This is a guest post by Marco Chayet and Dawn Hewitt, from the law firm Chayet & Danzo, LLC in Denver, Colorado.

There are several different types of trusts that can be used to enhance the quality of life for a trust beneficiary with special needs.  These trusts generally supplement benefits that the beneficiary receives through public assistance programs, such as Supplemental Security Income (SSI) and Medicaid.  As supplemental needs trusts, or special needs trusts, there are certain items that trust funds cannot be used to pay, such as food and shelter.  The reason for this is that the beneficiary’s public assistance programs are intended to pay for food and shelter.  However, in spite of these narrow exceptions for trust distributions, the trusts can be used for a wide range of purposes.

Some examples of how funds in a properly created special needs trusts can be used are for medical treatment and medication that are not otherwise covered through Medicaid, attendant care for non-medical services, education expenses, vehicle with modifications, travel, and entertainment.  These are just a few examples.  There are literally innumerable ways that funds in the trusts can be used.

Special needs trusts are often distinguished by the manner in which they are created and funded.  Colorado’s Medicaid regulations require that any trust that is created for the benefit of a Medicaid beneficiary be submitted to the state Medicaid agency for review and approval.  The type of trust determines the provisions that it must contain to comply with Medicaid regulations and SSI criteria.  There are five trusts generally used in special needs planning.  They are (1) disability trusts, (2) pooled trusts, (3) third party discretionary trusts, (4) testamentary special needs trust, and (5) income trusts.

The following is a discussion of the aforementioned trusts used in special needs planning in Colorado.

Disability Trust

A disability trust is created for a trust beneficiary under the age of 65 who is disabled under Social Security’s criteria.  The disability trust is funded with the beneficiary’s own assets.  Some common types of assets that are used to fund a disability trust are proceeds from a personal injury settlement and an inheritance.  Assets that are held in a properly created disability trust are exempt and will not affect the beneficiary’s ability to receive Medicaid and SSI.  Federal and state law require the disability trust to be established by the beneficiary’s parent, grandparent, or legal guardian, or by a court.

A disability trust must contain certain provisions for it to be exempt for Medicaid and SSI.  Most notably, it must contain a provision to reimburse the state medical assistance program up to the amount of benefits paid for the beneficiary during the beneficiary’s lifetime.  Repayment must be made under either of the following circumstances: (1) the beneficiary no longer requires medical assistance in the state where he has been receiving benefits (i.e., the beneficiary moves to a different state, or the beneficiary no longer wishes to receive medical benefits), or (2) the beneficiary dies.

If the trust is to be funded with an annuity or other periodic payments, then the state Medicaid agency must be named as the remainder beneficiary under the contract, up to the amount of medical assistance paid on behalf of the beneficiary.

The trust can contain a provision for distributions to remote contingent beneficiaries in the event that there are funds remaining in the trust after repayment is made to the state.

The trust must contain the name and mailing address of the trustee.  It is also generally advisable to name a successor trustee in case the original trustee is unable to act for any reason, such as if the trustee resigns, becomes incapacitated, or dies.  Notice of any change in trustee must be given to the state Medicaid agency within 30 calendar days.

The trustee has sole discretion on the use of trust funds.  Therefore, it is advisable to select a trustee who knows the beneficiary’s situation and needs well and who is willing to work with the beneficiary and/or the beneficiary’s legal representative to use the trust in the beneficiary’s best interests.  Professional trustees can also be named.

The trustee should not make distributions from the trust directly to the beneficiary, such as giving cash to the beneficiary.  Nor should the trustee expend trust monies for food or shelter.  Such distributions can be seen as income to the beneficiary and could affect the beneficiary’s ongoing eligibility for benefits.

Additionally, trust monies should not be used to purchase non-exempt assets, which would also affect ongoing eligibility.

Aside from these limitations, the trust assets can be used in a wide variety of ways.  The trustee will be required to provide regular accountings of the trust to the county and state Medicaid agencies.  Therefore, it is imperative for the beneficiary’s ongoing public benefits eligibility that the trustee properly administer the trust and maintain detailed records.

Pooled Trust

A pooled trust is similar to a disability trust, in that it is funded with the beneficiary’s own assets and that it requires the trust beneficiary to be disabled under Social Security’s criteria.  The pooled trust is most commonly used for Medicaid recipients who are over the age of 65, but it can also be used by younger individuals.  The trust is established by the individual, a parent, grandparent, or legal guardian, or by the court.

The pooled trust differs from the disability trust in that it is established for many disabled individuals, instead of just one individual.  Each beneficiary has a separate account.  The accounts are pooled for investment and management purposes.  Also, the trustee of a pooled trust must be a non-profit organization, approved by the Internal Revenue Service.

Similar to the disability trust, funds remaining in the individual’s account at his death must be used to reimburse the state Medicaid agency up to the amount of medical assistance provided on the individual’s behalf, to the extent that those funds are not retained by the pooled trust.  Additionally, funds in a properly created and administered pooled trust are exempt and do not affect the individual’s ongoing eligibility for Medicaid.  The trustee has the same wide range of discretion to use trust funds for the benefit of the beneficiary.

