LTC Bullet: Medicaid Planners Convicted

Wednesday, November 12, 2003


LTC Comment: Three Medicaid planners in Colorado have been convicted of consumer fraud. More after the ***news.***

*** The Center for Long-Term Care Financing will not publish LTC Bullets, LTC E-Alerts, LTC Readers, or LTC Data Updates next week. Staff are attending the "The 2003 National LTCI Producers Summit in New Orleans. Steve Moses will moderate a session at the conference titled "Capital Perspective: The Future of Medicaid and LTC" featuring Dennis Smith, Director of the Center for Medicaid and State Operations of CMS, AKA the "head fed" for Medicaid. Steve will also present a one-hour preview on Monday evening, November 17 (7:00 PM to 8:00 PM), of the Center for Long-Term Care Financing's highly regarded LTC Graduate Seminar. If you are coming to the Summit (registrations are closed due to full advance registrations nearing 700), be sure to take this opportunity to meet Center Executive Director Amy Marohn-McDougall and Administrative Coordinator Damon Moses in person. Amy will be introducing as many attendees as possible to the merits of joining and supporting the Center for Long-Term Care Financing. Damon will be conducting interviews and taking pictures in preparation for our fourth "virtual visit" to another major LTC conference. Watch for it in The Donor-Only Zone by the end of the year. ***

*** Speaking of conferences, one of the biggest and best is coming up February 8-11, 2004 in Houston, Texas. You can find complete information on the Society of Actuaries' Fourth

Annual Intercompany LTCI Conference at . Not sure this is the industry meeting for you? If you're a Center donor with access to The Zone, just click here to find our "Virtual Visit" to the last SOA-LTCI conference which was held in Las Vegas, January 26-29, 2003. (Misplaced your user name and password? Just drop a note to or call him at 206-283-7036 for a quick reminder.) Our virtual visits to major industry conferences are designed to give you a feel for what the meeting is like, including summaries of sessions, interviews with attendees, photographs of prominent participants, and details about cost and venue. ***

*** LATEST DONOR-ONLY ZONE CONTENT: Here's the latest Zone content followed by instructions on how to subscribe so you can receive these critical epistles daily by email.

The LTC Data Update #3-027--New Data Base Searchable by Medicaid Benefit or State (Find out what benefits Medicaid offers in your state or search all states for a specified benefit.)

The LTC Data Update #3-028--Retirement Worries Suggest LTCI Need ("What, Me Worry?" about retirement savings, say boomers per the Employee Benefit Research Institute.)

The LTC Data Update #3-029: 2004 Medicaid Spousal Allowances and Why They Matter (How much can the community spouse keep next year while the Medicaid spouse receives LTC benefits?)

LTC E-Alert #3-060--Well, Duh! Another Poll on LTC Misinterpreted (What's wrong with the incessant polls that claim the public is ignorant because they believe Medicare pays for LTC?)

Don't miss our "virtual visits" to major LTC industry conferences in The Zone. You'll find our comparison of the conferences, session summaries, interviews and pictures at .

Individual donors of $150 or more and corporate donors to the Center for Long-Term Care Financing receive our daily email LTC Bullets, LTC E-Alerts, LTC Readers, and LTC Data Updates for a full year. You'll also get access to the donor-only zone where these publications are archived along with other donor-only features. If you already qualify for The Zone, you can click the following link, enter your user name and password, and go directly to the latest donor zone content and archives: . If you do not already qualify for The Zone, mail your tax-deductible contribution of $150 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email your preferred user name and password (up to 10 characters each). You can also contribute online by credit card or direct withdrawal at . ***


LTC Comment: People often assume that Medicaid planning, i.e. artificial impoverishment to qualify for Medicaid LTC benefits, is fraud. They ask why the government allows Medicaid planning to continue. The truth is that Medicaid planning, properly done, is legal. True, the Balanced Budget Act of 1997 (BBA '97, AKA the "Throw Granny's Lawyer in Jail Law") made it a crime for a financial adviser to recommend Medicaid asset transfers to a client in exchange for a fee. But BBA '97 is unenforceable because Congress repealed the provision in the Health Insurance Portability and Accountability Act of 1996 (HIPAA '96, AKA the "Throw Granny in Jail Law) which made Medicaid asset transfers a crime. How could they hold attorneys legally culpable under BBA '97 for recommending a practice to a client that is legal again after the repeal of the germane provision in HIPAA '96? What a mess! The consequence is that virtually anyone with good legal advice can qualify for Medicaid LTC benefits while divesting or sheltering substantial income and assets. But poor people and those on the margin lose everything because they lack the wealth and savvy to afford sophisticated professional advice.

