020 figures) to his or her care.36 This co-payment continues until the patient has been at the nursing home for 100 days. After the firsl 100 days, the patient must pay the entire bill,37 or find another program (like Medicaid) to assist with payments.

The 100 days of coverage can be repeated if enough time lapses between illnesses. However, during that period, the patient must be on his or her own-not in a hospital, nursing home, or SNF-for at least 60 consecutive days.38 Hence, a patient can spend 100 days at an SNF, be discharged, spend 60 days at home, then have another 3-day stay at the hospital, and move to an SNF for another 100 days.

6-2:1.3 Medicare’s Home Health Care Coverage

For any given patient, Medicare Part A (Hospital Insurance), Medicare Part B (Med ical Insurance), or both will cover eligible home health services like intermittent skilled nursing care, physical therapy, speech-language pathology services, and con tinued occupational services.39 Typically, a home health care agency coordinates the services the doctor orders for the patient and arranges for their delivery or perfor mance. That being said, Medicare does not pay for the following services:

twenty-four-hour-a-day care at home;
meals delivered to a patient’s home;
homemaker services; and
personal care.40

6-2:1.3a Eligibility for Home Health Care Coverage

To be eligible for home health care coverage. the patient must be covered by either Medicare Part A or Medicare Part B. 1 Additionally, the patient must meet all of the following conditfons:

He or she must be under the care of a doctor, and must be getting services under a plan of care established by and reviewed regularly by a doctor.
1. TI1e patient must need, and a doctor must certify that he or she needs, one or more of the following:
  1. Intermittent skilled nursing care is required (other than for just drawing blood). If the patient’s underlying condition or complication requires a registered nurse to ensure that essential non-skilled care is achieving its purpose. and necessitates that a registered nurse be involved in the development. management, and evaluation of the patient’s care plan, the referring physician must include a brief narrative describing the clinical justification for this need. If the narrative is part of the certification form. then the narrative must be located immediately prior to the physician’s signature. If the narrative exists as an addendum to the certification form, in addition to the physician’s signature on the certification form, the phy sician must sign immediately following the narrative in the addendum.
  1. Physical therapy, speech-language pathology, or continued occupational therapy services are required. These services are covered only when the services are specific, safe, and an effective treatment for the patient’s con dition. The amount, frequency, and time period of the services need to be reasonable, and must be sufficiently complex or of a nature that only qualified therapists can perform them safely and effectively. To be eligible for Medicare coverage, (1) the patient’s condition must be expected to improve in a reasonable and generally predict.able period of time, (2) the patient needs a skilled therapist to safely and effectively develop a mainte nance program for his or her condition, or (3) the patient needs a skilled therapist to safely and effectively do maintenance therapy for his or her condition.”12
  1. The home health agency caring for the patient must be Medicare certified. In fact, Medicare.gov has made a checklist available to the pub lic that patients and thir family members can use the determine whether the home health agency they intend to use to provide care for the elderly patient is not only Medicare-certified, but satisfies several other criteria which indicate that the agency will provide excellent services.’D
  1. rn1e patient must be home bound, and a doctor must certify that fact.’¹¹ The certification must indicate that the patient is confined to home except when he or she is receiving outpatient services. The certification must also lay out a plan for the patient’s treatment and eventual recovery.·¹⁵

As these requirements indicate, someone is not eligible for home health benefits if he or she needs more than part-time or “intermittent” skilled nursing care.46

The rules also allow a patient to leave home for medical treatment for short, infre quent absences for non-medical reasons such as attending religious services. Like wise, an individual can st.ill get home health care if he or she attends adult day care.-‘7

As a final matter, note that home health services may also include medicaJ social services, part-time or intermittent home health aide services, medical supplies for use at home, DME, or injectable osteoporosis drugs:18

