USING A POOLED INCOME TRUST TO ELIMINATE A MEDICAID SPEND DOWN MARIE T. VAZ, STAFF ATTORNEY

USING A POOLED INCOME TRUST TO ELIMINATE A MEDICAID SPEND DOWN by MARIE T. VAZ, STAFF ATTORNEY Evelyn Frank Legal Resources Program New York Legal Assistance Group New York City 197

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Using a Pooled Income Trust to Eliminate a Medicaid Spend Down Marie T. Vaz, Staff Attorney Evelyn Frank Legal Resources Program New York Legal Assistance Group (212) 613 7310 eflrp@nylag.org http://nylag.org http://nyhealthaccess.org Updated March 2015 Background 3 What is a trust? A legal arrangement where one party has the legal ownership of money or property, but must hold it or spend it for the benefit of some other party Estate planning allows testator to make gifts to family members but have strings attached Avoidance of probate can substitute for a will, and avoid cost of will probate Protection from creditors spendthrift trusts cannot be reached by creditor claims Supplementing public benefits supplemental needs trusts, or special needs trusts 199 2014 New York Legal Assistance Group 1

4 What is a trust? Legal Control Benefit Grantor / Donor / Settlor Trust Property Trustee Best Interests Beneficiary* * May be same as Donor 5 What makes a trust a SNT? Supplements public benefits Trust agreement prohibits trustee from spending the trust property in any way that would impair beneficiary s eligibility for public benefits Irrevocable No give backs! Beneficiary is disabled Same definition of disabled as for SSDI/SSI Payback on death Any money left in SNT at death is paid back to State or with a pooled trust, the money stays in the trust to be used for the benefit of other people with disabilities 6 Two Kinds of SNTs Individual (d)(4)(a)* Only one beneficiary Trustee can be almost anyone (family, friend, lawyer) Beneficiary must be under 65 Must be established by a parent, grandparent, legal guardian, or by court order even though the $$ is the client s money Funds remaining at beneficiary s death must be paid back to State for cost of Medicaid services provided if any left after that, can pass on to remainder beneficiary Need an attorney to draft, and sometimes to go to court for approval Administrative/tax burdens on trustee More flexibility than pooled SNT *42 U.S.C. 1396p(d)(4)(A) 200 2014 New York Legal Assistance Group 2

7 Two Kinds of SNTs Pooled (d)(4)(c)* Assets pooled among many beneficiaries, but each has their own sub account Trustee is a non profit organization Beneficiary can be any age Can be established by beneficiary themselves (must have mental capacity or an agent with a Power of Attorney) Funds remaining at beneficiary s death must either be retained by the trustee organization, or paid back to the State No attorney needed Trustee organization takes care of administration Less flexible than individual SNT *42 U.S.C. 1396p(d)(4)(A) 8 How does a SNT work? Donor establishes SNT Executes trust agreement setting the ground rules for the trustee and the donor Donor transfers assets and/or income to SNT Personal injury settlement Inheritance Savings Monthly excess income Trustee invests and maintains assets Trustee must file tax returns (but not taxable income to beneficiary) Trustee must provide accountings 9 How does a SNT work? Trustee spends money on behalf of beneficiary Trustee cannot give beneficiary cash! Trust expenditures must be primarily for the benefit of the beneficiary Can t make gifts to others Can t pay expenses for others Can reimburse someone else for paying beneficiary s expenses Trustee must make third party payments Pay rent to landlord Pay utility bill Buy airplane tickets for beneficiary to go on vacation How expenditures affect public benefits depends on the specific program in question 201 2014 New York Legal Assistance Group 3

10 How does a SNT work? Donor can transfer income into SNT each month This only works for Community Medicaid People do this to eliminate their excess income for Medicaid, and thereby eliminate their spend down Donor cannot take money out of SNT (irrevocable) SNT ends at death of beneficiary However, since a pooled trust generally charges a monthly fee, if donor stops paying $$ into trust, and stops paying fee, trust account will be closed 11 How do Pooled Income Trusts PITs work? An elderly or disabled Medicaid recipient makes deposits of their spend down amount into a PIT every month The money deposited in a PIT is excluded from countable income in Medicaid budgeting Excluding the deposit amount eliminates the person s spenddown Eliminating the spend down activates their Medicaid The money that is deposited in the PIT can be used to pay the person s monthly living expenses Medicaid must approve this process on an individual basis Why use a PIT? 202 2014 New York Legal Assistance Group 4

