Thursday, July 05, 2007

As look back period for Medicaid nursing home care increases, wonder about filial responsibility laws

Last week financial and investing consultant John Waggoner wrote a column for USA Today (Friday June 29, p 3B), “When it’s time to tap your assets, order is important.” This is in reference to the spending of a parent’s assets by adult children providing the parent with eldercare and often paying for funds to care for assisted living or nursing home care.

As often noted, Medicare does not pay for custodial care. It only pays for Skilled Nursing Facility (SNF) care (for a specific number of days) when the patient is expected to get better. Often private supplemental insurance will extend the number of days of SNF care, and this may be part of a long term care policy or a separate coverage.

So adult children find themselves spending down a parent’s assets until Medicaid can pick up nursing home care (or sometimes Home Health Aides). The article gave some tax advice on various kinds of withdrawals. IRA’s (traditional, and Roth, which behave differently), and home equity, and unconverted 401K’s. The article also discussed homestead. In many states, a spouse can draw Medicaid to pay for the other legal spouse’s custodial care without selling the house, whereas a single person could not.

One great concern that I have is “filial responsibility laws” which in theory mean that adult children can be pursued for their parents’ custodial care expenses. I have a major reference here. Some books claim that this was commonly required in the days before Medicare, which is hard to grasp since Medicare, as noted above, doesn’t normally pay for nursing home care. There is a particular reference, the Kabb Law firm, that one can explore now. There is a sub headline “New Medicaid Law Means Parents Could Be on the Hook for Parents’ Nursing Home Bills”.

Much of the concern has to do with federal tightening of the "Look Back Period" in the Deficit Reduction Act of 2005, S. 1932, and the provision “SEC. 6011. LENGTHENING LOOK-BACK PERIOD; CHANGE IN BEGINNING DATE FOR PERIOD OF INELIGIBILITY” The visitor can study the provisions in detail in footnote [6] on that file.

Social Security gives this link on S 1932 (Hr 4241)
Apparently, this bill was signed into law Feb. 8, 2006,
The govtrack references is S. 1932 in the 109th Congress, link here.

What matters to many people, of course, is what happens when a parent has few assets, assuming these rules are in effect. If an adult child has assets (that is, other than those that were "given" to the child during the "lookback period", and particularly from parents who have no assets to "give away"), can a state go after the adult child? The Waggoner USA Today article doesn’t say that states can, but some websites do. Could there be triage (if there a siblings, an adult child without his own children is more “at risk” than another sibling with kids – again, what about legal marital status? Imagine where this could go (with gay marriage)?

I haven’t heard of cases where this has actually happened yet, even though the texts of some state laws seem to suggest it is possible. Here is a typical link.

What is clear is that the demographics are absolutely scary. Medicine makes it possible to keep people alive longer, without maintaining a comparable level of self-sufficiency-maintaining life skills. Alzheimer’s Disease can turn into the catastrophe that we predicted with AIDS twenty years ago. Medical progress with pharmaceuticals is slow but steady, and encumbered by liability concerns. Furthermore, in an age of individualism, “personal responsibility” has tended to stay within the confines of adult cognition, to the extent that many adults isolate themselves from filial responsibility by not marrying and having their own children. This does seem like a matter of time…

The inability of the Senate to pass a "pseudo-amnesty" bill regarding immigration also heightens the eldercare concern, as many of the people available to work in nursing homes and as home health aides are immigrants, sometimes "illegal". Conceivably adult children could be penalized for hiring them in the future. There could be more pressure on adult children to make themselves present to provide actual physical care, or modify their own homes to be able to do so. Today (July 5, 2007) the DC Examiner Blog Board had an editorial by La Shawn Barber, "Now that amnesty is dead, locals must act against employers."

I’ll dig more into the legal facts in the near future and place more specific material as I find it. I welcome constructive comments.

See Aug. 1, 2008

See the 8/1/2008 entry on this blog more discussion of how look-back works (based on Kiplinger). The actual law is very tricky and both lengthens look-back and changes the date from which it applies. It's designed to force beneficiaries to treat "give aways" as "loans."

Section 6011 of Chapter 2 of S 1932 has the exact rules (link given above). The Congressional Research Summary reads as follows:

"Subchapter A: Reform of Asset Transfer Rules - Amends SSA title XIX (Medicaid) to revise requirements relating to long-term care.

Section 6011 -
Lengthens from the usual 36 months to 60 months, or five years, the look-back period for counting for eligibility purposes all income and assets disposed of by the individual for less than fair market value after this Act's enactment.
Changes the start date of the ineligibility period, for all less-than-fair-market-value transfers made on or after enactment of this Act, to the first date of a month during or after which assets have been transferred, or the date on which the individual is eligible for Medicaid and would otherwise be receiving institutional level care based on an approved application but for the application of the penalty period, whichever is later, and which does not occur during any other period of ineligibility as a result of an asset transfer policy.
Specifies the criteria by which an application for an undue hardship waiver shall be approved.

Requires each state to provide for a hardship waiver of the transfer of assets requirement in specified circumstances for individuals residing in nursing facilities. Authorizes the state to make bed hold payments for hardship waiver applicants."

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