There are special funding requirements for pooled trust beneficiaries over the age of 65.  Specifically, there must be a written care plan for the use of the funds in the pooled trust that is actuarially sound based on the individual’s life expectancy.  Absent such a care plan, Medicaid will view the transfer of funds into a pooled trust as a transfer without consideration and will impose a penalty period.  During any applicable penalty period, the individual will not be able to receive Medicaid benefits.

Third Party Discretionary Trust

A third party discretionary trust (TPDT) is different from a disability trust and a pooled trust because it is funded with assets that do not belong to the trust beneficiary.  A TPDT is commonly established by a relative of the trust beneficiary, such as a parent or grandparent, for the purpose of gifting money or property that can be used for the benefit of the beneficiary, while allowing the beneficiary to remain eligible for SSI and Medicaid.

Another difference is that a TPDT does not contain a payback provision to reimburse the state Medicaid agency for benefits provided on behalf of the beneficiary.  Also, there is no requirement that the beneficiary be disabled under Social Security’s criteria.  Finally, there are no restrictions on the beneficiary’s age.

One advantage to establishing a TPDT is that it can receive gifts of money and property from many different sources.  For example, a TPDT established by the beneficiary’s parent can receive gifts of money or property, not only from the parent, but also from the beneficiary’s grandparents or other relatives.  The TPDT can even be a beneficiary under a will.  The TPDT can continue to be funded, even after the death of the person who created it.

Another advantage of the TPDT is that it is extremely flexible and diverse in terms of funding, use, and longevity.  Further, establishing a single entity to hold property simplifies administration and allows for greater flexibility in managing property.

Testamentary Special Needs Trust

A testamentary special needs trust (TSNT) is similar to a TPDT in that it can be created by anyone under their will to hold property to be used for the benefit of the trust beneficiary upon the death of the person who created the trust.

The disadvantage to the TSNT is that it is not funded until the person who created it dies, and it can only hold assets belonging to the person who created the trust.

This trust is generally used by parents of a special needs child who want to leave their child property in a manner that will not affect the child’s eligibility for SSI and Medicaid.

A TSNT can also be used by the spouse of a disabled person who receives certain types of Medicaid benefits.  However, in the case of spouses, there are limitations on the amount of the spouse’s assets that can be used to fund the trust.

Income Trust

An income trust is necessary for an individual who requires long-term care and whose income exceeds 300% of the SSI limit.  For 2010, the 300% limit is $2,022.  Each month, the individual’s income is deposited into the income trust.  The location where the individual receives long-term care services, such as at home, in assisted living, or in a skilled nursing facility, determines how his income is used each month.

For example, if the individual receives home and community based services (HCBS) at home, he may be able to keep $2,022 of his income each month to use for his living expenses.  However, if the individual receives HCBS in an assisted living facility, or receives skilled nursing care in a nursing facility, then most of his income will be paid to the facility each month as his patient payment.  He will be allowed to keep a small amount, usually less than $100, each month for his personal needs.

There are also some allowances for the use of all or part of the individual’s income for use by his spouse if the spouse does not require care, as well as for health insurance premiums, deductibles, co-insurance, and special medical services.

Conclusion

There a several different ways of creating a special needs trust to enhance the quality of life for the trust beneficiary without jeopardizing his or her eligibility for public assistance.  The disability trust, pooled trust, third party discretionary trust, testamentary special needs trust, and income trust are the main trusts used for disability and special needs planning.  The goals for funding and use of the trust will determine which type of trust is most appropriate.  You should work closely with an elder law attorney who is experienced with these types of trusts as well as the different public benefits programs to decide which trust works best for your situation.

About the Authors: Marco Chayet is a partner, and Dawn Hewitt is an associate, in the law firm Chayet & Danzo, LLC, (303) 355-8500.  Their practice emphasizes elder law, guardianships, conservatorships, public benefits, probate, estate planning, Medicaid planning, VA planning and long-term care planning.  They can be reached online at www.ColoradoElderLaw.com or by e-mail at Marco@ColoradoElderLaw.com or Dawn@ColoradoElderLaw.com or via mail 650 S. Cherry St., Suite 710, Denver, CO 80246.

I have always been a big fan of Howard Gleckman, author of Caring for Our Parents.  In fact, he was the very first person I interviewed for my Leaders in Elder Care series.  If you aren’t familiar with Howard’s blog, you’re really missing out on a complete play-by-play of how the health care debate is impacting the cost of senior care.

This morning, he shared some startling statistics about paying for elder care that I have quoted below.  In this article, Howard has links to some fascinating studies about the out-of-pocket costs for seniors, and it is shocking.  It is mind-boggling to me how financing elder care will be solved as we move forward. He wrote:

A typical couple would have to save nearly $200,000 to pay for their out-of-pocket medical costs from the time they are 65 until they die, according to an important new study by the Center for Retirement Research at Boston College. Add in nursing home costs, and they are likely to need $260,000.

But that’s only part of the story. About 5 percent of 65-year-old couples will face catastrophic medical and long-term care costs exceeding $570,000, according to researchers Anthony Webb and Natalia Zhivan.They estimate those expenses would have exhausted the total financial assets of 85 percent of all retirees even at the peak of the stock market in 2007.