Home health services

Home Health Agency Checklist

6-3 Costs of Care

An eligible person incurs zero costs for home health care services; instead, the home health agency providing the care is reimbursed by the U.S. Department of Health and Human Services.·¹⁹ However, should the patient be eligible to-and does use Medicare-approved DME21, he or she will be responsible for meeting 20%ofthe cost.50

law’s definition of “home” excludes institutions such as hospitals, community access hospitals. and SNFs.54

DME is often essential for people with short-term and/or chronic conditions. To be covered by Medicare. DME must be prescribed by a licensed physician, must be necessary to address a medical or physical need, and must not ordinarily be used in the absence of a medical or physical condition.55 TI1e ACA of 2010 introduced the requirement of a face-to-face encounter between the patient and the physician before DME can be prescribed.56 As an additional fraud and abuse protection measure, the ACA states that only Medicare-enrolled physicians or other ”eligible professionals” can prescribe DME.57

6-3 :2 Advance Determination of Medicare Coverage

The Centers for Medicaid and Medicare Services advises on its website that before someone begins receiving home health care, the home health agency should tell him or her just how much of the cost Medicare will cover.61 The agency should also inform the beneficiary whether any items or services it provides are not covered by Medi care, and the cost of these items and/or services to the beneficiary.62 The agency should explain this to the beneficiary both orally and in writing. The same rule applies for the supply of DME. The easiest way to achieve this is by giving the patient a notice called the Home Health Beneficiary Advance Notice of Noncoverage.⁶³ The patient can thereby know the cost of proposed services, equipment, and supplies before receiving them, and have the opportunity to accept or object to receiving them.

6-4 Hospice and Respite Care

…

6-3 :1 Texas Healthcare for People Age >65 and People With Disabilities

Texas has several Medicaid programs for low-income individuals aged 65 and above and people with disabilities. TI1ese programs include: (1) Medicaid for Long-Term Care, (2) Medicaid for People Who Get Supplemental Security Income (SSD, (3) Medi care Savings Program, and (4) MBI for adults.78

Medicaid and CHIP | Texas Health and Human Services

6-5:1.1 Medicaid for Long-Term Care

The Texas Medicaid for Long-Term Care79 program provides all Medicaid benefits including:

doctor’s visits:
- prescription drugs ordered by a doctor;
- lab and X-ray charges;
- hospital care;
- vision and hearing care; and
- dental care.

Medicaid also might pay for health care the person received 3 months before he or she applied for Medicaid services.

Depending on the person’s circumstances, he or she may also receive long-term services such as:

community programs while he or she is living at home;
- home care:
- nursing home care;
- a hospital for mental illness; and
- a place of care for people with intellectual disabilities.

The Medicaid for Long-Term Care program is designed for individuals who:

are either 65 or older or have a disability that is expected lo last a year or lon- ger;
need 30 or more days of non-stop, long-term care;
meet Medicaid’s low-income requirements; and
meet Medicaid’s low-asset/resources requirements.

An individual who qualifies for the Texas Medicaid for Long-Term Care program must pay part of the cost by first using all of his or her own money, except for a small monthly amount for personal needs and costs like health insurance premiums.

6-5:1.2 Medicaid for People Who Get Supplemental Security Income

The Texas Medicaid for People Who Get Supplemental Security Income (SSI) program80 provides the same basic benefits as the Medicaid for Long-Term Care program-that is, all Medicaid benefits including:

;9 Texas Health and Human Services, Health Care, Medicaid for Long-Term Care, available at h ttps://yourtexasbenefits.hhsc.texas.gov/ programs/health/disability-or-65plus/long term-care 0ast visitedMay 5, 2020).

WJ Texas Health and Human Services. Health Care, Medicaid for People Who Gel Supplement Security Income (SSO. available at https://yourtexasbenefits.hhsc.texas.gov/programs

doctor’s visits;
- prescription drugs ordered by a doctor;
- lab and X-ray charges;
- hospital care;
- vision and hearing care; and
- dental care.

