The State of Nursing Homes in Massachusetts

  

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By Harry S. Margolis

I recently attended a fascinating presentionat by W. Scott Plumb, Senior Vice President of the Massachusetts Senior Care Association, the nursing home trade association.  He described an industry that is beset by both the changing face of long-term care and lower reimbursement rates from both Medicare and MassHealth.

With more alternatives for home care and assisted living, nursing homes are caring for people for shorter periods of time who require a greater amount of care.  No longer are nursing homes places where seniors live out the last few years of their lives.  More and more they provide transitional care after hospitalizations until residents can return home and end of life care for people who can no longer live at home or in assisted living facilities even with assistance.

Nursing home funding comes from the following sources:

• Medicaid      66%

• Medicare      15%

• Private Pay   13%

• Other            6%

Other relevant facts about the state of nursing homes today:

• 9 out of 10 nursing home residents come from hospitals.

• 60% return home.

• 54% stay in nursing homes less than a month, with 86% being discharged within six months.

• Only 10% of nursing home residents stay longer than a year and only 2% more than 5 years.

• Nursing homes in Massachusetts employee 50,000 people and three quarters of their budgets, on average, go to paying wages and benefits.

• The number of nursing home days (number of residents times number of days in facilities) declined from 13.2 million in 2000 to 10.5 million in 2009, reflecting the changing nature of nursing homes from custodial to more acute care.

• According to Plumb, nursing homes on average lose $32 a day caring for MassHealth covered residents, an increase from $19 per patient day in 2006.

• They make up for this to some extent by making a "profit" on private pay and Medicare patients, but Medicare has also reduced its reimbursement rates, reducing the profit on Medicare patients.

In all, Plumb describes an industry that is quite squeezed with nowhere left to cut costs.  Any further cuts would adversely affect quality of care.

Hartstein Describes Massachusetts Long-Term Care Challenge

  

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By Harry S. Margolis

We were delighted when Secretary of Elder Affairs Ann L. Hartstein spoke at our office last week about the report and recommendations of the Massachusetts Long-Term Care Financing Advisory Committee.

They were charged with finding a solution to the challenge of an increasing number of aging baby boomers needing an increasing level of long-term services and supports (LTSS), estimated to cost $28 billion a year by 2030.  By then, all baby boomers will be over 65 and the oldest will be hitting age 85, at which point the need for LTSS will skyrocket.  With much of LTSS in Massachusetts covered by MassHealth, the costs to state government would be unaffordable without significant changes.

According to the Committee's report, Securing the Future, in 2005, LTSS costs in Massachusetts were paid from the following sources:

MassHealth               45%

Medicare                  19%

Out-of-Pocket          17%

Other public sources  10%

Private insurance       9%

The advisory committee supported a three part solution to be phased in over 10 years, to include:

• Incentives for residents to purchase long-term care insurance.

• Expansion of MassHealth coverage so that there could be cost sharing between residents' savings and MassHealth rather than the current system which encourages sheltering assets in order to depend entirely on MassHealth.

• Promotion of programs like the CLASS Act.

Unfortunately, the CLASS Act which was part of health care reform and promoted by the late Senator Kennedy has been set aside as not fiscally viable.  This was due to its voluntary nature, which would have led inevitable to adverse selection.  In other words with only those needing long-term care signing up it would quickly run out of money. 

One possible respone would be for Massachusetts to create its own mandatory (naughty word these days) version of the CLASS Act.  One of the biggest problems, however, for a state to take this step is the fact that people move around.  Those who paid into the system for years might move south when the retire, getting no benefit.  And should others who move in from out of state be able to particpate?  These are some of the touch questions policy makers are trying to answer.

Secretary Hartstein handed out to the crowd copies of Embrace Your Future, a planning guide for long-term supports in Massachusetts.  It can be read on line or ordered by clicking here.

Annie's Mailbox Gives Excellent Estate Planning Advice

  

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By Harry S. Margolis

Today's Boston Globe includes an a question and answer in Annie's Mailbox column titled "Estate Planning Helps Quell Family Squabbles."  We couldn't agree more.

The column answers a question from a 90-year-old in Indiana who is blessed with to sons and daughters-in-law who live nearby and help out, especially her oldest son and his wife.  She also has a daughter who lives out of state and doesn't help so much.

Her question was about how to divide her estate without creating family squabbles, especially with respect to family heirlooms such as the sterling silver and an antique wall clock, which cannot be divided equally.