As someone who has first-hand experience with out-of-pocket expenses and my Mother’s care, I was still so stunned by these numbers, that I could not write a conclusion to this article.  What do you say?

Obviously, I encourage you to check out Howard’s writing.  In the meantime, what are your thoughts about these big numbers?

Photo: bubble dumpster

A Guest Post by Brian Mahoney, Esq.

An often discussed mechanism in Medicaid/Nursing Home planning is the IIOT, an Irrevocable Income Only Trust.

Aside from Nursing Home issues and look back periods we need to first ask about financing issues. Consider whether the Trustee might ever need to obtain financing on the realty, perhaps for a new burner or roof. Most Lenders will not mortgage realty owned by any irrevocable Trust. Would deeding realty into an IIOT make a pre-existing mortgage due and payable?

If the sale of realty after it is deeded into the IIOT is a possibility we can structure the IIOT as a Grantor Trust. If an Elder Trustmaker later moves into Assisted Living or into a Nursing facility, there is no spouse at home and that realty is sold by the Trust we want the Trustmaker to be able to elect the $250K capital gain exclusion.

To that end I insert a testamentary power of appointment allowing the Trustmaker to appoint Trust property by Will to a class of persons described in the IIOT. I do not include a lifetime power to appoint because it may be considered too much power in the skeptical eye of a Medicaid caseworker especially in this era of recession. Their position might be this would render the IIOT a “Medicaid qualifying trust.” It can be overcome but do we want to go into the trial Court to refute their arguments?

The Trustmaker should have no power to appoint trust principal to himself, his creditors, his estate or his estate’s creditors. The ultimate goal of an IIOT is for Trust owned assets to be non-countable and the less the IIOT contains for “escape mechanisms,” the more certain our objective becomes.

We do provide an “escape hatch,” in the IIOT in case the look back period is not met to avoid the worst of both worlds, i.e., principal that is “countable,” for Medicaid purposes, but which cannot be accessed by the Trustmaker. Provide for appointment of a Trust Protector who could be a corporate fiduciary, Attorney, C. P. A. or an individual who is not related or subordinate to a transferor or any Beneficiary within the meaning of Section 672(c) of the Internal Revenue Code.

The IIOT may provide that during the Trustmaker’s lifetime the Trust Protector may in writing, direct the Trustee to pay to or apply for the benefit of the children or grandchildren of the Trustmaker or their spouses, so much of trust principal as the Trust Protector in its sole discretion deems advisable.

To preserve Grantor Trust status then, along with the testamentary POA and “Trust Protector escape hatch,” we need to add a so-called Designating Person who can add a class of Beneficiaries. The class might consist of: children, grandchildren, spouses, or charities. The Trustmaker, the Trust Protector, any Beneficiary of the IIOT (including any person who may be added as a Beneficiary) any so-called “adverse party,” as defined in Section 672(a) of the Code, or any so-called “related or subordinate party,” as defined in Sect. 672(c) of the Code should not be appointed to serve as a Designating Person.

Can the Trustmaker(s) be Trustee? There appears to be no express prohibition against that, but with the current government deficits and budget cuts, why risk a higher level of scrutiny. If we have decent prospects as Trustee it may be safer to not have the Trustmaker in the position of power as a Trustee.

We all know the number of potential Adult Child/Trustee pitfalls that can develop. Will the existence of the Trustmaker’s testamentary POA be enough to keep an Adult Child/Trustee in line if he can be “disinherited,” from the very Trust that Child administers?

Include a provision allowing the Trustmaker to remove any Trust Protector or Trustee with or without cause at any time to allow the Trustmaker some much needed control in the event a relationship with a fiduciary sours in the future. Is that too much power for Medicaid? Can a Client afford not to have such removal powers?

Many practitioners are now acting as Trustees or Trust Protectors for their Clients’ IIOT’s knowing they’ll never act in a manner contrary to the Trustmaker’s best interests.

About the Author: Brian F. Mahoney is an estate planning and elder law attorney in Canton, MA.  He has been practicing for 26 years, and can be reached at www.attybrianmahoney.com.

Elder care mediators have a specialized process knowledge base and understanding of the life changing issues faced by elders and their families. They assist in navigating the uncertain path created by unplanned changes in the physical, emotional, and relational well being of parents.

With the deliberate implementation of conflict resolution tools and mediation methods such as evaluative, facilitative, transformative and narrative approaches there is a safe environment for all stake-holders including the elder. Elder mediator guidance facilitates families efforts in finding the best quality of life decisions for an elder and their family with the overall goal of integrating new relationship dynamics through the conflict resolution process.

Changes in Health Alter Family Dynamics

A debilitating physical change in a parent that has long been the pillar of strength in a family creates many needs and emotional dynamics among family members. The development of perceptions about the distribution of family support can create conflict within the family unit making necessary communication’s strained and possibly leading to relationship deterioration.

The cognitive changes related to age may also come to impact the daily household management. The ability to manage finances effectively and safely become of concern in concert with the vulnerability created by the loss of the physical ability. How to approach dealing with this can be source of serious conflict among family members that significantly alters relationships and hampers the ability of the family to respond to the immediate needs of the elder.

