Justice for the Rich; Slapdown for the Rest of Us

In a September 30, 2016 decision, Price v. Medicaid Director, 838 F.3d 739 (6th Cir. 2016), The U.S. Sixth Circuit Court showed its lack of compassion and understanding of those who have limited income and modest net worth. The court held that while nursing home residents may have their eligibility for care paid by the state backdated up to three months before they apply for Medicaid, assisted-living residents, whose benefits are generally much lower, may not. The court took pains to resolve ambiguities against the impoverished assisted-living residents in contrast to the court’s willingness to find loopholes that favor wealthy taxpayers in a very recent tax case.

The key ruling in Price is that federal law prohibits the state from extending eligibility for Medicaid assisted-living services under the Home and Community-Based Services Waiver, or simply “Waiver,” that are rendered before a beneficiary’s “service plan” is approved. The Medicaid application for nursing home residents is effectively a one-step process because they are determined eligible for the services when admitted. Application for Waiver benefits has two steps – financial eligibility determined by the Medicaid agency and physical need evaluated by a “Waiver Agent,” typically the Area Agency on Aging, which develops the service plan. Depending on the region, applicants might wait six months or more on a waiting list for the Waiver Agent to get around to evaluating them.

While nursing home applications can languish for months on a Medicaid worker’s desk, on approval the eligibility begins with the application date if the applicant was then factually eligible. It is even possible to apply for three months of benefits preceding the original application. Waiver applicants get no such treatment. According to the Price decision, eligibility for benefits begins, if at all, when the Waiver Agent signs the service plan.

Price and the other plaintiffs sued the Ohio Medicaid director, complaining that Waiver beneficiaries should be eligible for retroactive benefits the same as nursing home Medicaid beneficiaries. The operant provision in the Social Security Act reads, in part, as follows:

[S]tates must offer Medicaid assistance to all beneficiaries for care and services included under the [Medicaid] plan and furnished in or after the third month before the month in which [the beneficiary] made application … for such assistance if such [beneficiary] was (or upon application would have been) eligible for such assistance at the time such care and services were furnished. 42 U.S.C.A. § 1396a(a)(34).

According to the court’s rationale, the plaintiffs would have been entitled to Waiver reimbursement during the three months prior to their applications only if those services were provided, under 42 U.S.C.A. § 1396n(c)(1), “pursuant to a written plan of care.” “Pursuant” means “after,” in the court’s view. Thus, a prospective Medicaid beneficiary is eligible only after the service plan is signed. Price v. Medicaid Dir., 838 F.3d 739, 747-49 (6th Cir. 2016).

The court could have reached the opposite result if it had based its rationale on “or upon application would have been” eligible, which would relate backward, rather than its dubious reliance on the temporal aspect of “pursuant to.”

To buttress its holding, the court observed that a prospective applicant could request an evaluation and service plan in advance of applying for Medicaid. This is asinine. There would seldom be such an opportunity.

In the first place, the family would have no way of knowing that it would be necessary to ask for an evaluation that early unless they have an elder-law attorney on retainer and consult him or her almost constantly. Secondly, the need to apply for Waiver services generally comes close on the heels of the need for care.

Comparing this decision to a tax decision, Summa Holdings v. Commissioner, No. 16-1712, Slip Op. at 5 (6th Cir. Feb. 16, 2017), it is clear that the court cares deeply about preserving rich families’ millions and not a all about preserving poor families’ pittances.

The tax attorneys for the Benensons, a wealthy family near Cleveland, Ohio, concocted an ingenious tax strategy involving a “domestic international sales corporation” (DISC) and Roth IRAs. According to the decision:

Summa Holdings is the parent corporation of a group of companies that manufacture a variety of industrial products. Its two largest shareholders are James Benenson, Jr. (who owned 23.18% of the company in 2008) and the James Benenson III and Clement Benenson Trust (which owned 76.05% of the company in 2008). James Benenson, Jr. and his wife serve as the trustees, and their children, James III and Clement, are the beneficiaries of the Trust.

