LTC Bullet: SSI Expands Medicaid's "Renoir" and "Two Mercedes" Loopholes
Thursday, March 10, 2005
LTC Comment: At a time when the Bush Administration, Congress, and all state Governors are struggling to get the "Medicaid Monster" under control, SSI has supercharged two major asset eligibility loopholes. More after the ***news.***
*** Today's LTC Bullet deals with creative techniques people use and attorneys recommend to achieve artificial self-impoverishment in order to qualify for Supplemental Security Income. To find seven years worth of LTC Bullets specifically about "Medicaid estate planning," artificial self-impoverishment to qualify for Medicaid, go to the LTC Bullets archives by subject at http://www.centerltc.com/bullets/subject.htm#medicaid_plan . There you'll discover 100 articles including links to hundreds more sources on the topic. ***
*** MOSES ARTICLE PUBLISHED. Center President Steve Moses's article titled "So What if the Government Pays for Most Long-Term Care" has been published in the March 2005 issue of Health Insurance Underwriter magazine. Read it at http://nahu.timberlakepublishing.com/article.asp?article=1117 . In this article, Steve updates nursing home and home health care expenditure statistics based on the latest (2003) data from the Center's for Medicare and Medicaid Services. He also explains how excessive dependency on Medicaid and Medicare financing impairs long-term care quality, chills the market for private financing alternatives like LTCi and home equity conversion, and bankrupts America's LTC safety net for the poor. ***
*** MULTI-LIFE LTCI BOOT CAMP takes place May 1-3 at the Hilton Hotel at the Kansas City Airport. Jesse Slome informs us that early registration for the LTC insurance multi-life sales Boot Camp ($279) expires April 4th. Then the registration fee increases to $379. But, get this, Jesse says you can save $50 off either price by writing 'Center LTC' in the 'Discount Code' box when registering. If you have questions, go to http://www.ltcsales.com/multilife/ or call (888) 599-5997. ***
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LTC BULLET: SSI EXPANDS MEDICAID'S "RENOIR" AND "TWO MERCEDES" LOOPHOLES
LTC Comment: President Bush has proposed and Congress is working to implement a $4.5 billion savings for Medicaid (over 10 years) by discouraging the abuse of asset transfers. For now, never mind that this paltry goal is nothing compared to the savings that could accrue to Medicaid by implementing rational eligibility reform along lines the Center for Long-Term Care Financing has recommended. (See "How to Save Medicaid $20 Billion Per Year AND Improve the Program in the Process" at http://www.centerltc.org/pubs/howtosavemedicaid.pdf .) Rather, focus for a moment, on the Medicaid planning floodgates recently thrown wide open by the Social Security Administration (SSA).
SSA runs the Supplemental Security Income program (SSI). SSI is federally administered cash assistance to the aged, blind and disabled. SSI is important to Medicaid because in most states, most of the time, anyone eligible for SSI is eligible for Medicaid, including Medicaid's most expensive long-term care benefits. Thus, the easier SSI is to obtain, the easier it is for people to qualify for Medicaid.
Until recently, SSI placed a dollar limit on the value of "household goods and personal effects" that SSI recipients could own without affecting their eligibility for the program's benefits. SSI also limited the value of an exempt automobile under rare circumstances. Effective yesterday, however, those rules changed. Now and henceforth there will be no limit on the value of household goods, personal effects, or an automobile that SSI recipients (and hence Medicaid recipients) can own without affecting their eligibility for these public welfare programs. (For details and to understand important exceptions and SSI's tortured reasoning for this rule change, go to the Social Security Administration's explanation of this rule change at http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/05-2248.htm .)
So what? Who cares?
Even before these latest changes, SSI's already generous eligibility rules were wide open to abuse by Medicaid estate planners. Here are some examples.
One author described the "Renoir Loophole" this way: ". . . if the individual happens to have about $82 million lying around, he or she could even buy a painting by Renoir to hang on the walls of the house, . . . [a] strategy [called] 'burying money in the treasure chest of the house.'" (Mary Schroeder, "Elder Law Expert Outlines Features of Asset Transfer, Power of Attorney," Financial Services Week, Vol. 3, No. 20, July 9, 1990, p. 19.)