How does a family navigate these difficult places?

Future-Focused

Elder mediation is future focused and is a mechanism for elders and families to address finances, joint responsibility and decision making, medical care, end-of-life decisions, guardianship, property maintenance, personal privileges to name a few.

Elder care mediator’s are focused on serving the elders and the families through offering a process that creates a safe space for an often difficult dialogue.

Photo: kenleyneufeld

About the Author: Kim Bunker RN BSN & Registered Mediator in Georgia is President and CNO of Southern Cross Mediation and Legal Nurse Consulting.  She is an Elder Issues Mediator and is available for consultation and questions at kimbunker@gmail.com or on Skype with the ID Kim Bunker.

We’ve all been bombarded with the statistics about the growing number of Baby Boomers who will required elder care of some sort.  It’s a massive number, which makes it appealing to many of the elder care providers – assisted living, home care, skilled nursing…you name it.

But have you ever sat back and thought about the implications of the entire world aging?!  The United States is a large country, but we are tiny compared to the populations in India and China.

It’s well documented that healthcare costs continue to rise.  But the average number of caregivers per elder is also declining, forcing system change in how we approach elder care.  The problem has also gotten the attention of large technology companies such as Intel.  This video shares a lecture from the University of Washington Engineering Department and features a researcher from Intel.  While the lecture is long — 50+ minutes, it’s facinating the technical and cost hurdles that will need to be cleared to truly provide care for the next billion.

For those brave enough to watch the whole thing, I’d love to hear your comments!

For those of you who aren’t familiar with it, the Center for Excellence in Assisted Living (CEAL) is a non-profit collaborative of 11 national organizations that builds upon the work of the Assisted Living Workgroup (ALW), [U.S. Senate Special Committed on Aging Initiative].

CEAL’s goal is to promote high-quality assisted living and server as a national clearinghouse, bringing together research, practices, and policy that foster quality and affordability in assisted living.

In this brief, CEAL discusses Medicaid and the long-term care implications with declining state budgets.  CEAL’s analysis is always very enlightening and presented in a compact format.

I.    Introduction:  State Budget Deficits & Medicaid

The current recession is having a severe impact on state budgets in general and on Medicaid spending in particular. Just four months into fiscal year (FY) 2009, well over half of state Medicaid directors have reported that enrollments and expenditures are increasing to levels well above those projected at the beginning of the year(1).  In response, states have made notable changes to their Medicaid budgets for fiscal year 2009 and beyond.  Nineteen states have enacted or proposed Medicaid or CHIP cuts for FY 2009 or FY 2010.  Secondary budget cuts will likely include actions that will make it harder for new families to get coverage, actions that will make it more complicated for those currently enrolled to keep their coverage (cuts in eligibility and enrollment), and actions that could prevent currently enrolled families from getting health care (cuts in provider reimbursement, cuts in benefits, and increases in cost-sharing)(2).   The most common type(3)  of Medicaid reform undertaken by states is a reduction in how much participating providers are paid for their services, which may result in enrollees having a harder time finding a health care provider to provide services.  States are attempting to close these staggering budget deficits while facing increased demand for services(4).   States are accordingly paring services under Medicaid, which complicates the goal of expanded assisted living services championed by many advocates of community-based care.

II.    The Impact on Long-Term Care Options

Long term care services, which comprise a significant portion of the Medicare and Medicaid budget, are provided to older persons and those with disabilities in the form of institutional care and community care.  Approximately 70% of all formal long-term care services is funded by government programs; Medicaid contributes 48% percent, Medicare contributes 18%, and other public spending accounts for the remaining 4%(5).   Private insurance and out-of-pocket spending make up the remainder of long-term care spending.  Public and private spending is increasing at an alarming rate; the Congressional Budget Office (CBO) projects that in 2009, the federal Medicaid spending for long-term care will reach $66 billion(6),  one-third of the program’s spending on benefits.

Currently, long-term care provided in institutional settings (i.e. nursing homes) is a mandatory benefit under Medicaid, while community based services (such as assisted living) are not a mandated benefit.  While there is no statutory limit on the number of people who may receive care in the institutional setting under Medicaid, states have the option of providing for community-based services through optional state plan amendments or waivers.  Given the current pressure on state budgets, optional programs – such as community-based services – are in a precarious position.