In 2001, James III and Clement each established a Roth IRA and contributed $3,500 apiece. Just weeks after the Benensons set up their accounts, each Roth IRA paid $1,500 for 1,500 shares of stock in JC Export, a newly formed DISC. The Commissioner did not challenge the valuation of these shares then and has not challenged them since. To prevent the Roth IRAs from incurring any tax-reporting or shareholder obligations by owning JC Export directly, the Benensons formed another corporation, JC Holding, which purchased the shares of JC Export from the Roth IRAs. From January 31, 2002 to December 31, 2008, each Roth IRA owned a 50% share of JC Holding, which was the sole owner of JC Export.

With this chain of ownership in place, the family, trust, and company were a few clicks away from the possibility of considerable future tax savings. Summa Holdings paid commissions to JC Export, which distributed the money as a dividend to JC Holding, its sole shareholder. JC Holding paid a 33% income tax on the dividends, then distributed the balance as a dividend to its shareholders, the Benensons’ two Roth IRAs. From 2002 to 2008, the Benensons transferred $5,182,314 from Summa Holdings to the Roth IRAs in this way, including $1,477,028 in 2008. By 2008, each Roth IRA had accumulated over $3 million.  Summa Holdings, Slip Op. at 5 (Feb. 16, 2017).

Each of these cases turned on subtle legal principles that could have been resolved either for or against the appellants. It is not coincidence or simple luck that the wealthy litigants won and the poor ones lost.

This is not to say that federal courts never issue decisions that disadvantage the rich or help the poor. However, studies clearly show that the courts have a marked proclivity to favor wealthy litigants over poor ones. Michele Benedetto Neitz, “Socioeconomic Bias in the Judiciary,” 61 Cleveland State L. Rev. 137 (2013); see also Ga. Supreme Court Comm’n on Racial & Ethnic Bias in the Court Sys., “Let Justice be Done: Equally, Fairly, and Impartially,” 42 Ga. St. U. L. Rev. 687 (1996).

Occasionally, a jurist is perceptive enough to comment on the disparity. Dissenting from the court’s decision in United States v. Pineda-Moreno, 591 F.3d 1120 (9th Cir. 2010), Chief Judge Alex Kosinski stated,“No truly poor people are appointed as federal judges, or as state judges for that matter. Judges, regardless of race, ethnicity, or sex, are selected from the class of people who don’t live in trailers or urban ghettos.” He termed this “unselfconscious cultural elitism” and observed that for him and his colleagues “the everyday problems of people who live in poverty are not close to our hearts and minds because that’s not how we and our friends live.” Pineda-Moreno at 1123.

There was a time when lawyers and judges were socially and economically closer to their clients and litigants. Abraham Lincoln, who attended school for less than a year was a case in point. In 50 years, the law has changed from a reasonable career choice for those on the lower rungs of the economic latter to all but unreachable even for the lower middle class. Prior to World War II, legal education in the United States was more haphazard. In Michigan, only two years of college were required before law school. By the 1970s, admission to law school in Michigan and most other states required a bachelor’s degree. Law school tuition was relatively affordable up until the 1990s. Since then, tuition has skyrocketed. The legal profession has become the province of the affluent.

We in the elder law and disability rights community cannot reverse decades of elitist self-selection in our profession. However, we must become aware of the “unselfconscious cultural elitism” in ourselves and the hearing officers and judges we practice before.

We can relate socially with most of the judiciary because we speak their language. Our kids go to school with their kids. We see them at PTSA meetings and civic events. What we must do is learn to relate to those who live in trailer parks and ghettos and truly accept their humanity. Then, perhaps, we can communicate what we have learned to the hearing officers and judges making crucial decisions about their liberty and property.

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com

©2016 John B. Payne, Attorney

Michigan Designated Funeral Representative

A new law, 2016 Publ. Act 57, effective June 27, 2016, authorizes a person identified as the declarant, to designate a funeral representative to make decisions about postmortem funeral arrangements and the handling, cremation, disposition, or disinterment of the declarant’s body. MCLA 700.3206(2)(a).  The Act includes authority for cremation and determination of the right to possess the cremains, which is an important change. Under prior law, all persons with equal priority as next of kin had to approve cremation.