13 Medicaid doesn t care about your living expenses Gross monthly income $1,516 Health insurance premiums (Medicare Part B) $105 (Medigap) $161 Unearned income disregard $20 Net countable income $1,230 Income limit for single $825 (2015) Excess income $405 14 Before the pooled trust Rent $800 Client ConEd Phone 50 50 Medicaid Spend Down? $405 Income: $1,516/mo. Food Health Insurance 200 266 Other 150 Expenses: $1,516 15 After the pooled trust Pooled Trust $800 Rent $820 ConEd 50 Medicaid Spend Down? Client Income: $1,516/mo. Phone Food Health Insurance Other 50 200 161 150 ZERO and Client comes out ahead by $85 Why? Expenses: $1,411 203 2014 New York Legal Assistance Group 5

16 Medicaid budget with pooled trust Gross monthly income $1,516 Health insurance premiums (Medigap) 161 Unearned income disregard 20 Contribution to pooled trust 820 Net countable income $515 Income limit for single 825 Excess income ZERO 17 How can client come out ahead? An extra perk of the pooled trust is it can make your client eligible for Medicare Savings Program (MSP), which pays the Medicare Part B premium So, by using the pooled trust, your client can get a $105/mo. raise to their Social Security, in addition to eliminating their spend down In most cases, this will cover the monthly cost of the trust, which is the fee charged by the pooled trust organization In our example, the fee was $20/mo. (client contributed $820 so trust could pay $800 rent after deduction of fee) Medicare premium is $104.90/mo. in 2015 Who is appropriate for a PIT? 204 2014 New York Legal Assistance Group 6

19 What s the big deal? Let s just get everyone in a PIT!? Don t put the cart before the horse! A PIT is NOT for everyone There are some downsides: Start up costs Ongoing fees Logistical hurdles Future recerts 20 Why Medicaid? Uninsured For clients who are totally uninsured, and would only be eligible for Medicaid with a spend down they cannot meet, a PIT is perfect But remember, disabled individuals under 65 can get Medicaid without a spend down, if they are doing any amount of work, through MBI WPD Income limit: $2,432/mo. Resource limit: $20,000 21 Why Medicaid? Under insured Clients with Medicare who have extremely high Part D drug costs, but whose income is over the limit for MSP / Extra Help can use a PIT to qualify for MSP Clients with Medicare who cannot afford Medigap and want to use Medicaid to wrap around Medicare Medicare covers most of the cost (80%) of most services but client is responsible for 20% coinsurance and deductibles Medigaps are insurance plans that clients can purchase to supplement Medicare but they carry $150 $250 monthly premiums CAVEAT: Medicaid only covers services from Medicaid providers CAVEAT: It may be cheaper to pay 20% coinsurance than establish a PIT Explore Medicare Advantage or cheap Medigap 205 2014 New York Legal Assistance Group 7

22 Why Medicaid? Home Care Medicare does not cover long term care services, such as home care, but Medicaid covers up to 24/7 Private pay costs: An agency employed home attendant costs $20/hour; a 24/7 home attendant costs $8K/month; an assisted living facility costs $6K/month; a nursing home costs $13K/month Clients can pay for home care up to their spend down amount and then Medicaid will pay for the rest, but many cannot afford to do that Clients with Medicare and Medicaid are now required to enroll in Managed Long Term Care (MLTC), where failure to pay their spend down amount can lead to loss of home care services 23 Public Benefits and PITs/SNTs How the PIT/SNT affects eligibility depends on the specific public benefit program The rules are different for every program and are explained in the SNT outline (at http://wnylc.com/health/download/9/) Medicaid SSI Food Stamps SCRIE/DRIE HEAP Public Housing / Section 8 Etc. How do PITs affect Medicaid eligibility? 206 2014 New York Legal Assistance Group 8