A survey of several states shows the impact of the recession on the provision of community-based care.  In Minnesota, the state capped its Community Alternatives for Disabled Individuals waiver and its Traumatic Brain Injury waiver, both of which allow people with disabilities to be cared for in a community setting rather than a nursing home or institution(7).   As part of its plan for FY 2009, South Carolina capped its Community Choices waiver, which provides home and personal care services to the elderly and people with disabilities. Capping this waiver means that individuals will be put on a waiting list for these services(8).   Nevada has used cuts rather than caps, as its Community Homebased Initiatives Program (CHIP) was reduced 450 slots (services for the frail elderly), and the assisted living (AL) waiver was cut 34 slots in FY 2009. For FY 2010-2011, the CHIP waiver will be reduced another 78 slots and AL another 12 slots, averaging about 1,708 cases per month.  The state also enacted wage decreases for personal care assistants (PCAs); this program saves roughly $5.5 million a year, but the state will lose this same amount in federal funds and may witness a loss of vendors willing to provide PCA services.  The District of Columbia announced a limit on the health care services that individuals who are covered under certain home- and community-based Medicaid waiver programs can receive in their home or in a community setting in FY 2009(9).   Lastly, Massachusetts cut funding in FY 2009 for the Community First Initiative Medicaid waiver, which would have allowed older beneficiaries and those with disabilities to move out of nursing homes and be treated in community-based settings.(10)

III.    Reforms Proposed and Enacted at the State Level

While many states are limiting long-term care options in the wake of budget deficits, several states are maintaining or increasing their long-term care options for beneficiaries.  A review of several states shows the innovative measures being taken across the nation:

A.    New York:  Restructuring Reimbursement Rates(11)

In New York, the budget proposal for 2009-2010 calls for lowering the Medicaid reimbursement rates to nursing homes.  The proposal involves the replacement of a flawed nursing home reimbursement structure with a regional pricing system that encourages greater efficiencies in nursing home management.  The plan aims to more accurately reflect the costs of hard-to-serve patients, promote better quality services, and support the development of assisted living beds.  The plan also extends to home-care, aiming to replace the current provider-specific cost based system with a pricing methodology based on the patient’s medical needs.

The plan would phase out 6,000 nursing home beds and replace them with community alternatives, including reforming assisted living program reimbursements and phasing in 6,000 new assisted living beds over five years.  The state also intends to lift the moratorium on new community-based, adult day care programs.

B.     Maine:  Saving Costs By Limiting Services(12)

Rather than restrict the number of residents that are able to access assisted living services, Maine incurred cost-savings by reducing the number of services provided.  Beginning January 1, 2009, three (of the seven) assisted-living centers in Maine will no longer provide breakfast, forcing residents to subsidize their own morning meal.

C.    Florida:  Using Tobacco Settlement

Florida funded care for 40,000 people who are “medically needy” (people whose medical bills take up the vast majority of their income) or who qualify for a special Medicaid waiver program for the elderly and people with disabilities with onetime funding from the state’s tobacco settlement fund in its FY 2009 budget.

D.    Colorado:  Reliance on Veterans Administration Funding

Despite announcing a “lean” budget for fiscal 2009-10, Colorado provides for extending access to assisted living by relying on funding from the Veterans Administration.  Governor Ritter has proposed spending $200,000 in fiscal year 2009-10 to begin planning and designing a first-of-its-kind residential care center for military combat veterans at Fitzsimons in Aurora.  The care center would include a 47-bed assisted-living facility for aging veterans.  The $49 million project would be built in partnership with the federal government, with 65 percent of project funds coming from a Veterans Administration federal grant program.

E.    Illinois:  Expand Medicaid Coverage

Illinois initiated the “Illinois Supportive Living Program” to provide services akin to assisted living by providing accommodations for residents under Medicaid coverage.  As for February 2008, 91 Supportive Living communities were in operation throughout the state of Illinois offering over 7,000 apartments, and another 56 sites and 4,800 apartments were under development. In all, 71 Illinois counties will be served with supportive living, which makes the Illinois Supportive Living program one of the largest affordable assisted living models in the country. The program itself provides apartment homes for residents, and while living independently, these residents have access to meal service, housekeeping, social, educational and wellness activities, help with bathing and dressing, medication management and scheduled transportation.

Financially, residents who qualify are offered a Medicaid-funded financial assistance program that makes the cost of these assisted living-type services more affordable to those with moderate to modest means.  Unlike assisted living communities (which do not accept payment from Medicaid, and may force residents to leave the community when they are no longer able to pay privately), Supportive Living is a Medicaid benefit, and residents are able to continue living in the community without worry about payment.  Illinois expects the program to produce cost-savings, as the state’s Medicaid budget is expected to benefit by offering seniors with fewer healthcare needs a more residential setting that is less expensive than nursing home care and more conducive to the residents’ lifestyle and needs.

IV.    Suggested Reforms by the Congressional Budget Office(13)

In its Budget Option, Volume I compilation, the CBO proposes an increase in the federal matching rate for home and community based services, and a decrease in the federal matching rate for nursing home services.  Currently, regardless of whether a beneficiary receives care in an institutional or community setting, states receive the same federal medical assistance percentage (hereinafter FMAP) rate from the federal government.

Rather than maintain the current differences in reimbursement rates, CBO proposes a similar treatment for services regardless of setting, whereby the FMAP for home and community based services (hereinafter HCBS) would increase by five percent.  This increase would encourage states to increase the number of eligible individuals receiving care in the community setting; the corresponding decrease in the FMAP rate for nursing homes would ideally lessen the current bias towards institutional care.  This approach: (1) ensures that individuals who prefer HCBS would have a better chance of placement; and (2) provides states with additional resources to service individuals in the HCBS setting.  The additional federal funding may allow states to build a more comprehensive infrastructure and provide more HCBS services.