The Act revises the priority of persons who may decide on final arrangements and inserts a “designated funeral representative” ahead of spouses, family members and others. MCLA 700.3206(3). The only authority with higher priority is a person designated to direct the disposition of a service member’s remains under federal law or Department of Defense regulation, when the decedent was a service member at the time of death. Id

Historic reenactor Les Scott, dressed as the town mortician at the door of his funeral parlor at South Park City Museum, a collection of historic buildings in Fairplay, Colorado

Historic reenactor Les Scott, dressed as the town mortician at the door of his funeral parlor at South Park City Museum, a collection of historic buildings in Fairplay, Colorado

 

A funeral representative designation may be included in another estate-planning document, such as a will or designation of patient advocate, but it must be executed with two witnesses or be notarized. MCLA 700.3206(2)(b). Like a designation of patient advocate, a funeral representative designation may not appoint or be witnessed by a person associated with a declarant’s medical provider, and persons associated with a funeral establishment, cemetery, or crematory that would provide services for the declarant are also excluded. MCLA 700.3206(2)(c).

A funeral representative designation may be revoked by the declarant, or by the representative’s resignation, absence despite reasonable efforts to locate, or refusal act within 48 hours of receiving notice of the decedent’s death. Revocation by the declarant must be in writing and signed with the formalities of the original designation. MCLA 700.3206b.

The declarant may appoint a contingent representative. MCLA 700.3206a(1). The represtentative accepts the appointment by signing an acceptance or by acting as the funeral representative. MCLA 700.3206a(2).

mortuaryCircumstances that would bar an individual from inheriting from the declarant, such as divorce or annulment of marriage to the declarant, desertion disqualify the individual. MCLA 700.2801(2).  Being convicted of abuse or killing of the declarant, disqualifies the individual, MCLA 700.2802(2)(c), and being charged with the abuse or killing of the declarante bars the individual from acting as the designated funeral representative while the charges are pending. MCLA 700.3206(12).

A major concern for an individual nominated to act as designated funeral representative is personal liability for the declarant’s final arrangements. Unless he or she is a special fiduciary, the medical examiner, or the director of corrections in the case of a prisoner, a person who acts as designated funeral representative is personally liable for the costs of disposition to the extent that payment is not covered under a trust, prepaid funeral contract, or other “effective and binding means.” MCLA 700.3206(13). This is alarming because the statute includes no requirement for the funeral director or other provider of funeral or burial services to advise the nominated funeral representative that if he or she accepts the appointment and makes the necessary dispositions that there could be personal liability. The representative is not even required to sign an acceptance of appointment, if he or she accepts by performance.

Adapted with editorial changes from John B. Payne, “Michigan Probate, 2016-17 ed.,” Chapter 13, 125-27 (Thomson Reuters 2016).

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com

©2017 John B. Payne, Attorney

Integrated Care Initiative

Michigan’s Medicaid system is involved in a project to better integrate the care provided to Medicaid recipients who also have Medicare coverage. These recipients are referred to as “dually-eligible.”

In an ideal world, it would not make any difference whether your care were covered by Medicare, Medicaid, or private insurance. If you had an ingrown toenail or a torn ACL, you would go to the same doctors and get the same effective, reasonable treatment. At least that would be my ideal world. Patient Protection and Affordable Care Act (“Obamacare” to the President’s enemies) opponents would define “ideal world” as one in which only those willing and able to pay would get care.

In this world, Medicare and Medicaid are different programs, with different sets of covered services, different financial costs to participants, and different sets of providers – try to find a dentist who accepts Medicaid. One glaring example is long-term care. Medicare covers up to 100 days of rehabilitation or skilled care after a three-day inpatient hospitalization. After that, long-term care in a nursing home is at the patient’s expense unless he or she has long-term care insurance or Medicaid. Basic nursing care is a service that is covered by Medicaid, but not by Medicare. Other services may be covered by both, but there will still be differences in how the services are authorized, provided, and paid.

Think about all the differences between private health insurance plans. What is covered, what the insured pays, and who provides the services can be greatly different depending on whether the patient has a Blue Cross or a Health Alliance Plan card.

