LTC Bullet: They're Baaack, Part V: "A Person With $1 Million Is Not Wealthy"
Wednesday January 9, 2002
The Center’s "They're Baaack" series of LTC Bullets attempts to enlighten public opinion about problems caused by Medicaid estate planning by means of extensive quotations from Medicaid planners in their own words. In the first four "They’re Baaack" LTC Bullets in this series, we brought you verbatim transcripts of actual Medicaid planning seminars conducted at the National Academy of Elder Law Attorney’s (NAELA) 2001 Symposium last April. Today, we resume the series with excerpts from an article in "The Elder Law Report" (Neil Golden and Kenneth Coughlin, "NAELA Institute Meets in St. Louis," December 2001, pps. 1-5) summarizing a session titled "Long-Term Care for the Wealthier Client" from NAELA’s most recent conference in early November. Session presenters were NAELA members Steven Stern of Islandia, NY and Matthew Lefevre of Hartford, CT.
Unfortunately, the damage Medicaid planning does to our LTC system for the poor remains hidden from most Americans. Medicaid planning is conducted behind closed doors in attorneys' office throughout the country. Its practitioners are protected by the attorney-client privilege, so we rarely hear from them. Their clients, usually adult children of the frail elderly, are often too ashamed to admit what they've done. The victims of Medicaid planning almost never have a voice, as they are frequently stricken by cognitive impairment incidental to Alzheimer's Disease, stroke, or some other chronic illness. Neither the nursing homes nor the Medicaid program can speak out about egregious examples of intentional impoverishment because of confidentiality rules. So Medicaid planning remains the secret of those who profiteer on the poverty program. Except, of course, to the extent the Center for LTC Financing is able to bring such material to your attention.
Here are several extended excerpts from the Elder Law Journal article with CLTCF commentary.
"Stern began by raising the question of who is wealthy. He noted that in New York a person with $1 million is not wealthy. There is no bright line between the wealthy and the middle class. Most of Stern’s clients are not poor, but are individuals with assets they hope to preserve. The discussion of Medicaid may be appropriate even in the case of individuals with more than $1 million in assets. Clients have a right to know about the options even if they do not pursue them. A wealthy client may be put off by a discussion of Medicaid, but this may change after he grasps the magnitude of long-term care expenses."
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"Lefevre stated that there is obviously a big hole in the health care system with respect to long-term care and noted that much of his planning deals with this hole. He believes Medicaid planning is amoral, not immoral, and that it is the elder law attorney’s obligation to deal with the facts as they walk in the door."
[CLTCF: Which facts would suggest Medicaid planning as the preferred alternative? How about these:]
"The following hypothetical was the basis for the rest of the discussion. Mr. and Mrs. Jones, 68 and 65, have assets of more than $1 million consisting of a residence, bank account, regular investment account, IRA’s, nonqualified tax deferred annuities and life insurance. Mr. Jones has income of $1,200 a month from Social Security and a small amount of pension and annuity income. Mrs. Jones has Social Security and a small pension. . . . Mr. Jones has entered a nursing home as the result of a catastrophic illness."
[CLTCF: It’s certainly too late for Mr. Jones to plan ahead with long-term care insurance, for example (although Mrs. Jones appears be a good candidate). To his credit, according to the article’s authors, Stern conveyed that "long-term care insurance is the best way to meet the cost of long-term care without having to spend assets down to poverty levels." But why shouldn’t the Jones’ tap their wealth to pay privately for Mr. Jones’ care? Surely, Mr. Jones isn’t an appropriate candidate for taxpayer-funded public assistance. Or is he?]
"The first decision is whether to qualify for Medicaid. Lefevre thought the answer is yes because in 3 to 4 years the community spouse will be in financial trouble. . . . If there are trustworthy family members, gifting should also be considered. . . . Under these circumstances in New York, Stern would look to spousal refusal because it could result in immediate Medicaid eligibility.
[CLTCF: Spousal refusal is a technique whereby a community spouse refuses to provide financial support to the institutionalized spouse thereby forcing the state to pay the entire bill for care in exchange for the possibility of a recovery action by the state. See our recent LTC Bullet: "They're Baaack, Part IV: "Abandon Your Spouse . . . Get Medicaid" at www.centerltc.org/bullets/archives2001/310.htm for a more detailed analysis of this practice.]
"Lefevre said that in Connecticut he would recommend taking the assets out of a revocable trust in order to try to avoid dealing with a five-year look-back period. Next, he would have the clients sign new wills leaving everything directly to the children, so if there was a death prior to Medicaid he could take the position that the assets passed by will at death and therefore are not subject to a transfer penalty. Stern commented that although the focus often is on the ill spouse, it is frequently the other spouse who passes away first. Thus, it is standard for his office to put the assets into a revocable trust to avoid estate recovery.
[CLTCF: Estate recovery is the federally mandated process wherein states recoup the cost of care from the estates of deceased Medicaid recipients to support the Medicaid program’s ability to care for others. Medicaid planners emphasize the importance of evading estate recovery as much as qualifying for Medicaid in the first place.]
"Lefevre next would consider raising the possibility of making a large gift and paying for care privately for three years. Stern said that most of his clients refuse to do this. He finds that wealthier people love control over their lives and assets, so he would rarely have that discussion. What about buying a more expensive home? Although frequently discussed, clients never choose this option. Clients may buy a new car or do repairs to their house, but usually no more."
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"In discussing these issues with clients, Stern goes very slowly, tries to simplify the discussion, and continually asks if the client understands. Nevertheless, the next day the clients will call saying they didn’t understand the discussion and the plans."
[CLTCF: What a surprise that Medicaid planning clients have a hard time following their attorneys’ "now it’s countable, now it’s not" hocus pocus. Unfortunately for clients, Medicaid planning is just a different path to the same undesirable destination as if they’d spent-down their money on care instead: welfare-financed care of limited scope and often of questionable quality. Yet, spending-down the old-fashioned way by paying for one's own care affords access to quality care at the most appropriate level at least for a while. All the more reason to plan ahead with savings, investments or insurance to avoid any type of spend-down, real or artificial.]