Alternatively, the CBO proposes a change in the Medicaid structure that would make HCBS a mandatory benefit under Medicaid.  States would be required to provide HCBS to all Medicaid beneficiaries who meet the requirement for receiving institutional care if the individual prefers HCBS.  Financially, this would increase Medicaid spending by about $20 billion over the 2010-2014 period, which includes the estimated reduction in nursing home spending as a result of the decline in Medicare beneficiaries receiving institutional care.  Research indicates that short-term investments made by states to rebalance their resources to emphasize HCBS and reduce institutional expenditures pay off in long-term savings.(14)

V.     The Argument Against Medicaid Cuts

Despite the current trends at the state level, there is a strong argument that reductions in Medicaid spending are not the rational response to the budget deficits, and may in fact worsen state economies.  Medicaid spending generates economic activity including jobs, income and state tax revenues at the state level.  Furthermore, Medicaid generates income within the health care sector and throughout other sectors of the economy due to the multiplier effect.(15)

Studies consistently show a positive correlation between Medicaid spending and state economies, depending on the level of state Medicaid spending, the state’s matching rate (FMAP), and the economic conditions in a state.   Accordingly, reductions in this spending will lead to declines in federal Medicaid dollars, decreases in the flow of dollars to health care providers, and declining activity within state economies.  To help states meet the demand, Congress included $87 billion in additional Medicaid spending in the American Recovery and Reinvestment Act, and President Obama signed it on February 17, 2009. The economic stimulus package includes an enhanced federal share for Medicaid, especially targeting states with high unemployment. While the bill has no specific spending for long-term care, it should relieve some of the budgetary pressure to cut optional programs.

________________________

This CEAL Issue Brief was prepared by Kate Abramson, CEAL intern, and Don Redfoot, PhD, CEAL board member.

1. Kaiser Family Foundation, Medicaid in a Crunch: A Mid-2009 Update on State Medicaid Issues in a Recession, Available at: http://www.kff.org/uninsured/upload/7848.pdf, 2009.
2. Family USA. A Painful Recession: States Cut Health Care Safety Net Programs.  Available at: http://www.familiesusa.org/resources/publications/reports/a-painful-recession-findings.html, 2009.
3. States using this tactic include California, the District of Columbia, Florida, Georgia, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New York, South Carolina, and Utah.
4. Jane Zhang, The Wall Street Journal, page B5B (January 28, 2009)
5. Government Accountability Office, Long-Term Care Financing Growing Demand and Cost of Services Are Straining Federal and State Budgets. Testimony before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives, April 2005.
6. Congressional Budget Office, Budget Options, Volume I: Health Care.  December 2008.
7. State of Minnesota, Office of Management and Budget, 2008 Legislative Session – Enacted Budget Changes, July 2008, available online at http://www.mmb.state.mn.us/doc/budget/op08/budget-changes.pdf
8. South Carolina Department of Health and Human Services, op. cit.
9. A Painful Recession: States Cut Health Care Safety Net Programs.  FAMILY USA.  Available at: http://www.familiesusa.org/resources/publications/reports/a-painful-recession-findings.html.
10. Massachusetts Budget and Policy Center, MassBudgetBrief: Examining the Plan to Close the Budget Gap (Boston: Massachusetts Budget and Policy Center, November 7, 2008), available online at http://www.massbudget.org/file_storage/documents/FY099Ccuts.pdf.
11. Health-Care Execs Examine Budget Cuts.  Business First of Buffalo (Dec. 17, 2008).  Available online at: http://buffalo.bizjournals.com/buffalo/mobile/stories/2008/12/15/daily26.html
12. Meg Haskell, Breakfast Cut At Assisted Living Sites.  Bangor Daily News (Dec. 10, 2008).  Available online at: http://bangornews.com/detail/94920.html
13. Congressional Budget Office, Budget Options, Volume I: Health Care.  December 2008.
14. H. Stephen Hayes, Mitchell P. LaPlante, and Charlene Harrington, “Do Non-Institutional Long-Term Care Services Reduce Medicaid Spending?” Health Affairs, Vol. 28, No. 1, pp. 262-272 (January/February 2009).
15. Kaiser Commission on Medicaid and the Uninsured, The Role of Medicaid in State Economies: A Look at the Research (January 2009).

For any of you who’ve been challenged by the intricacies of Medicare, supplemental coverage and drug coverage, you’ll be glad to know there’s finally a solution.

Joppel is a free service created by a team with over 65 years of experience in healthcare to assist seniors and their caregivers navigate the difficult task of choosing appropriate health insurance. According to John Hobson, president of Joppel, “We wanted to create easy to use, consumer-friendly tools that provide transparency of information and allow the consumer to compare all plans side by side.”

Medicare plans vary from county to county, creating an overwhelming number of plans and options to choose from.  Seniors traditionally rely on an insurance broker or friends for insurance plan recommendations. This approach limits the number of options to plan carried by the broken or to friends’ recommendations that may not fit others in the same way.

Joppel leverages technology to do the heavy lifting in sorting through all plans based on consumer requirements.  Joppel’s unique side-by-side approach to insurance plans enables consumers to realize cost savings by picking plans that better align with their needs.