The Integrated Care Initiative is an effort by the Centers for Medicare and Medicaid Services (CMS) to integrate care for individuals who have both Medicare and Medicaid. The idea is to provide the full array of Medicare and Medicaid benefits through a single delivery system. CMS hopes that it will be possible to provide quality care to dually eligible beneficiaries, better care coordination and fewer administrative burdens. At least that is the “company line.”

The Initiative may be dismissed as the equivalent of bureaucratic self-abuse by critics who assume that anything the government does will be inefficient, pernicious, misguided, and dysfunctional. Medicare and Medicaid are, by definition, bureaucracies. So are private insurance companies, private telecommunications providers, automobile manufacturers, and banks. Barring a TEA Party sweep of the 2012 elections, Medicare and Medicaid will continue to serve millions of U.S. citizens. The Integrated Care Initiative is an effort at better serving those who are covered by both programs. The Initiative may fail to make any significant improvement, but the fact that CMS is attempting to do its job better should be recognized as a positive development.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2011 John B. Payne, Attorney
 
 

Stealth Regulations under Pennsylvania Medicaid Program

Pennsylvania Department of Public Welfare issued a “policy clarification” on June 27, 2011 pertaining to the sale of a person’s home when the person has a spouse who is receiving nursing care funded by Medicaid. This policy unfairly restricts the amount of money the person can keep out of the sale and is contrary to federal law. Further, it is not part of the Medicaid policy manual, but must be ferreted out by someone who is looking for it. Intentionally or not, this policy clarification comes as a nasty surprise when a person sells his or her home, expecting to be able to use the funds for financial support.

Medicaid has a complicated financial eligibility structure for nursing home residents and persons who receive nursing care in community settings – such as in their own home or in an assisted living facility. However, once Medicaid is approved for the spouse who is receiving nursing care, called the Institutionalized Spouse, the Community Spouse’s assets should not be considered. This is clearly stated in federal law, which provides, “During the continuous period in which an institutionalized spouse is in an institution and after the month in which an institutionalized spouse is determined to be eligible for benefits under this subchapter, no resources of the community spouse shall be deemed available to the institutionalized spouse.” Compared to the Byzantine regulatory maze of most of the Social Security Act, this sentence is almost absurdly simple. The section of which it is a part is over 3,200 words.

Importantly, the operant language is only 14 words: no resources of the community spouse shall be deemed available to the institutionalized spouse. Unlike most of § 1396r-5, there are no exceptions. It says that “no resources shall be deemed available to the institutionalized spouse,” not “no resources shall be deemed available to the institutionalized spouse, except as provided in sections (a)-(r)(r) of subpart C of part R of chapter XXII,” or an exception to an exception to an exception. No resources means no resources, yet Department of Public Welfare has carved out a major exception when the community spouse sells a home.

Policy Clarification, Medicaid – Long Term Care PMN15842440, provides that if the community spouse (CS) sells his or her home it could affect the eligibility for Medicaid of the institutionalized spouse’s (IS). The directive reads as follows:

If the CS sells the property, the entire value of the property will be counted as a resource for the IS. It does not matter that the property was titled only in the name of the CS. When the property is sold, all of the proceeds are considered available to the IS except for the amount used to purchase a new residence. The purchase of the new residence should be within three months. Proceeds remaining after the purchase of the new residence may be transferred to the CS, but only up to the Community Spouse Resource Allowance figure.
If the residence was transferred, the entire uncompensated value is considered available to the IS (even if the name of the IS was never on title) and an applicable penalty period should be imposed.

It is disturbing and distressing when a government agency deliberately breaks the law. As I observed in “Dreadful Michigan Medicaid Joint Tenancy Rules,” on April 9, 2011, Michigan ignored state property law and the federal Social Security Act to prevent poor Medicaid applicants who are otherwise eligible from qualifying.

Like the Michigan Medicaid rule change, this Pennsylvania policy clarification is a flagrant violation of federal Medicaid law. DPW figures it can get away with it because most Medicaid applicants and recipients do not have legal representation and those who have attorneys will still lack the money and the gall challenge the agency in court. As it has done in the past, DPW issues policy it knows is contrary to federal law because it can get away with it. It can take years to force DPW to stop trying to enforce illegal policy provisions.

