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MA Health and Medicaid Planning

Long term healthcare and nursing home care are topics of concern for many with aging parents or grandparents.  A hot-button in the Commonwealth of Massachusetts, including the North Shore and towns such as Wakefield, Reading, Lynnfield, and Saugus, is MassHealth (Medicaid) and senior benefits. MassHealth is the government run health insurance plan in MA which combines Medicaid and CHIP (State Children’s Health Insurance Program) into one program. Qualified MassHealth members may be able to get doctor visits, prescription drugs, hospital stays, and many other important services.

commerce-acts-books-477966-m A recent court ruling from the Supreme Judicial Court (the highest court in Massachusetts)   presents some good news in determining qualification for certain benefits under MassHealth that may have an important impact on seniors. Daley v. Secretary of the Executive Office of Health and Human Services (Mass., No. SJC-12200, May 30, 2017) and Nadeau v. Director of the Office of Medicaid (Mass., No. SJC-12205, May 30, 2017).

For seniors to qualify for MassHealth, the general rule is that individuals must have assets of less than $2,000.00; and couples living together less than $3,000.00. This limit often requires individuals and couples to “spend down” or deplete their resources in order to qualify for Medicaid long-term benefits when they enter a nursing home.  One practice has been for seniors to engage in “‘Medicaid planning’ in an attempt to transfer or dispose of assets long before they need long-term care so that, when the need arises, they may satisfy the asset limit and qualify for Medicaid benefits.”  The purpose of Medicaid planning is essentially to give individuals whose assets exceed the aforementioned “limit” and would make them ineligible for long-term care benefits, the opportunity to qualify for Medicaid benefits.  Some transfer their assets to their children or other loved ones to meet the asset threshold and avoid using their own assets to pay for long-term care.  Medicaid rules enacted by Congress impose two restrictions on Medicaid planning, in an effort to prevent individuals from taking advantage of MassHealth benefits.  The first is the “look back” rule, which “imposes a penalty for any asset transfer for less than fair market value made by an individual within five years of the individual’s application for Medicaid benefits”.  For example, if elderly parents convey their home to their children for less than the fair market value.  The “look back” rule provides that if such a transfer were to occur within that five year period, the applicant would be “ineligible for Medicaid benefits for a period of time determined by dividing the value of the transfer by the average monthly cost of the nursing home facility”.

The second restriction applies to trusts.  Where the individual has put assets into an irrevocable trust,  if there are circumstances in which the assets of the trust could be used to benefit the individual, the assets may still be countable for determining qualification for MassHealth benefits.  This is called the “any circumstances” test.  Under this test, “if the trustee is afforded even a “peppercorn of discretion” to make payment of principal to the applicant, or if the trust allows such payment based on certain conditions, then the entire amount that the applicant could receive under “any state of affairs” is the amount counted for Medicaid eligibility.” (Emphasis added.)  In this instance, MassHealth would consider the assets of the trust to be income of the individual and the applicant may be ineligible for benefits.  One exception to this restriction is that:

“if the amounts that may be paid to the Medicaid applicant come only from the income of the trust, those income payments do not render the principal of the trust available as an asset; rather, they are treated as income that may affect the amount of Medicaid benefits to be received but not the applicant’s eligibility for such benefits”.

The recent SJC decision in Daley and Nadeau provides guidance in the application of the any circumstances test.   MassHealth had denied coverage for two seniors because they “failed to meet eligibility requirements”.  They had each transferred their homes to an irrevocable trust but lived in the homes.  The applicants argued that they only reside in the home but cannot reach any of the equity in the home under the trust terms, thus the equity in the home should not be countable as an asset because it may not be paid to them. Medicaid and lower courts did not agree and denied MassHealth benefits.  The SJC, on appeal, reversed. Since each had their homes in trusts at least five years before applying for benefits, MassHealth should not have counted the homes as assets.  The seniors’ right to use and occupy the home did not give them the right to sell the property.  Instead, occupancy was merely a payment from the “income” of the property.  Thus, the fair market rental value may be countable as income of the grantors, but the value of the home itself or the equity in it, is not countable.

Nursing home care costs a staggering average of $128,000.00 per year in Massachusetts. The decision in Daley and Nadeau is an important ruling for Medicaid and estate planners.