Medicaid also might pay for health care the person received 3 months before he or she applied for SSL

This program is available only to persons who are receiving SSL

6-5:1.3 Medicare Savings Program

17,e Medicare Savings Program helps beneficiaries pay for all or some of their Medi care monthly payments-that is. premiums, co-pays, and deductibles.81 To qualify for this program, the applicant must be receiving Medicare benefits, and must satisfy the Medicaid low-income and asset requirements.

6-5:1.4 Medicaid Buy-In for Adults

171is program offers the basic Medicaid offerings to participants:

doctor’s visits;
- prescription drugs ordered by a doctor;
- lab and X-ray charges;
- hospital care;
- vision and hearing care: and
- dental care.82

To qualify, applicants must (1) have a physical, developmental, intellectual, or mental disability; (2) be working; and (3) not permanently reside in a nursing home, state hospital, or intermediate care facility for people with.intellectual disabilities.

As regards cost, the program operates pursuant to its name: People can “buy-in” to Medicaid coverage by making monthly payments.

/health/disability-or-65plus/have-SSI Oast visited May 5, 2020).

111 Texas Health and Human Services, Health Care, Medicare Savings Program, available at https://yourtexasbenefits.hhsc.texas.gov/ programs/health/disability-or-65plus/ medicare savings-programs Oast visited May 5, 2020).

l(l Texas Health and Human Services, Health Care, Medicaid Buy-In for Adults, available at https:/ / yourtexasbenefits.hhsc.texas.gov / programs/health/disability-or-65plus/buy-in Oast visited May 5, 2020).

6-5:2 Eligibility for Texas Medicaid

To qualify for Medicaid assistance for nursing home care in Texas. an individual must clear five hurdles: age. residency, level of care, monthly income amount, and asset amount.

6-5:2.1 Aged, Blind, or Disabled

TI1is is the easiest of the five hurdles the elderly long-term care applicant must pass through. Put simply, to qualify for Texas Medicaid assistance, the patient must be 65 or older, blind, or disabled.1’3

6-5:2.2 Citizenship and Residency

Second, the applicant must be a Texas resident.s.1 He or she must have established residence in Texas and must express an intent to remain there.

If a Texas resident temporarily visits another state intending to return to Texas, his or her Texas residency is considered to have never ended so long as the absence from Texas has a specific purpose; when that purpose is ended, the person must move back to Texas.65

The individual must also be a legal resident of the United States: a citizen, a perma nent resident, or a person otherwise legally living in the United States.86

6-5:2.3 Level of Care

As an initial matter, we note that Medicaid will not pay for custodial care. However, Texas Health and Human Services provides various long-term services and supports for people who are aging and who have cognitive and physical disabilities.87 TI1e agency also licenses and regulates providers of these services, and administers the state’s guardianship program.

The Texas Medicaid and Healthcare Partnership (TMHP) Long-Term Care Department (LTC) supports the provider community. Providers submit forms and assessments through the LTC Online Portal and render claims for services through the Claims Management System.

TMHP determines the medical necessity and level of care for patients who are Medicaid eligible and meet the medical necessity requirements of admission into a nursing home or a cost-effective alternative to institutionalization. After all, in Texas, Medicaid wiJl pay for a nursing home only if it is “medically necessary” for the patient to be placed there.66

To find that nursing home care is medically necessary for a patient, TMHP must conclude that the patient has a medical condition that is so serious that he or she needs the level of nursing care that is available only in an institution. The patient’s doc tor must document the patient’s medical condition and must prescribe ski11ed nursing services to be provided to the patient on a regular basis in an institutional setting. Nursing care includes things like giving shots, inserting a feeding tube or catheter, treating bed sores, and changing wound dressings.

For Medicaid to keep paying for the patient’s nursing home stay, a doctor must cer tify at least every 6 months that the patient meets the standard of medical necessity.