One very cool feature was the ability to invite a co-browser, which would enable family members to help their loved one’s navigate the system while in two different locations.  It’s as if they are both looking at the same screen!

Joppel has a chance to change the way people interact with and choose Medicare plans.  Very nice.

About the Author: Ryan Malone is the managing editor of Inside Assisted Living, a online resource dedicated to helping families evaluate and transition to assisted living.  He is also the author of The By Families, For Families Guide to Assisted Living.

The purpose of the Understanding Residency Agreements series is to provide you with a working knowledge of the contract you’ll likely face should you choose assisted living for your loved one. The contract we’ll use as an example is from a major corporate assisted living company.  Many of these contracts can be found by searching Google, but I believe this agreement serves as a good example.

Part 6, the final part of the series, will discuss termination and other relevant legal sections.

XI. Termination

The termination section of the contract defines in what situations the contract may be terminated, what money is refunded after termination and what sections of the agreement continue after the end of the contract.  Our sample agreement defines termination rules in a variety of scenarios, including termination by the resident, termination by the community and termination in the event of closure.

Most communities will negotiate little on this section of the agreement, as it defines much of how their business is operated.  You should still be aware the rules in each scenario so that you can plan accordingly.  It never hurts to ask what can be changed negotiation, so give it a shot!

Some things to be aware of:

• What are the resident’s termination rights?  What notice is required?  Thirty days is fair, but don’t let it be more than that, as you will lose your flexibility.  Is there a shorter notice period in the case of death or health reasons, such as admission to a hospital or the requirement for extended skilled nursing care?
• Ensure that you can terminate, with notice, without reason.

So what are the community’s termination rights?

• Ensure the community can only terminate for cause rather than for any reason.  Cause typically includes things like failure to pay rent, failure to meet residency requirements, intentional damage of the facility, being a danger to other residents, etc.
• In the event you are under threat of termination, attempt to negotiate a period of time to remedy the situation.  Most contracts allow for thirty days to remedy contractual issues.
• What is the appeal procedure if you feel you are being terminated or evicted unjustly.
• The community may also terminate contracts in the event they lose their license or close. What happens in this case?

What happens when the contract is terminated?

• How long does your loved one have to remove his or her belongings?
• What should you expect in terms of refunds, e.g. security deposits, community fees or unused monthly fees?  Depending on the amount of the community fee that was prepaid, you may be entitled to some type of refund.
• Within how many days is  the facility required to issue these refunds?

Other Legal Stuff

Most contacts have several pages of standard legal language.  Most of the time, these sections have no impact on the substance of your agreement.  The details of these sections are also outside the scope of the Understand Residency Agreements series.  However, it does make sense to alert you to a few “gotchas” below:

• Costs and attorney’s fees. If there is a provision that resident shall bear all costs and fees (including attorney’s fees) to enforce the agreement, try to remove that language.  Attorney’s fees can become quite costly and these fees should be part of the facility’s cost of doing business.
• Insurance and liability. First, most communities will require the resident to maintain their own insurance to cover personal property.  You’ll likely be unable to change this, but you should get insurance if it is not provided.  Second, the community will likely try and disclaim all liability.  You want to try and negotiate this such that the community is at least responsible where the community or its staff has acted intentionally, recklessly or with gross negligence.
• Assigning or subletting. Most agreements will not allow you to sublet the unit to someone else.  However, in the event the community does this, you may still be responsible financial.  In other words, make sure you protect yourself in the event of subletting so you are not on the hook for damages, rent and other expenses.  Read this section carefully.
• Arbitration. Arbitration is a clause put into contracts so that disagreements are resolved by a third party and not in court.  Arbitration can be conducted anywhere, and many companies would like to have arbitration close to their corporate offices.  In the case of a residency agreement, you want to make sure the arbitration location is near your home.  That way, you don’t need to incur additional expenses should the need for arbitration arise.
• Entire agreement. Make sure the residency agreement presented to you represents the entire agreement.  You have a right to review all auxiliary materials referenced in the contract, including documents, handbooks or verbal representations.

That concludes the Understanding Residency Agreements series.  As mentioned during the first part of the series, you should also have an attorney review any agreement you sign, especially one that has such large financial and emotional implications.  Our hope is that this series will empower you to be a more educated negotiator and have a more fruitful discussion with your attorney.

Relevant Articles:

• Understand Residency Agreements – Part 1
• Understanding Residency Agreements – Part 2: Accomodations and Term
• Understanding Residency Agreements – Part 3: Fees, Core Services and Meals
• Understanding Residency Agreements – Part 4: Residency Qualifications
• Understanding Residency Agreements – Part 5: Maintenance and Use

The purpose of the Understanding Residency Agreements series is to provide you with a working knowledge of the contract you’ll likely face should you choose assisted living for your loved one. The contract we’ll use as an example is from a major corporate assisted living company.  Many of these contracts can be found by searching Google, but I believe this agreement serves as a good example.

Part 5 of the series will discuss maintenance and use.

VIII. Maintenance, Repairs and Alterations

This section defines the rules to be followed regarding redecoration, alterations and basic housekeeping.  It also defines to what extent the assisted living community will be responsible for maintenance and repairs, as well as the resident’s responsibility for damages.