Once in a while, however, Medicaid planners get it wrong. What follows is the story, republished with permission, of three planners convicted of fraud for their misguided "Family Asset Protection Plan."


ELDER LAW FAX -- November 3, 2003


A free weekly newsletter by Timothy L. Takacs, Certified Elder Law Attorney

This issue: Medicaid Planning Attorney Convicted of Consumer Fraud


Bob Mason, 70, a long-time attorney in Colorado Springs, began advertising in 1996 seminars touting his ability to help seniors shelter assets from the nursing home and become eligible for Medicaid nursing home benefits.

Consumers were invited to learn how to "Protect (Their) Home and Assets from Probate and Nursing Home Costs" and to "Receive Nursing Home Benefits-Paid for by the Government." Mason and his associates Harry Hochstetler and Claude Roy Page conducted these seminars throughout the state of Colorado, usually at local hotels.

By all accounts, his seminars were very popular. Hundreds of people turned out to hear his message. Mason claimed that the plans would qualify purchasers for Medicaid while still allowing them to keep their assets free from eligibility reviews and limits. Mason told his audiences that he could draft revocable trusts that would protect assets for the spouse at home in case one of them went into the nursing home and for future heirs.

The business was successful. Together the three men sold a ''Family Asset Protection Plan'' to as many as 700 people for an average of $2000 each.

Colorado Attorney General Ken Salazar brought a case against the three men in November 2001, under the state consumer fraud statute, contending that the men knew their claims were false and that their "Family Asset Protection Plans" accomplished little if anything of what the men said they would do.

After listening to the testimony of numerous senior victims, the testimony of an estate planning expert and a representative of the State Medicaid office, in September the trial judge concluded that the three defendants had falsely represented their plan in violation of the Consumer Protection Act.

Mason's scheme can be characterized, charitably, as one that may have sounded too good to be true. No doubt those who bought into his scheme wanted to believe the revocable trusts would work.

According to reports in the Colorado Business Journal, Marianne Twoey, trust policy specialist with the Colorado Department of Healthcare, Policy and Financing, reviews plans like the one Mason concocted. Mason's plan came to her attention when the children of a couple who entered a nursing home monitored their Medicaid application process.

After the couple's application for Medicaid nursing home benefits was denied, the children reported the Mason plan to the Better Business Bureau.

According to Ms. Twoey, Mason's scheme was the first fraud case of its kind in Colorado.

As experienced Medicaid planning attorneys should know, in most states putting exempt assets such as the home into a revocable trust does the exact opposite of what the planner intends. Putting exempt assets into a revocable trust disqualifies the applicant from Medicaid eligibility; it does not shelter assets from the nursing home.

Hochstetler contends that he never intended to mislead anyone about the plans he helped Mason sell. The Family Asset Protection Plan was obviously designed for probate avoidance, but the plans were not marketed that way, and the denials of eligibility were certainly not the outcome that the men's victims were told they could expect.

Colorado's Medicaid agency is reportedly working with Mason's victims and allowing them to restructure their estate plans so they can qualify for Medicaid.

A hearing is pending on the penalty phase of the trial. The defendants could be fined up to $10,000 for each violation of the Consumer Protection Act since all of their victims were over the age of sixty. In addition, the court will be asked to order the defendants to pay full restitution to all of the victims.


Elder Law FAX is published weekly and copyright 1995-2003 by Timothy L. Takacs, Certified Elder Law Attorney, Hendersonville, Tennessee ( ).

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