Besides being unfair and illegal, the policy clarification is unavailable in the regular Medicaid policy handbooks and manuals. In fact, important parts of the policy handbooks are out of print and not available on the Internet. It is next to impossible for someone outside the agency to determine what Medicaid rules currently apply. As bad as it is to create unfair rules, it is worse to make unfair rules and keep them secret.

Pennsylvania Medicaid owes it to Pennsylvanians to promulgate fair rules that comply with federal law and, furthermore, to make the rules readily available in a comprehensive set of policy handbooks or manuals so those who need Medical Assistance will be able to discern what they need to do to qualify for the program.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2011 John B. Payne, Attorney
 
 

Medicaid Estate Recovery Mystification

One of the core principles of government in the United States is transparency. Freedom of the press and laws that require government agencies to provide information to citizens on request are considered essential to keeping our bureaucrats, mandarins, syndics and pashas more honest than they might otherwise be. However, as in many states, Michigan Department of Human Services and Department of Community Health, which administer welfare programs, are exempt from the public notice and open meetings laws that govern other departments. DHS and DCH are particularly restrictive in providing information about the new Estate Recovery Program that started July 1, 2011 to recoup Medical Assistance, or Medicaid, benefits from deceased recipients.

State welfare agencies are the bureaucratic offspring of local and county welfare boards. These boards operated with very loose guidelines to provide assistance to the poor and the sick. Until welfare became largely federalized and firm guidelines imposed, the role of the welfare worker was very maternalistic toward the individuals and families the welfare boards helped. They were free to remove children from homes that fell short on hygienic or moral grounds, as viewed by the workers. They would stage dawn raids on the homes of single mothers to look for a man in the house or evidence such as men’s shoes under the bed. This highhandedness has been curbed through court cases establishing that welfare recipients have the right to fair treatment, but it still exists.

The Medicaid agency must properly consider relevant data in making its decisions. Friedman v. Perales, 668 F. Supp. 216, 221 (S.D.N.Y. 1987), aff’d, 841 F. 2d 47 (2d Cir. 1988). This infers a right to present information to the agency and the right to be informed how the agency makes its decisions. Michigan DHS and DCH have been thwarting elder law attorneys and their clients in procuring information about estate recovery. For example, HMS, the estate recovery contractor refuses to provide a copy of the form used to request an estate-recovery exemption.

In a call to HMS recently, the agent refused to provide a copy of the exemption form unless an estate-recovery questionnaire were first submitted–and HMS decided that there might be an exemption. This would make it difficult to know how to fill out the questionnaire. A letter to the DCH Director has not been answered.

In a bizarre twist, DCH refuses to provide information about how it will determine whether a home is “of modest value.” Medicaid policy says that a home is of modest value if it is worth less than the average price of a home in the county where located. A colleague attempted to get information about how HMS and DCH will determine the relevant average. He explained that his request concerned the exemption in MCL 400.112g(3)(e)(i) “for the portion of the value of the medical assistance recipient’s homestead that is equal to or less than 50% of the average price of a home in the county in which the medicaid recipient’s homestead is located as of the date of the medical assistance recipient’s death.” He requested a copy of records to be used to determine the value of the “average price of a home” for each Michigan county or the method that would be used to determine it.

The response from DCH was:

There are no records that meet the description of your request. It is the responsibility of the applicant to provide sufficient documentation showing that a hardship exists. If the home is of modest value, this would include a tax assessment value from the county where the home is located. It may also include an appraisal of the home. This documentation must be submitted along with the undue hardship application to show that a hardship exists. MDCH will use this information in making a decision about whether to grant the hardship.

In other words, the personal representative should provide information about the value of the home and hope that the agency will decide that it is of “modest value.” This is unfair to potential and present Medicaid recipients of long-term care services. They need to make decisions about whether to maintain the home or abandon it, keep it or sell it.

