Governments at all levels are making applying for benefits of every kind more accessible and easier than ever before. In many cases, this ease is helpful to those needing benefits. However, governments typically don’t inform applicants of the dangers of applying incorrectly. Following are examples of how poor timing in particular circumstances can be disastrous for unsuspecting families.
Medicaid Disaster
Let’s start illustrating such a disaster with the story of Bill and Martha. This type of scenario repeats itself over and over every month throughout the state of Florida.
Bill and Martha had advanced in age. Now in their late 70’s Martha’s health was failing and a recent stroke was the final event that dictated a nursing home would be necessary for the remainder of her life. Bill and Martha worked hard over their life, saved and invested wisely, educated their children, paid their taxes, and were upstanding and contributing members of society. As life often does, it created challenges for Bill and Martha’s two children. The last economic downturn created job losses for both children’s families and new jobs, once found, were at a much lower pay. This hardship created the need for the children to ask Bill and Martha to help out financially. Loving their children and grandchildren, Bill and Martha agreed to give each family $50,000, which together accounted for almost half of Bill and Martha’s savings and investments. At the time it was not concerning for Bill and Martha because they lived on less than their pension and Social Security income and only had the money tucked away for rainy days like their children were now experiencing. Everyone involved was happy with the outcome of the gifts that occurred 60 months ago.
Now that Martha was leaving Rehabilitative nursing home care and entering long-term nursing home care, the reality of the massive coming expense was setting in. At nearly $9,000 per month the need for government financial assistance was undeniable. The nursing home social worker agreed to file for Medicaid Long Term Care benefits for the family as a courtesy. Bill was relieved and thankful for the help. The social worker asked about current assets and income, collected appropriate documents including the last three months bank statements and by all appearances Martha would qualify for benefits. Unfortunately, the social worker didn’t ask about past gifting and that’s where the trouble began.
About 60 days went by and Medicaid was ready to approve Martha’s application. However, the last step in the approval process is running an “AVS” (Asset Verification Search). This search encompasses a number of databases and information access points including banks, credit unions, brokerages, insurance companies, public records, etc. It searches for the last 60 months of balances prior to the date of the application. In Bill and Martha’s case the AVS system generated an asset “hit” based on a $100,000 reduction in the balance of an annuity (the two $50,000 gifts) within five years prior to the application date. The Medicaid system generated a Notice of Case Action (NOCA) requesting information on what happened to the annuity assets. Unfortunately, the answer disqualified Martha for benefits for 12.5 months from the date of the application and cost the family about $110,000 because Bill took no corrective action. Even if corrective action was taken, Bill would have owed the two months of nursing home bills that had accumulated since the application date. This expense was approximately $18,000 plus Bill would have needed to hire an attorney and potentially a Medicaid application service to fix the problem which would have likely cost another $10,000.
If instead, Bill had sought out knowledgeable advice, he could have simply waited one month (which would have made the gift 61 months prior to the application), paid the nursing home approximately $9,000 and then had the same social worker apply for benefits which would have been approved. To worsen the situation, many attorneys do not know how to fix this type of problem since the children cannot return the cash. Therefore, in many circumstances a family in this situation would simply pay privately (like Bill and Martha) for the 12.5 months and deplete the remaining family assets. Is this a financial disaster? Most people would likely think so!
VA Disaster
Veteran’s Administration benefits for older veterans needing assistance at home or in an assisted living facility are often referred to as Pension or Aid and Attendance benefits. These benefits are reimbursement benefits and therefore cannot be applied for in advance. Unfortunately many veterans, who could qualify if expenditures were handled properly, fail to gain approval because of missteps.
Let’s illustrate such a disaster by using Joe as an example. Joe is a Korean War veteran that meets all of the necessary criteria for VA Aid and Attendance benefits except proving expenditures. Joe’s legal representative, Fred, misunderstood the program and filled out the application thoroughly, excepting proof of expenditures. Fred’s plan for Joe was to apply for and gain benefits for assisted living and then move Joe from his private home into the assisted living using the V.A. Aid and Attendance benefits to dramatically supplement the cost of the ALF.
Unfortunately, the time it took to work the application through the system, because it was handled by Fred who had no working knowledge of the process, was extensive. In Joe’s case the application took just over a year. By the time Fred received Joe’s denial letter, Joe could have already been receiving the assisted living care for more than a year and received the benefit to reimburse his account for the expenditure. Unfortunately, given this application scenario no benefit was available because no health care expenditure occurred. In other words, Joe delayed care he needed in exchange for potential benefits he cannot now receive because of delaying the expense and care. While this scenario may not have been a financial disaster, it was a healthcare disaster.
Summary
The point of this article is not to provide the technicalities of any government program. Rather, it is to make the point that the timing of an application can be every bit as important as actually making the application. While most application professionals and attorneys are biased, they have seen these scenarios and dozens more, create real hardship for families unnecessarily. Can someone apply for benefits free of charge? Absolutely! Is it the best thing to do? Probably not. Most attorneys and application services will be honest about whether you need professional help or not. Set an appointment, bring the facts to the appointment, and let someone with experience advise you as appropriate.
Be aware that in the State of Florida, an attorney must be involved in any Medicaid application that involves asset protection strategies or legal document recommendation or creation.