6-5:3 Monthly Income Amount

To qualify for Medicaid benefits, an elderly Texan’s income cannot exceed a certain amount per month. 1l1is amount changes annually. For 2019, that figure was $771 for an individual and $1,157 for a couple.89 If the applicants are living in a nursing home, the limits increase to $2,313 for a single individual, and $4,625 for a couple if both spouses are applying for benefits.90

For several years, this income cap proved to be quite harsh. People who were as little as $1 above the limit were being denied Medicaid benefits. To counter that, prac titioners and Congress devised the Qualified Income Trust (QIT), known in Texas and a few other states as the Miller Trust.

6-5:3.1 The Qualified Income Trust (Miller Trust)

As an initial matter, we note that a QIT does not shelter assets. It is neither a way to hide money nor a way to save resources. Rather, it is a way to circumvent the income cap imposed by Medicaid.

The ability to use a QIT for those people who have too much monthly income i qualify for long-term care benefits grew out of Miller v. Ibarra, a 1990 federal coUI case from Colorado.91 In Miller, a nursing home resident had too much income to qualify for Medicaid. His family went to court to create a guardianship, and obtained a court order imposing a limit on the amount of retirement funds the resident could use each month. 1l1e court created a trust, placed all of the retirement funds therein, and ordered the trustee to limit withdrawals therefrom to an amount less than the Medicaid income cap.92

Colorado contested the trust, but eventually the federal district court decided the trust was legal.93 Accordingly, Mr. Miller was allowed to receive Medicaid benefits even though his income would be too high without the trust and its limitations.

TI1e Miller Trust became officially known as a QITwhen it was codified at 42 U.S.C.

§ 1396p(d) (4) (B). Pursuant to the statute, the assets put into a QIT are not countable to an individual applying for Medicaid benefits who needs the benefits and protections provided by a QIT.

6-5:3.2 Characteristics of the Qualified Income Trust

Federal law controls the establishment of a QIT. As an initial matter, the law states that a QJT may contain only pension funds, social security funds, and other income (including accumulated trust income) due to a nursing home resident.⁹⁵ As regards income, the resident may divert all of his or her qualifying income into a QIT, or if he or she has income from multiple sources, only the income from certain sources. However. income from any given source must go entirely into the QIT, or not at all.% ln the final analysis, though, the trust cannot own any other assets. Since the trust has no trust corpus, the need for much of the standard trust language about management of the trust principal is eliminated, and the language of the written trust instrument may be shortened accordingly.

The trust must be irrevocable.97 However, a trust instrument that states that the trust is irrevocable, but allows the trust to be revoked through court action, does not meet the irrevocability requiremenl

The trust instrument may provide for successor or co-trustees waiver of bond and incorporation of the Texas Trust Act provisions about the powers of the trustees. The statutory authority for a QIT is silent on the subject of who may serve as the trustee. but HHSC recommends that the beneficiary not serve as the trustee also.98 Among other concerns, HHSC reports that it has seen many instances where a beneficiary did not follow the trust requirements, resulting in him or her losing Medicaid eligibility.w

Appendix XXXVI, Qualified Income Trusts (QITs) and Medicaid for the Elderly and People with Disabilities (MEPD) Information

Medicaid for the Elderly and People with Disabilities Handbook

The trust instrument must have a reversion clause stating that at the death of the trust beneficiary, the trustee must pay to the state of Texas any funds still in the trust account, up to the full amount of Medicaid assistance that was given to the beneficiary and not otherwise repaid.¹⁰⁰ vVhen the time comes to make such reimbursement, pay ments made to HHSC, as residuary beneficiary, should be in whole dollar amounts and by cashier’s check, money order, or personal check.101 The trustee should submit the payment along with Form 4100 to HHSC. The trustee should make a notation that this is repayment to HHSC under the QIT provisions of the Social Security Act.102

The QIT legally restricts the amount that can be withdrawn to pay for the nursing home resident’s needs. 111e QIT instrument must require that the trustee pay:

a monthly personal needs allowance to the beneficiary;
a sum sufficient to give a minimum monthly maintenance needs allowance (MMMNA) to the spouse (if any) of the beneficiary; and
the cost of medical assistance given to the beneficiary, from the funds remaining.100

HHSC has prepared a sample QIT for use by persons wishing to create Miller trusts. The language used in the form is by no means the only allowable language. \Ve are including the sample in Appendix 12.