This is an important issue to our elderly poor and middle class. The Michigan government owes fair disclosure to Medicaid recipients and their families. The exemption form and how DCH will determine the average values of homes in various counties will become common knowledge as estate recovery claims are made and decided. It is oppressive and unfair to the first few Medicaid recipients who have to deal with the issues to impose an information lockdown. The Medicaid agency should stop playing headgames with its clientele and adopt a policy of open and fair disclosure.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2011 John B. Payne, Attorney
 
 

Fleecing the Deceased

Michigan’s Medicaid program has started estate recovery. As of July 1, 2011, on the death of a Medicaid recipient who received Medicaid benefits after age 55, the estate recovery minions will send the family a letter demanding cooperation in recouping the benefits paid by the state. The state contracted with HMS Holdings Corp. (NASDAQ: HMSY) to pursue the estates of Medicaid recipients, presumably for a piece of the estate-recovery pie.

HMS has wasted no time. My clients’ kin and I started receiving letters and questionnaires regarding deceased Medicaid recipients at the beginning of August. It is too soon to tell how aggressive HMS will be, but experience with private collection agencies suggests that they will squeeze as much as possible out families, with little concern for the legal limitations on when, from whom, and how much recovery is legally permissible.

As determined as they are to repeal the estate tax to protect the property of wealthy decedents, TEA Partiers and other conservatives are surprisingly blasé about the state grabbing the homes of poor ones. There are no millionaires on Medicaid. Millionaires do not apply for Medicaid because they do not go in nursing homes. They stay at home and hire caregivers, or they move to comfortable apartments in high-end continuing-care retirement communities.

Estate recovery grabs the homes of persons who die with nothing but their homes. Usually, the homes are very modest, but for a family on the edge of poverty a small legacy could help a son or daughter avoid homelessness or start a grandchild toward a college degree.

The new Medicaid policy was promulgated effective July 1, 2011, but it applies to all Medicaid recipients who were over 55 and received benefits after September 30, 2007. There are many grey areas regarding what estates may have Medicaid claims filed against them and what would be covered by a hardship exemption. Whether an estate that was opened and closed before July 1, 2011 is safe from the state’s Medicaid claim is unclear. It will depend on whether the courts decide that Medicaid was entitled to notice as a “known creditor” before July 1, 2011. It is also unclear whether the personal representative must fill out HMS’s questionnaire and apply for an exemption from Department of Community Health or lose the exemption. Filling out the questionnaire is “voluntary,” but it says in the fine print that failing to send in the questionnaire would cause the loss of the exemption.

There can be no estate recovery if the Medicaid recipient is survived by a spouse. There can also be no estate recovery if the estate consists of the home and a family member who meets certain technical requirements lives in the home. Any survivor of a Medicaid recipient who receives a letter and questionnaire from HMS should consult an attorney to find out whether there is an exemption that can be taken. Do not rely on the advice of HMS agents at the toll-free number on the letter.

Whether HMS will respect the legal boundaries on its collection authority is an open question. At least some HMS representatives will be like the police officer who gives Miranda warnings then says, “The law says I have to read you your rights, but if you ‘lawyer up’ I will not be able to help you.” An amazing number of persons in custody confess to crimes they did not commit because the police convince them it is in their best interests–this is not a joke! At least some HMS agents will do the same. They will say, “Yes, you can claim an exemption, but I can no longer cut you a deal if you do.”

Collection agents have a lot of practice talking people out of money, while the surviving next of kin who are being targeted for collection efforts will have little or no experience dealing with them and often will not know their rights. The agents will have only one objective–getting as much money out of the surviving family as possible, in the shortest time. They are not be paid to be fair; they are paid to bring in money. Trying to deal with HMS without an attorney is like going to a gunfight with a rubber knife.

Medicaid Estate Recovery is a new program in Michigan, with a lot of grey areas that make it difficult to know whether a given estate is vulnerable. Even in Pennsylvania, where estate recovery has been in place for nearly a decade, there are many uncertainties. It is vitally important to consult an Elder Law attorney before responding to a letter from HMS. It is also important to talk to an Elder Law attorney if you or a close relative is nearing the age where long-term care is more likely, or if you have a loved one who already needs long-term care. Nursing care is expensive, whether at home or in a nursing home. An Elder Law attorney can provide valuable advice about how the expense can best be managed.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2011 John B. Payne, Attorney
 
 

Dreadful Michigan Medicaid Joint Tenancy Rules

Michigan Department of Human Services has promulgated restrictive new policies concerning real estate owned by a Medicaid applicant or recipient jointly with someone else. Prior to April Fool’s Day 2011, real estate owned as a joint tenant with rights of survivorship (JTWROS) with someone outside of the Medicaid asset group (anyone other than a spouse, in most cases) was not considered that person’s asset, as long as the other joint tenant refused to agree to sale or tranfer of the property. New policy that became effective April 1, 2011 is a cruel prank on thousands of frail senior citizens of limited means.