Annie's Mailbox recommends, first, that the senior Hoosier consult with an estate planning attorney.  Second, the column recommends that she not favor her older son and daughter-in-law because "it could create all sorts of resentments later."  But does say that she might make them "special gifts of jewelry or sentimental gifts" either while she is alive or through her estate plan.

This is excellent advice.  We have seen too often where parents favor one child over the other causing a rupture in the family, even if the parent did this as compensation for great sacrifices the child made to provide care.

MassHealth Planning as Asset Protection Planning -- Massachusetts

  

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By Harry S. Margolis

A colleague recently wrote an article about the fact that most trust designed for asset protection planning, whether offshore or domestic, don't do anything for asset protection planning.  "Neither Domestic Asset Protection Trusts nor Offshore Asset Protection Trusts Work for Medicaid Asset Protection" by Evan Farr.

My first response was "who cares?"  Anyone who is creating an offshore or domestic asset protection trust has too much money to be worried about the cost of long-term care or qualifying for Medicaid (MassHealth in Massachusetts) coverage. 

But then I thought about turning the question around.  Can MassHealth planning trusts also provide asset protection for non-MassHealth purposes?  The answer is "yes."

Many of our older clients transfer assets, often their homes, into irrevocable trusts in order to protect the property in the event they need long-term care.  After a five-year wait, it permits them to qualify for benefits without having to spend down the assets in trust and, if the protected property is a home, it permits their children to sell the home without the proceeds having to be spent down.

These trusts, if properly drafted, have the added advantage of protecting assets from other risks, especially a lawsuit for any reason.  They also avoid probate.

Further, the trusts may be drafted to provide protection for our clients' children and grandchilren from lawsuits, bankruptcy, divorce and early death.  When consulting with an elder care attorney about long-term care planning ask if you can include asset protection in the plan.

Should You Be Doing Long-Term Care Planning? - Massachusetts

  

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By Harry S. Margolis

    The simple answer to this question is “yes.”  Everyone is at risk of needing long-term care and if you plan ahead you are likely to receive better care at less cost to yourself and your family.  Of course, nothing is really that simple.

    In general, long-term care planning involves either purchasing long-term care insurance (LTCI) or transferring assets, often into a trust, to protect them both from having to be spent down to qualify for MassHealth and from MassHealth’s right to recover its costs from the probate estate of the beneficiary.  Whether you should take these steps depends on answers to a number of questions, including the following:

    •    Can you afford to pay LTCI premiums and maintain your current lifestyle?
    •    Do you have any preexisting conditions that would preclude you from qualifying for LTCI?
    •    What is the health history of your parents and grandparents?  Did any of them suffer from Alzheimer’s disease?
    •    If you were to transfer your home or other assets into an irrevocable trust, would you still have enough income and assets left to pay your expenses for the following five years?
    •    Do you have children or others to whom you would like to pass your estate?
    •    Or is it more important to you that you have resources available to pay for your own needs?
    •    How important to you is it that you stay at home?  Or are you comfortable with receiving care in another setting, such as assisted living or a nursing home?
    •    Do you have sufficient funds to pay for any care you may need without significantly affecting your financial security or that of loved ones?
    •    Do you have family members who would care for you if necessary?

    Everyone is different in terms of their circumstances and their desires, values and goals.  No long-term care plan is right for everyone.  Answers to these questions can help you, with your attorney, fashion a plan that best matches your wishes, whether that involves purchasing LTCI, sheltering assets in trust, or simply executing a durable power of attorney and health care proxy.

What is the Chained CPI and Why It's a Bad Idea

  

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 By Harry S. Margolis

There's a move afoot in Washington to change the way annual cost of living adjustments (COLA) are made in Social Security and Supplemental Security Income are calculated, that would reduce this protection against inflation.  Many critics already charge that the current method of calculating the COLA already understates inflation for seniors because it is based on living expenses for younger people who have much lower health care expenses, which have been increasing faster than other costs for decades.

The so-called chained CPI would further reduce the annual COLA because it is based on the assumption that if the cost of an item increases, you won't simply pay the higher cost, but instead you will substitute a less expensive alternative.  So, your cost of living may not actually go up as fast as prices increase.  For instance, if Starbucks raises the cost of a cappucino, you may buy a regular coffee or go to Dunkin Donuts instead.