I think most people will find this section to be reasonable and consistent with renting a house or apartment.  However, you should read it closely to be sure there are no unreasonable requirements in the contract.

Some things to be aware of:

• You and your loved one will likely want the new apartment to feel like home, and therefore may want to redecorate.  While our sample agreement provides for things like paint and wallpaper, you should ask specifically if you intend to do something not mentioned.  If the community agrees with your request, get their approval in writing during the contract negotiation.  Similar, if you are already a resident, all redecoration plans should be approved in writing before the project begins.
• Similar to redecorating, should you wish to make structural or non-structural alterations to the unit, make sure you get written permission during the contract negotiation.  Usually, the cost for non-structural alterations like fixtures, toilet items and shelving are the responsibility of the resident.  If your loved one is disabled, the community should make reasonable efforts to accommodate their needs.  In our sample agreement, this language is very vague.  Make sure you articulate your loved one’s needs and get in writing the community’s intent to provide those alterations.  You should also insist that these alterations are completed prior to your move-in date.
• Most communities provide some housekeeping services and things like routine carpet cleaning.  Some facilities charge extra for additional housekeeping.  If you intend to have an outside housekeeper visit your loved one’s unit, make sure this is allowed for in the agreement.
• Damages are often ambiguous in many lease agreements, and residency agreements are no different.  Ask the facility to define damages versus normal wear and tear and to give examples.  Some questions to ask may include: Who conducts the repairs?  Are costs based solely on actual material cost or do the residents pay for associated labor as well? How do residents resolve situations in which repair costs appear to be abnormally high?  If the resident can repair the damage on their own, how much time do they have to complete the project?

IX. Use of Unit

The purpose of this section is to clearly define how and for what the unit can be used.  This section normally addresses issues like pets, parking, guests and storage of materials.  The language in this section is usually specific, so make sure to ask questions about items you don’t see in the text.

Some common questions to ask:

• Is parking included? If not, is there an additional fee?
• Can your loved one have overnight guests?  Are there restrictions on how many nights they can stay?  Are there additional costs associated with those visits?
• Are pets allowed?  How many?  Are there optional services available such as dog walking, grooming, etc? What are the additional fees associated with pets?
• Can there be joint occupancy?  This is particularly relevant if spouses want to live together in an assisted living community. How does this affect the cost? Is there a cost benefit to joint occupancy?  How do the costs change if one resident leaves?  For example, at my mother’s facility, a resident’s wife spends the night several times a week, but maintains her own home down the street.  How would a scenario such as this be treated under the agreement?
• Are caregivers considered to be joint occupants? Are there fees or meal charges associated with live-in caregivers?  At one local community, a monthly surcharge is assessed for caregivers which is nearly $1,000.

Relevant Articles:

• Understand Residency Agreements – Part 1
• Understanding Residency Agreements – Part 2: Accomodations and Term
• Understanding Residency Agreements – Part 3: Fees, Core Services and Meals
• Understanding Residency Agreements – Part 4: Residency Qualifications

The purpose of the Understanding Residency Agreements series is to provide you with a working knowledge of the contract you’ll likely face should you choose assisted living for your loved one. The contract we’ll use as an example is from a major corporate assisted living company.  Many of these contracts can be found by searching Google, but I believe this agreement serves as a good example.

Part 4 of the series will discuss residency qualifications.

VII. Residency Qualifications

This section is designed to protect both your loved one and the assisted living community.  Why?  Assisted living communities are only licensed and staffed to provide certain types of care.  By defining the qualifications of residency, the community ensures they have the staff and resources to take care of your loved one.   There are also requirements to protect other residents such as those requirements around contagions like tuberculosis.

Some things you should be aware of:

• Review the minimum requirements carefully and make sure your loved one meets these requirements.  It’s important to be honest with yourself, as you don’t want to be in a situation where you’ve violated the agreement within the first week.
• Does the contract state what happens in the event your loved one ceases to meet these requirements?  For example, will they be forced to move out and with what notice? Is there an appeal process to dispute whether your loved one meets the requirements?  How does that process work?
• Some facilities may require the presentation of medical records or results from a recent medical exam.  Make sure the contract ensures the results of the exam are kept confidential except as released by you or your loved one.
• Some facilities may require a pre-admission assessment in which a nurse and community executive conduct an interview and/or medical exam.  Make sure to understand in advance the purpose of the exam and what will be covered.

Skilled Nursing Transfers

My mother came to assisted living from a skilled nursing facility.  In her case, the assisted living community did not conduct a pre-admission assessment. However, they did require medical records from the skilled nursing facility and had a lengthy conversation with the head nurse.

In this case, you should follow up with both parties to ensure consistency of the results. The goal here is to avoid any inconsistencies during the admission process.

While this part of the contract may in some cases appear intimidating, it is important to realize that it benefits both parties.

Relevant Articles:

• Understand Residency Agreements – Part 1
• Understanding Residency Agreements – Part 2: Accomodations and Term
• Understanding Residency Agreements – Part 3: Fees, Core Services and Meals