This is the first in a multipart series that will delve into the whacky world of Medicaid nursing home benefits after the Deficit Reduction Act. I don't know how many installments we will have . . . enough to get the job done.

Part I

For all practical purposes, in the United States the only "insurance" plan for long-term institutional care is Medicaid. Medicare only pays for approximately 7 percent of skilled nursing care in the United States. Private insurance pays for even less. The result is that most people pay out of their own pockets for long term care until they become eligible for Medicaid. While Medicare is an entitlement program, Medicaid is a form of welfare - or at least that's how it began. So to be eligible, you must become "impoverished" under the program's guidelines.

Despite the costs, there are advantages to paying privately for nursing home care. The foremost is that by paying privately an individual is more likely to gain entrance to a better quality facility. The obvious disadvantage is the expense; in Georgia, nursing home fees average $5,500 or so a month. Without proper planning nursing home residents can lose the bulk of their savings.

For most individuals, the object of long-term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done within the following rules of Medicaid eligibility.

In Georgia, Medicaid is administered by the Division of Medical Assistance of the Department of Community Health (the "DCH"). Across the state, the county Departments of Family and Children Services ("DFACS") assist the DCH in Atlanta with local program management. However, in order to qualify for federal reimbursement, the state program must comply with applicable federal statutes and regulations. So the following explanation includes both Georgia and federal law as applicable.

THE ASSET RULES

The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in "countable" assets in his or her name. If the applicant is married, the spouse is called the Community Spouse, and there are rules concerning how many countable assets the Community Spouse may keep. Those rules will be discussed in a later installment. "Countable" assets generally include all belongings except for (1) personal possessions, such as clothing, furniture, and jewelry, (2) one motor vehicle, (3) the applicant's principal residence, and (4) assets that are considered inaccessible for one reason or another. The asset rules are quite complex.

Keep in mind, the rules discussed in this part relate to qualifying for Medicaid and have nothing to do with transferring those assets or whether those assets might be subject to estate recovery upon the death of the applicant. Those rules will be discussed in a later installment.

Real Property: The Home

A home with equity of less than $500,000 (until February 1, 2007, there was no limit) will not be considered a countable asset and, therefore, will not be counted against the asset limits for Medicaid eligibility purposes as long as the nursing home resident intends to return home or his or her spouse or other dependent relatives live there. It does not matter if it does not appear likely that the nursing home resident will ever be able to return home; the intent to return home by itself preserves the property's character as the person's principal place of residence and thus as a noncountable resource. The "Home" also includes an unlimited amount of real property (as long as the equity does not exceed $500,000). As a result, for all practical purposes nursing home residents do not have to sell their homes in order to qualify for Medicaid. Do keep in mind, that while the Home does not count for Medicaid qualification purposes, it may likely be subject to estate recovery later after the death of the Medicaid applicant and his or her spouse. See the discussion of Estate Recovery in a later installment.

Real Property: Tenancies-in-Common
 

A tenancy-in-common is a method of holding title to real property jointly with others. The percentages need not be equal. Each "tenant in common" has an equal right to use the real property. Upon sale of the real property, the proceeds are divided according to the percentage ownership interests. Each tenancy-in-common interest can be separately sold, transferred as a gift, and passed on under a Will.

Real Property: Life Estates

These are often referred to as "life time rights" or "life rights". In this type of ownership, one owner is referred to as the Life Tenant, the other as the Remainder Interest. The Life Tenant has a current ownership interest that brings with it the exclusive right to occupy and use the premises for the rest of her life. Life Tenants are legally obligated to maintain the premises, pay the taxes and keep it insured. The Remainder Interest holder has a current ownership interest, too, in as much as he may transfer that interest at anytime. The Remainder Interest holder does not have the right to use or occupy the premises, however, until the Life Tenant has died. Once the life tenant has died, the property passes automatically to the Remainder Interests and free of liens the Life Tenant may have added to the property after the life tenancy was created.