6-5:3.2a Treatment of Trust Income

Trust income must be deposited into the trust account during the month in which it is received; meanwhile, the trustee must make distributions from the trust account no later than the last day of the month following the one in which the trust income was received.

HHSC does not deduct any costs of trust administration in determining the amount of the beneficiary’s income that must be app1ied to the cost of medical assistance given to the beneficiary. Also, HHSC determines the amount that must be applied to the cost of medical assistance given to the beneficiary based on the beneficiary’s total income, including any income that is not diverted to the QIT. If funds remain in the trust account after these distributions are made, such funds may be applied to the cost of trust administration.

Income paid from the trust to purchase institutional services, home and community based waiver services, or other medical services for the beneficiary is not countable

income for Medicaid eligibility purposes. However, income paid from the trust directly to the beneficiary, or otherwise spent for his or her benefit, is countable income for eligibility purposes.1C4

6-5:3.2b Establishing a Bank or Other Financial Account as the QJT Account

In addition to preparing a trust instrument that meets the QIT requirements as deter mined by HHSC, the attorney must ensure that the trust account is properly set up. A trust account is a bank (or other financial institution, such as a credit union) account used to deposit the income from the sources listed in the QIT instrument. The trust account must contafo only income; it cannot-should not-contain the patient’s resources.¹⁰⁵

Once the trust account is opened, only the beneficiary’s income may be directed to it Any income deposited into the QIT bank account from a source that is not listed in the QIT instrument may be countable income and will result in the bank account becoming a countable resource. Any deposits made to the QIT bank account from other resources the beneficiary may own will result in the bank account becoming a countable resource. Any deposits to the QIT bank account from another individual may be countable income and result in all deposits to the account being countable income and the bank account becoming a countable resource.¹⁰⁶

6-5:3.2c Effective Date of the QIT

HHSC disregards income for Medicaid eligibility purposes the first month that a valid written trust instrument is signed and properly executed, a trust bank account with the beneficiary’s Social Security number is set up, and enough of the beneficiary’s income is placed into the account to reduce any remaining income to below the spe cial income limit¹⁰⁷ While the trust may be set up with any or all sources of a benefi ciary’s income, an entire income source must be deposited. These things may be done before the beneficiary applies for Medicaid benefits, in which case the effective date

of the income disregard may be established as much as 3 months prior to the applica tion filing date (if all other program requirements are met during the prior period).¹⁰⁸

6-5 :4 Transfer of Assets

111e phrase “transfer of assets” refers to the general prohibition against a Medicaid applicant or recipient transferring his or her assets without compensation.100 vVhen such a transfer-that is, a transfer of assets without compensation-occurs, it may result in a penalty period for Medicaid payment for institutional care or ineligibility for Medicaid benefits under the Medicaid for the Elderly and People With Disabilities program.110

Now, income that is diverted to a QIT is not a transfer of assets if it is used for payment of institutional services or home and community-based waiver services for the Medicaid for the elderly recipient.111 Also, any distributions to the recipient’s spouse and allowable payments for trust administration are not considered a transfer of assets.¹¹² However, distributions from the trust that are not made to the Medicaid for the elderly recipient or community-based spouse, or for the benefit of either, are considered by HHSC to be a transfer of assets.113

As a final matter, we note that if the trustee fails to make distributions from income deposited into the trust account in the month of receipt by the end of the following month, HHSC considers his or her failure to timely distribute the income to be a trans fer of assets subject to the usual penalties associated with such transfers.114

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6-5 Medicaid Planning

Medicaid planning is a method by which potential Medicaid recipients-with the help of their attorneys and/or financial planners-manipulate their income and resources so that the government will pay part or all of the cost of their long-term health care.