25 The Four Questions Resources Does the trust property count as a resource to the beneficiary? If the applicant transfers money into a PIT, does it create a transfer penalty? Income Does the trust create income to the beneficiary of the trust? If the beneficiary transfers money to the PIT each month, are those contributions deducted from countable income? 26 Is the PIT a resource? If it is a properly established SNT, then it is by definition not a countable resource for Medicaid purposes If individual SNT, must comply with 42 U.S.C. 1396p(d)(4)(a) If pooled SNT (e.g. PITs), must comply with 42 U.S.C. 1396p(d)(4)(c) For SSI: Same rule; doesn t count toward $2,000 / $3,000 resource limit 27 Is there a transfer penalty? Community Medicaid This includes all varieties of Medicaid except for nursing home Home care (PCA or home attendant, CHHA, MLTC, waivers) There is never a transfer penalty for Community Medicaid Therefore, there is no transfer penalty for transferring income or assets into a PIT for applicants of any age for Community Medicaid 207 2014 New York Legal Assistance Group 9

28 Is there a transfer penalty? Nursing Home Medicaid Transfers of Assets If under age 65 at time of the transfer, then NO penalty. If over age 65 at time of the transfer, then YES. For SSI: Same rule. Look back period is 3 years. 29 Is there a transfer penalty? Nursing Home Medicaid Transfers of Income Over 65 There is a transfer penalty, but not if beneficiary spends all income contributed to PIT on living expenses before going into nursing home Beneficiary may no longer transfer income into PIT once permanently residing in a nursing home on Institutional Medicaid 30 Do payments from the PIT count as income? Because it is a type of SNT, the trustee is not allowed to give cash to the beneficiary If the trustee only pays bills on behalf of beneficiary, then it is not countable income for Medicaid purposes This is because Medicaid does not count in kind income at all unless from legally responsible relatives (i.e., spouses or parents for minor children) In-Kind Income Goods or services provided for free (or for less than their actual value) by a third party For SSI: Different rule. Payments for shelter or food cause reduction of SSI benefit. 208 2014 New York Legal Assistance Group 10

31 Is income transferred into a PIT deducted from countable income? Community Medicaid For all varieties of Medicaid except for nursing home, contributions of income to a PIT are deductions from countable income As a result, someone receiving Personal Care Services, CHHA, MLTC, etc. can eliminate their spend down by contributing their excess income to a PIT 32 Is income transferred into a PIT deducted from countable income? Institutional Medicaid Because of complex post eligibility budgeting rules, contributions of excess income to a PIT do not reduce the NAMI or spend down But, if a client is on Institutional Medicaid but has Community Budgeting, should be able to use contributions to a PIT to reduce spend down 33 Is income transferred into a PIT deducted from countable income? Waiver Programs Gray area: there is considerable variation among counties and waiver programs For SSI: Different rule. You can t meet income limit or increase benefit for SSI by contributing excess income to a PIT. 209 2014 New York Legal Assistance Group 11

34 Use the right tool for the job If the problem is Excess resources for someone under 65 then is a pooled trust the solution? Yes Excess resources for someone 65 or older Probably not Excess income for someone of any age Yes 35 Readiness Checklist Otherwise Medicaid eligible Only problem is income; shouldn t use pooled trust to solve a resource problem for over 65 Client cannot afford to pay the spend down Some clients have low living expenses relative to income 36 Readiness Checklist Client has capacity, or has someone else with valid POA Some PITs will not accept a standard POA; it must have specific language about establishing trust Client has someone who can help with paperwork Even if client can handle it now, what about 10 years from now? Write monthly checks, send monthly disbursement requests, manage account 210 2014 New York Legal Assistance Group 12

37 Readiness Checklist What expenses will be paid out of a PIT? Rent / maintenance / mortgage is best Must be third party vendor payments; not cash reimbursement Can usually pay credit card bill down (for approved expenses) Each trust has its own rules Must make sure that you do not accumulate a large balance in trust account; this could cause a transfer penalty for nursing home care 38 How much to contribute? Exact amount of spend down Trust can pay expenses after deduction of fee More than spend down E.g., for rent Spend down will still be zero Less than spend down If client can afford to pay some spend down Appropriate where expenses are relatively low and there is danger of accumulating a balance Use our worksheet to make it easy! http://www.wnylc.com/health/download/316/ 39 Which PIT? There are about 20 different PITs in New York state Each have different rules, minimum contribution limits, fees, etc. This training assumes the Center for Disability Rights*, but only because they currently have the lowest fee schedule; many others are perfectly suitable Main criterion is that they will allow monthly contributions of income rather than a lump sum of assets See unofficial list at http://www.wnylc.com/health/entry/4/ * CDR used only as example; not intended as an endorsement. 211 2014 New York Legal Assistance Group 13