More examples: "If the person is married, household goods, a car and personal effects are protected without regard to their value! . . . For example, oriental rugs or paintings that appreciate in value may be worthwhile investments that add beauty and hide assets at the same time." . . . "Here's another loophole that a nursing-home resident may want to consider. He or she could buy a brand-new--and expensive--ring right before going into a nursing home. After all, the law doesn't limit this exclusion to rings purchased at the time of a wedding or engagement." (Armond D. Budish, Avoiding the Medicaid Trap: How to Beat the Catastrophic Costs of Nursing-Home Care, Henry Holt, New York, 1989.)
(It is important to note that SSI rules allow for counting the value of investment-grade assets that might be disguised under these rules as "household goods." But here's the problem. SSI and Medicaid eligibility workers rarely check on the value or character of such items, so any implied or explicit limits are moot for all practical purposes.)
The "Two Mercedes Rule" is a technique long used by Medicaid planners to jettison their clients' wealth and qualify them for public assistance. One car of unlimited value is exempt for purposes of qualifying for SSI and Medicaid. Therefore, giving it away is not a "transfer of assets for less than fair market value to qualify for Medicaid." Hence, no transfer of assets eligibility penalty applies if you give a car away. So, if you want to get down to SSI's and Medicaid's "draconian" asset limit of $2,000, simply buy a Mercedes, give it away, buy another, and give it away until you are officially "impoverished." Voila', virtually instantaneous Medicaid eligibility.
The "elderlaw" literature is replete with examples like these which are easily accessible to anyone who takes the trouble to look. If you don't want to visit a law library, however, just Google "Medicaid planning" and peruse the 1.3 million hits you'll find. Or attend one of the omnipresent seminars for seniors designed to teach them how to obtain "nursing home care virtually free for life." Or buy one of the many books available on "government benefits planning."
For example, here are some quotes from Golden Opportunities: Hundreds of Money-Making, Money-Saving Gems for Anyone Over Fifty, by Amy and Armond Budish, Henry Holt and Company, New York, 1992. (This book, and the author's other book, Avoiding the Medicaid Trap, cited above, are available on Amazon.com and BarnesandNoble.com. More recent books and publications generally use less egregious language because of the shame and embarrassment media exposure of Medicaid planning has brought to that industry. Nevertheless, the same techniques and loopholes are commonly used throughout the United States, usually coming under the government's and the media's radar.)
"We have committed an act of piracy--we have broken into the Fort Knox of Government benefits and uncovered the best legal strategies available to you for claiming your share of the gold from the Government's treasure chest. . . . We'll explain how you can 'strike gold' in the Social Security [including SSI], Medicare, and Medicaid programs. . . . With this book we are handing you the treasure map, deciphered from a mine of unintelligible government rules and regulations." (p. xiii)
"Are you having trouble making ends meet on Social Security or other retirement benefits? Relief could be available from a surprising source: your Uncle Sam may have a monthly check for you under the Supplemental Security Income (SSI) program!" (p. 433)
"As many as HALF of all eligible persons are NOT receiving money that is rightfully theirs--usually because they don't even realize there's money set aside for them. Don't you pass up this Golden Opportunity." (p. 433, emphasis in the original)
"Qualifying for SSI may also open up a variety of other Golden Opportunities too, such as Medicaid, food stamps, rehabilitation, hot meal programs, and home care." (p. 434)
[On page 437, the author lists 27 kinds of income that SSI does not count in determining income eligibility, including income tax refunds, grants, scholarships and fellowships, free medical care and services, medical insurance premiums paid by someone else, food stamps, housing assistance, public assistance, loan proceeds, principal payments on a loan you made to someone else, payment of your bills by someone else, airline or train tickets received as gifts, interest on excluded burial funds, etc.]