The problem with using this measure, however, is that many seniors depending on Social Security or SSI are already buying their coffee at Dunkin Donuts (to continue the analogy) and don't have the option of substituting a lower cost alternative.  Instead, they would have to give up coffee all together (again, continuing our analogy).  

Experts say that switching to the chained CPI would have only a very small effect on benefits in the first few years after retirement, but that the effect would increase with every year that goes by, as the reductions add up.  This especially means balancing the budget on those who can least afford it because low-income seniors are both the most likely to rely heavily on Social Security for their support and are most likely to be adversely affected by the fact that their other sources of income don't keep up with inflation.

There are much more fair ways to make the small adjustments necessary to keep Social Security solvent indefinitely.  One that I have espoused for many years (and haven't heard anyone else discuss) is to cap the annual COLA by a specific dollar amount, perhaps $25 a month.  This would affect those receiving a higher Social Security benefit and not those receiving smaller amounts each month.   

For instance, someone with a $1,000 a month in Social Security benefits would be limited to a 2.5% COLA while her neighbor receiving $500 a month would not run up against the limit until inflation reached 5%.  This change further reinforces the progressive nature of Social Security benefits, unlike the chained CPI.

Elderly Lawyer Suspended for MassHealth Screw Up

  

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By Harry S. Margolis

Eighty-one year old Revere attorney Frederick C. Diamond was recently suspended from the practice of law by the Board of Bar Overseers (BB0) for six months for a series of errors involving the transfer of a home into an irrevocable trust and a subsequent application for MassHealth.

In 2005, Attorney Diamond was approached by a client with the request that he prepare an irrevocable trust to shelter her aunt's house.  The aunt suffered from dementia and depression.  Attorney Diamond never met her "nor did he attempt to determine if she was acting under undue influence."

Nevertheless, Attorney Diamond prepared the trust which was for the benefit of his client.  In addition, three days before recording the deed and trust at the registry of deeds, Attorney Diamond recorded a mortgage and loan documents purportedly reporting a $300,000 loan to the aunt.  It's unclear from the report whether the money was ever lent or whether it went to the client rather than her aunt.

In any case, the aunt then applied for MassHealth coverage of her nursing home costs and was denied based on the transfer of the house.  Attorney Diamond represented the aunt both on an administrative appeal and subsequent appeal to superior court, arguing undue hardship because the aunt could not undue the trust.  The BBO report doesn't say what happened on appeal, but under the circumstances, it certainly sounds like a losing argument.

Ultimately, the nursing home sued both the aunt and the client for its $200,000 in unpaid bills.  Attorney Diamond responded representing both of them, despite the fact that they have differing interests.

The BBO found that Attorney Diamond violated multiple provisions of the Massachusetts Rules of Professional Conduct involving conflict of interest, failure to take adequate steps to determine the competence of the aunt and that she was not under undue influence, and failure to determine the truth of the facts he alleged both in the MassHealth appeal and the defense against he nursing home claim.

The BBO felt that Attorney Diamond's age and the fact that he had no personal gain as a result of his misconduct were mitigating factors, but also noted that he had been disciplined twice in the past.

All in all, this is a case study in what not to do when representing elderly clients, doing long-term care planning, and representing clients before MassHealth.  Click here to read the entire decision.

Beware Bankers Life Long-Term Care Insurance - Massachusetts

  

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By Harry S. Margolis

A recent article on the CBS News website, "Some long-term healthcare policies not paying up," highlights the difficulties many owners of Bankers Life long-term care insurance policies are having trouble collecting.  As the article reports, and as some of our clients have experienced, Bankers Life typically gives policyholders a major run around when they make claims, often claiming not to have received documentation that has been sent in.

The CBS News article reports on problems encountered by a Kansas family who, fortunately, were related to the state's insurance regulator.  She investigated and brought a claim along with 39 other states, ultimately resulting in Bankers Life paying $32 million in fines and restitution.

Bankers Life, however, did not admit any wrongdoing and claims to be "committed to the highest standards for ethics, fairness and accountability."

Our clients have experienced similar responses, or non-responses, from Bankers Life.  After paying in premiums for years so that their eventual need for long-term care will be covered, they have received denials for a range of invalid reasons.  After advocacy by our firm, sometimes threatening litigation, Bankers Life has always ultimately paid up.  In one case, they even reimbursed the clients for the attorneys fees they paid us.

