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Medicaid Spend-Down Litigation Shows Need for Wise Planning / York, PA

FallingMoneyThe Buckeye State is hot water over its interpretation of federal rules governing the use of Medicaid funds. In 2013, a group of elderly residents of Ohio sued their state's Department of Job and Family Services for what they consider a wrongful denial of Medicaid benefits. At the heart of the complaint there are issues related to long-term care and the right to enjoy income from insurance annuities. This case has drawn plenty of attention due to its legal and financial implications. Essentially, the case has escalated to the point of a federal judge warning state regulators that she would consider issuing an order to drop Ohio from Medicaid enrollment altogether, leaving the Buckeye State without federal funds to provide medical care for its elderly residents.

Medicaid administrators in Ohio say that an elderly nursing home patient is not entitled to long-term care benefits as long as he or she has a relationship with an individual who has purchased an annuity. In effect, the State of Ohio is penalizing seniors by refusing to grant them long-term care benefits because a spouse or close relative has purchased a Medicaid-compliant insurance annuity.

Other cases have been filed in federal courts in Ohio, and one federal judge has warned Ohio officials that she may hold them in contempt if they don’t follow federal law. The latest lawsuits filed against Ohio’s Medicaid administrators were brought by three elderly women whose husbands used their retirement accounts to buy annuities, which State Medicaid investigators say is illegal.

A recent Insurance News article, titled Medicaid Asset Protection Plan Causes Ohio Judge To Tell Ohio Medicaid to "Follow the Rules" or Lose Federal Funding,” reports that more and more seniors are concerned about Medicaid planning and other retirement planning issues such as Medicaid, and some states are tending to be more heavy-handed than others in the administration of their Medicaid program.

Gentle or severe, it’s important to understand and think through your plans for Medicaid. For example, single Ohio seniors are required to first spend down their assets to $1,500 and receive less than $45 in monthly income before Medicaid's long-term care benefits will apply. Married couples, like the plaintiffs in the cases mentioned above, must split their assets in a way that the healthy spouse retains no more than $117,240, but the spouse in the nursing home cannot have more than $1,500 or monthly income higher than $45.

These kinds of drastic thresholds for income create frustration and anxiety when seniors try to plan the Medicaid spend-down. While some seniors are relieved when they are able to purchase Medicaid-compliant insurance annuities, which gives them some income even when they are in a nursing home, Ohio and some similar states don’t care for these financial solutions. The result is that the elderly can become completely destitute before entering a Medicaid nursing home.

The original article says that planning early—at least five years in advance—is critical in Medicaid planning. Although no one has a crystal ball as far as when a person might need to move to a nursing home, Medicaid spend-down provisions in your state may be restrictive like Ohio, and a qualified Medicaid Planning attorney can assist you in managing this before it becomes an issue, as it did for those involved with the lawsuits in Ohio.

Early planning with a Medicaid Planning attorney is essential to make sure you qualify for Medicaid benefits and still are able to enjoy the life you worked so hard to make for yourself and your family in your younger years.

For more information about estate planning, please visit my estate planning website.

Reference: Insurance News (November 18, 2014) Medicaid Asset Protection Plan Causes Ohio Judge To Tell Ohio Medicaid to "Follow the Rules" or Lose Federal Funding

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