Step By Step Process 41 Sequence Overview If client can meet spend down (e.g., old bills, home care services) Apply for Medicaid with spend down Enroll in pooled trust Obtain proof of disability Submit pooled trust and proof of disability to Medicaid 45 days 45 days ~ 6 mos. If client cannot meet spend down Enroll in pooled trust Obtain proof of disability Apply for Medicaid with spend down, enclosing pooled trust and proof of disability 45 days 90 days (in theory) 42 The Pooled Trust Triangle Client Medicaid Pooled Trust 212 2014 New York Legal Assistance Group 14

43 1) Apply for Medicaid with Spend Down Although counterintuitive, this is the fastest option for most applicants Shorter turnaround time on Medicaid application without pooled trust and disability documents enclosed Can use old bills or prospective home care (e.g., MLTC) to meet spend down after approval Normal Medicaid application Pretend there is no pooled trust (because there isn t, yet) 44 2) Enroll in PIT The procedure and timeline for enrolling in a PIT varies from trust to trust This can be done in parallel with Medicaid application Generally, you will need the following but every PIT differs: Beneficiary Profile Sheet Joinder Agreement, filled out and signed before a notary public Enrollment funds Also can send disbursement requests and requests for automatic withdrawals from client s bank account 45 Note on timing The ultimate goal is to have Medicaid rebudgeted with a zero spend down retroactive to the earliest date possible. That date should be the earliest date where all of the following conditions have been met: Resource eligible for Medicaid Began contributing at least spend down amount to pooled trust each month On or after onset of disability (i.e., proof of disability) So, the earlier you set up the pooled trust, the better, and The earlier you get the proof of disability from the doctor(s), the better 213 2014 New York Legal Assistance Group 15

46 3) Notify Medicaid about the PIT In about 45 days, the client should receive an approval both of Medicaid with spend down, and of enrollment in their PIT of choice Now, to complete the triangle, you must notify Medicaid about the change in the client s situation i.e., their enrollment in the PIT This is the most difficult and critical stage of the process, because any errors can cause Medicaid to deny or mishandle the rebudgeting 47 3) Notify Medicaid about the pooled trust You must submit the following items to Medicaid: Proof of PIT enrollment Master Trust Agreement Joinder Agreement, signed by both you and the trustee Verification of Deposits made to SNT SNT Acceptance Letter (cont d on next page) 48 3) Notify Medicaid about the pooled trust You must submit the following items to Medicaid (cont d): Proof of Disability If client was ever approved for SSDI or SSI on basis of disability, then you only need to submit award letter and none of the following forms, otherwise submit: DSS 486T Medical Report for Determination of Disability Medical records for all doctors back 12 mos. or to desired onset date DSS 1151 Disability Questionnaire MAP 751D Medicaid HIPAA Release (for you as rep) OCA Official Form 960 NY State HIPAA (for doctor) x 3 Cover Letter See cover letter template at: http://www.wnylc.com/health/download/64/ 214 2014 New York Legal Assistance Group 16

49 Am I done yet? Follow up with client Make sure client continues making proper monthly contributions to trust, and that they are successfully obtaining disbursements towards living expenses Follow up with Medicaid It can take many months to process Look out for notices Final outcome is notices setting spend down to zero and approving enrollment in QMB (the Medicare Savings Program) Check effective dates: if they are not as early as you wanted, request fair hearing 50 Other web resources How to use a pooled income trust to eliminate a Medicaid spend down Step by Step Guide http://wnylc.com/health/entry/44/ Longer Memo http://wnylc.com/health/file/4/ Disability Determinations http://wnylc.com/health/entry/134/ List of Pooled Trusts http://wnylc.com/health/entry/4/ Legal Authorities http://wnylc.com/health/entry/128/ Thank you! 215 2014 New York Legal Assistance Group 17

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