Life Estates are an unsettled and confusing area of Georgia Medicaid law. Clearly, Life Estates are not countable property if the property has been used as a residence; however (and this is important), the purchase of the life estate will be a penalized transfer if the purchaser did not live in the residence for at least 12 months.

Unclear is the status of real property life estate interests that were not acquired (perhaps the interest was inherited). A literal reading of the Georgia Medicaid manual says that a percentage portion of the property is a countable resource. The problem is that many people own life estates in nonhomesite property. If the owner transfers the life estate to someone, he will incur a transfer penalty (more on that in a later installment). He can not access the value of the property because no thinking buyer will be interested in purchasing a life estate (when the life tenant dies, the buyer will have nothing). The result of this mess is the life tenant has an asset that cannot be transferred, that cannot be sold and cannot provide a source of funds (perhaps rent), and that will continue to disqualify him for Medicaid.

The best reading of federal law and legislative intent is that a life estate that was not purchased should not be countable. Under old rules, many people were sheltering assets by purchasing life estates and thereby excluding the purchase money. The new rules attempt to control that problem by penalizing the purchase of a life estate unless the purchaser lives in the property for at least twelve months. Many situations do not fit that scenario. Life Estates will be a challenging area until DCH is able to clarify the rules.

Life estates also have the added feature of not being available for estate recovery upon the death of the Life Tenant. The rules clearly say that a life estate IS subject to estate recovery, but Life Estates have, for centuries, passed free of liens and encumbrances placed on the property by the life tenant. Although DCH says Life Estates are subject to Estate Recovery, no one has demonstrated to me how it would be done.

Real Property: Joint Tenancies

Join tenancies in real property are somewhat similar to tenancies-in-common. As long as the joint tenancy exists, if a joint tenant dies, the surviving joint tenant or tenants take the deceased tenant's interests automatically (in this way, a joint tenancy is similar to a life estate). Because of that feature, joint tenancy property might escape estate recovery (I will not guarnatee there wouldn't be a fight over it).

In the next installment, we will discuss the rules applicable to other types of assets.

Information abounds about how Social Security Disability Benefits work. Much of it is very confusing. I hope a brief series of articles will help with, as Detective Friday used to say, the "facts Ma'am, just the facts."
 

My last Social Security Disability article (October 2007 issue of Elder Law Update) dealt with basic filing requirements and eligibility issues. This month let's look at two important Social Security disability issues: onset date and waiting period. 
 

Onset date in Social Security Disability is not the same as the diagnosis date in a medical case. The onset date is the point at which two different factors are met at the same time: 1. The individual has a severe condition that prohibits most work related activities and, 2. The individual is not engaging in Substantial Gainful Activity.
 

Substantial Gainful Activity is Social Security's wording for work activity. Certain earnings criteria have been established as reasonable indications of SGA. For an employee, the SGA test is a monetary test, $900.00 per month or less (2007 rates). For self-employed individuals, there is a 3 level test used to determine SGA: 1. Significant Services and Substantial Income, 2. Comparability of Work Activity, and 3. Worth of Work Activity.
 

Many individuals with severe medical problems continue to work long after the diagnosis, and are ineligible for Social Security disability so long as they work at SGA levels. At the point they drop below SGA, Social Security can establish an "onset date."
 

After the onset date, an individual must serve a mandatory 5 month waiting period that begins with the first full month after onset. There are no exceptions to the waiting period.

Many folks mistakenly believe that benefits are paid retroactively to the onset date after the waiting period. Again, this is not correct. Everyone serves the waiting period. We've been discussing Social Security Disability cases; there is no waiting period in Supplemental Security Income (SSI) cases.

An example will help to clarify all the information:
 

An individual is diagnosed on March 15, 2007, with a severe illness but continues to work fulltime earning over $1,500 per month (SGA level) until July 10, 2007. The onset date would be July 10, 2007. The five month waiting period would then be August, September, October, November, and December. Entitlement would occur in January, 2008, and the first payment would be due in February, 2008.
 

We'll share more information in the months ahead.