A great result, but at a great cost.  Bankers Life adds great stress to the already stressful situation of needing expensive care.  Repeatedly providing documentation and waiting for a positive result during months of uncertainty is extremely stressful.  At the same time, the families either must pay for care out-of-pocket or, if they can't afford to do so, ask the facility to wait for payment, which is unfair to the provider of care as well. 

While seniors should not have to hire lawyers to assert their rights under long-term care insurance policies, our firm is ready to help when needed.

New Rules in Massachusetts if You Don't Have a Will

  

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By Harry S. Margolis

Massachusetts has adopted its own version of the Uniform Probate Code (MUPC) which will take effect on March 31, 2012.  It changes the entire process for probating an estate, simplifying it considerably where there is no conflict among heirs.

One interesting change is what happens to your estate if you die without a will, technically called dying "intestate."  The results depend on whether you're married, have children or have living parents.  The rules are very specific.  Here are a few examples"

• You die leaving a spouse, no children, but surviving parents:  Your spouse will take the first $200,000 plus 3/4 of the rest, the last 1/4 going to your parent or parents.

• You leave a spouse and children from a prior marriage:  Spouse takes first $100,000 plus 1/2 of the rest, the remaining 1/2 going going to your children.

• You leave a spouse and children you had together:  Everything goes to your spouse.

Another interesting change is what happens if you pass away without a spouse, but with surviving children and grandchildren.  Massachusetts has switched from the old per stirpes method of distributing estates to what is called per capita at each generation.  The easiest way to explain this difference is through an example:

You had three children, who we will call A, B and C, but B and C passed away before you.  B had two children, who we will call B1 and B2, and C had three children, who we will call C1, C2 and C3.  Let's also assume that your estate after all expenses totals $900,000 to be distributed to your heirs.

Under the old per stirpes method of distribution, your estate would be divided into three equal shares of $300,000 each, with one share going to A, one share to B's children, with B1 and B2 receiving $150,000 each, and one share going to C's children, with C1, C2 and C3 receiving $100,000.

To a lot of people, this doesn't seem fair since you're related equally to all of your grandchildren.  Why should some get a larger part of your estate from others?

The result is per capita at each generation, which is part of the MUPC.  Under this approach, A would still receive his 1/3 share, but all of your other grandchildren would share the other 2/3rds, each receiving $120,000.

If you don't like any of these result, you need to create your own will or trust.

Don't Commit Cookie Cutter Estate Planning - Massachusetts

  

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By Harry S. Margolis

I recently met with a woman (and her son) whose situation illustrate's the need to avoid cookie cutter estate, one size fits all estate planning.

The mother was widowed.  She is healthy, living on her own in the house she shared with her husband for many decades.  The is comfortable financially with significant savings in addition to the home, but by no means wealthy.  Her four children all have families of their own and they and their spouses have good jobs, so they don't need her financial support.

The issue my client and her son presented on coming in was whether the mom should put her home, and perhaps some of her savings, into an irrevocable trust in order to protect them in the event she needs long-term care.  She also expressed her steadfast wish to stay at home.

I explained that if you do not have long-term care insurance, for the most part you will need to pay for long-term care out-of-pocket.  MassHealth will cover nursing home care and some home care after you have run out of savings, but the home care coverage generally is not complete.  It will only supplement what you pay for yourself.

The purpose of an irrevocable trust is to shelter assets that are placed into it so that they don't have to be spent down before qualifying for MassHealth.  In terms of a home, it permits it to be sold and the proceeds protected and it protects the home from the state's claim for reimbursement upon the death of the MassHealth beneficiary.

There are two principal trade offs for placing assets into an irrevocable trust.  The first is that you make yourself ineligible for MassHealth coverage of nursing home care for the subsequent five years -- the so-called "look back" period.  The second, which was of more importance for my client, was that it renders the assets unavailable.  They cannot be used to pay for the grantor's care, and in the case of the home, the trust makes it impossible to borrow funds on the home equity to pay for care.

For many of our clients, these trade offs are well worth it.  Their primary concern is protecting assets for their children and grandchildren, and they always keep substantial assets out of trust to pay for their anticipated needs.

But for my recent client, her major concern is staying at home.  While she has significant savings, the cost of care is so high that she could run through everything in a few years.  Then, she would want to be able to tap into the equity in her home to be able continue to live there.  This being more important that preserving assets for her children and grandchildren, she wisely chose not to transfer her home into an irrevocable trust.