For many years, a joint tenant in a piece of real estate was not prevented from qualifying for Medicaid if another joint tenant who is not the spouse of the Medicaid applicant refused to sell or convey the property. This was consistent with the rules for Supplemental Security Income (SSI), which is federal welfare for senior and disabled persons who have no income and very limited property. The Medicaid asset rules concerning real estate owned as JTWROS stated as follows:

Jointly owned assets are assets that have more than one owner.
Note: For FTW determinations jointly owned assets are considered to belong to the initial person.
An asset is unavailable if an owner cannot sell or spend his share of an asset:
• Without another owner’s consent, and
• The other owner is not in the asset group, and
• The other owner refuses consent. Department of Human Services Bridges Eligibility Manual (BEM) Item 400(7) (April 1, 2011).

This a reasonable policy. Many persons become joint owners of property due to inheritance, by joint purchase of real estate, or through adding names to property for estate planning. Joint owners with rights of survivorship are locked in. They can execute a quitclaim deed and give or sell their interests, but they cannot separate their interests in the property from the other owners without their consent. Under Michigan law, joint owners with rights of survivorship cannot force partition of the property through legal action. However, the April Fool’s Day Medicaid rules were drafted with blatant disregard for this legal principle.

Here is the new Medicaid policy:

Exception: Jointly owned real property is only excludable if it creates a hardship for the other owners; see hardship in this item. BEM Item 400(7) (April 1, 2011).

Note: For jointly owned real property count the individual’s share unless sale of the property would cause undue hardship. Undue hardship for this item is defined as: a co-owner uses the property as his or her principal place of residence and they would have to move if the property were sold and there is no other readily available housing. BEM Item 400(8-9) (April 1, 2011).

This new policy will make it impossible for many deserving Medicaid applicants to get Medicaid through no fault of their own. Often these Medicaid applicants will be rendered ineligible for Medicaid through no act of their own.

Let’s assume that Stymie Stone, an unmarried nursing home inmate who needs Medicaid, inherited a portion of a pig farm known as the Stone Family Sty. Stymie is a joint tenant with rights of survivorship with his three siblings. If the parcel is worth more than $8,000, Stymie cannot get Medicaid because the interest will be valued by DHS at more than $2,000. He cannot force his siblings to buy him out or sell the property and if he gave his interest away, he would be subject to a divestment penalty.

In order to exclude Stymie’s interest in the Stone Family Sty, he would have to demonstrate not only that one of his siblings lives in the pigsty as his or her principal residence, but that there would be “no other readily available housing.” Try to prove that there is no other readily available housing in this real estate market!


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Many applicants with no resources except for interests that they cannot sell will be denied Medicaid. This new policy is dreadfully unfair. It makes no distinction between applicants who put their own real estate in joint tenancy intentionally to qualify for Medicaid and those who inherited or were given a joint interest. It also makes no distinction between property that has ready market value and property that cannot be sold for one reason or another.

To put the legal case for overturning the rule in a nutshell: It is arbitrary and capricious. DHS has carved out a class of applicants who will be denied Medicaid through no fault or action on their part, yet who are as deserving as other applicants who will be granted eligibility.

Many applicants will be able to maneuver around this new rule, with legal help. The simplest is to quitclaim their interests to the other joint tenants, if the applicant is willing to do so. There are ways to create Medicaid eligibility despite gifts within the five-year look-back. It is a cosmic joke that only those applicants with enough money to hire legal counsel will be able to qualify for this welfare program.

The new policy is so unfair that it cannot be upheld as rational rule-making by the courts. However, it will subject many families to dire hardship until it is struck down. If you or family members who may need care in a nursing home own real estate jointly with anyone other than a spouse, consult a competent Michigan Elder Law attorney now.

 

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com
 
©2011 John B. Payne, Attorney