6-6 :1 Transfer of Assets for Medicaid Planning

Before transferring assets as part of Medicaid planning, the attorney must be aware of two things:

Medicaid rules may disqualify the potential recipient from receiving benefits if

he or she has given away assets.

Property transferred by gift may give rise to the imposition of the federal gift tax.

In rea1ity, the federal gift tax is not usually an impediment to Medicaid planning. After all, the lifetime estate and gift tax exclusion amount of over S11 million 138 by far exceeds the typical value of gifts made by individuals engaging in Medicaid planning.

The issue that really arises in Medicaid planning is that of the Medicaid disquali fication penalty. The penalty has changed dramatically through the years. Currently, rules included in the Omnibus Budget Reconciliation Act of 1993139 (OBRA ’93) deter mine the way the disqualification penalty is imposed. In Texas, the OBRA ’93 rules are augmented by rules found in the Texas Administrative Code. Pursuant to these rules, if a person transfers property by gift and subsequently applies for Medicaid assistance, the person’s disqualification period for receiving such assistance is calcu lated by dividing the amount of the gift by the “average cost” of nursing home care for a private-pay patient in the person’s area.1 0

6,-6:1.1 Look-Back Period

TI1e penalty imposed on gifting assets does not apply to all lifetime transfers. Rather, for most assets and forms of income, only transfers within the past 36 months. prior to filing the Medicaid application can be counted in determining the disqualification period.HI 1l1e look-back period for payments and distributions from revocable trusts and irrevocable trusts that benefit the Medicaid recipient is 60 months.1-12

6-5 Medicaid Estate Recovery Program (MERP)

OBRA ’93 not only made it more difficult for individuals to qualify for Medicaid assis tance but a1so attempted to make Medicaid less beneficial to the recipient’s family. Pursuant to OBRA ’93, by federal mandate, Texas-like other states in the Union must attempt to recoup the funds it spends on Medicaid recipients by making a claim against each deceased recipient’s estate. This claim is made through the MERP.

6-7 :1 Programs and Services Affected by MERP

MERP affects only long-term care services and supports an individual receives after the age of 55, and only if the Medicaid recipient first applied for these services after March 1, 2005.w IJ the Medicaid recipient was on an interest list for Medicaid ser vices before March 1, 2005, but did not complete an application for services until after that date, the recipient’s estate is subject to MERP.118

MERP seeks recovery from the estates of decedents who benefited from the fol lowing Medicaid-funded services and programs:W)

nursing home care;
intermediate care for individuals with an inte11ectual disability or related condi tion; and
the following Medicaid waiver programs:
1. Home and Community-Based Services (HCS);
1. Community Living Assistance and Support Services (CIASS);
1. Texas Home Living (fxHmL) Program;
1. Consolidated Waiver Program (CWP);
1. Deaf-Blind \Vith Multiple Disabilities (DBMD);
1. Community Based Alternatives (CBA);
1. STAR+ PLUS 0ong-term care services);
1. Integrated Care Management (ICM); and
1. Community Attendant Services (CAS).

MERP also affects the costs of certain hospital and prescription drug services received by Medicaid recipients.150 However, Primary Home Care (PHC) is not affected by MERP.151

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Your Guide to the Medicaid Estate Recovery Program

Beware the MERP: Texas offers huge loophole to recovery program– Jul 5, 2020

HMS can only recover a MERP claim after you die, and then only against the assets that go through your probate estate.

The loophole? There is no recovery against assets that do not go through your probate estate. It only takes a bit of planning on your part to protect your assets. A few popular tactics:

Name a beneficiary (not your probate estate) on your accounts. Ownership of the account goes directly to the beneficiary when you die.

Establish a Revocable Living Trust. The assets that pass through a revocable living trust are nonprobate assets. When you die, your trustee will distribute the assets to the beneficiaries.

Tex. Admin. Code § 373.205- Medicaid Estate Recovery Program (MERP) Claim

chapter pdf,