"GEM: Have Your Child Give You a Life Estate." (p. 439)
"GEM: Take Food and Shelter as a Loan." (p.439-440)
[These techniques evade having SSI count free food and shelter as income against eligibility limits.]
"GEM: Separation or Divorce Can Pay Off with SSI. . . . Your ineligible spouse's income is only deemed against you if you are living together as husband and wife. If you are divorced, or even just living apart for a month, your spouse's income won't reduce your SSI benefits." (p. 444)
[On page 446, the author lists nine kinds of assets that SSI does not count in determining asset eligibility, including a residence, household goods and personal effects, an automobile, life insurance, burial and funeral costs, jointly owned real estate, real estate that can't be sold, etc.]
"GEM: Promise to Come Home--in Writing. If you leave home, keep it protected by stating IN WRITING your intent to return. . . . If you enter a nursing home, try to get your doctor to state, in writing, that there is at least some chance you'll be able to return home. That, coupled with your state intent to return, should allow you to keep the house and qualify for SSI." (p. 447, emphasis in the original)
"You can buy burial spaces (any amount) not only for yourself and your spouse but also for your adult children, brothers, sisters, parents--and their spouses. None of these will be counted as part of your assets." (p. 448)
"GEM: Borrow and Rent Your Second Home! . . . "Rent it for a couple of weeks, maybe to a child, and the property has 'magically' become protected." (p. 450-451)
"GEM: Grow Crops on Vacant Land and Reap Benefits! . . . As long as you sample the fruits of your labor, the property should be protected!" (p. 451)
"Cashing in on SSI. If your income or assets are too high to get SSI benefits, does that mean you're out of luck? No! By using our gems, you may be able to cash in on hundreds of dollars each and every month!" (p. 452)
"GEM: Use a Little Alchemy to Change Countable Assets into 'Gold. You can take money from bank accounts, stocks, bonds, CDs, and so on--all of which would count against you for SSI--and put it into your home. No, we DON'T mean that you should take cash out of the bank and hide it under the bed. But because a home generally is protected, adding to your equity can qualify you for SSI. . . . Putting countable assets into the home can have a double benefit because it reduces both assets and income. This helps you kill two of the SSI requirement birds with one stone." (p. 452, emphasis in the original)
"GEM: Buy a Home for Your Child. "If you've got too much cash to qualify for SSI, you can get yourself an SSI check by using that money to buy a home for a family member!" (p. 453)
"GEM: Buy Other Protected Assets. Let's say you've got $15,000--which is well over the $2,000 SSI threshold. You could put those funds into other protected assets, so they will not count against you for SSI qualification. Need a new refrigerator? Is the stove on its last leg? Time to buy a new coat for the winter? . . . How about a new car?" (p. 454)
"GEM: Give Assets Away. . . . Until recently, making a gift or transfer would cause you to be disqualified for SSI for up to two years. But now there is NO disqualification period for SSI. You can give your money away and IMMEDIATELY qualify for SSI! (p. 455, emphasis in the original) [This particular SSI loophole does not apply to Medicaid which does retain a transfer of assets eligibility penalty, albeit one that is easy to evade.]
"GEM: Create an Irrevocable Trust. Another way to minimize the risks involved in giving money to children is to set up an irrevocable trust." (p. 457)
"GEM: Check Medicaid. Creating a Medicaid Trust is not the only Medicaid gem that can be a gold mine for SSI benefits. Because the Medicaid rules are so much like the SSI rules, the gems are almost interchangeable. . . . In fact, by opening up the treasure chest of one program, you should be able to find the gold in the other as well." (p. 457)
"Most people know nothing about SSI. And that's sad, because a lot of folks are missing out on money that is there for the asking. The Golden Opportunities we've presented in this chapter can add enough income to make a real difference in your everyday life-style." (p. 462)
LTC Comment: Because of loopholes and abuses like these, Medicaid costs are spinning out of control. If you want to help wake up Congress, the President and the media to such problems and their solutions, send them to www.centerltc.org .
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