Monday, August 26, 2013

New Hampshire limits responsibility of children for parents’ care costs

Filial responsibility laws can be a big problem for the children of aging parents. These laws can make you financially responsible for your mother or father’s unpaid care costs.  
In Pennsylvania a child can be held liable to pay for the cost of caring for a parent where there is no other adequate source of payment. This is sometimes referred to as “filial responsibility.” The word “filial” means “pertaining to, or befitting a son or daughter.”  
Pennsylvania filial responsibility laws are being used by hospitals, nursing homes and other care providers to sue children for the unpaid cost of the care provided to the parent. For example, in the recent case of HCRA v. Pittas a son was held liable for over $93,000 of his mother’s nursing home costs. The son was not accused of any wrongdoing. The mother had not turned her assets over to the son. He was liable merely because he was his mother’s son and had some ability to pay.  
The legal citation for the Pennsylvania filial responsibility law is 23 Pa. C.S.A. §§ 4601-4606. See “Further Information” below for more on Pennsylvania’s law.  
Filial responsibility laws are under attack in some states
According to the Wall Street Journal “[t]wenty-nine states have ‘filial support’ laws that could be used to go after patients' adult children for unpaid long-term-care bills.” 
Until recently, one of those states was New Hampshire. Its law made children liable to provide support for their parents’ “reasonable subsistence compatible with decency or health.” It also allowed the state to pursue children for assistance rendered by the state to the child’s father, mother, stepfather or stepmother.   
But earlier this year, New Hampshire enacted HB 481 which repealed the liability of children for their parent’s care costs. In addition to repealing the liability of children for their parents’ cost of care, the New Hampshire law also now limits the liability of parents for the support of their adult children.
Montana also has a filial responsibility law. But in July, a Judge refused to allow a nursing home to collect an outstanding bill from the son of one of its residents. (Heritage Place, Inc. v. Jerry A. Jarrell (Mont. Dist. Ct., 11th Dist., No. DV-11-430(D), July 2, 2013). The Court suggested that application of the Montana filial responsibility law would be preempted by the federal prohibition against nursing homes requiring a third party to guaranty payment of the costs of care. (See 42 USC section 1395i-3(c)(5)(A)(ii); 42 USC Section 1396r(c)(5)(A)(ii) and 42 CFR 483.12(d)(2)).   
And in Pennsylvania legislation has been introduced to repeal this Commonwealth’s filial responsibility laws. (See Senate Bill 70 and House Bill 224, 2013-2014 Session.) Recently Pennsylvania has seen the most reported use of the filial responsibility laws in litigation against children. 
Although legislation to repeal these laws has been introduced, at the present time it seems unlikely that either of the Pennsylvania bills will move. Of course, voters could probably give the bills momentum by voicing their support to their state legislators.

A Public Policy Question

Long term care costs are often catastrophic. The policy question is: who should pay for mom’s care when her money runs out?  Nursing homes and other care providers say it shouldn’t be them, and it’s hard to disagree. But that leaves only the family and/or the government to pick up the costs for otherwise unpaid long term care services. Should the children pay, or should the government? 
Perhaps the children should pay in situations where there has been wrongdoing, or the parent’s funds have been transferred to the children. This is a public policy decision for our elected state representatives to make.
But in the Pittas case there was no evidence that the child had been enriched in any way. Under Pennsylvania law, an innocent child, even one who has devoted years of caregiving to the parent, is financially liable for the parent’s unmet care costs. It’s my guess that Pennsylvania's current policy strikes most voters are unfair. Most people I speak to about the Pennsylvania law are shocked by its existence, feel that goes too far, and believe that it should be modified, if not fully repealed.
But until the Legislature gets motivated to address this policy question, children will continue to be liable for their parent’s unpaid care costs in Pennsylvania.   
My thanks to Penn State Law Professor Katherine Pearson for pointing out the New Hampshire law in the ElderLawProf blog.

Further Information

The Montana case (Jarrell) is available on the Elder Law Answers website but access may be restricted to members of ElderLawAnswers

Sunday, August 18, 2013

How Medicaid Transfer Penalties Are Calculated

Medicaid ("Medical Assistance") is a primary source of payment of nursing home and other long-term care costs in Pennsylvania.  But, before an individual can receive government Medicaid benefits for long term care, he or she must meet the financial need criteria of the program.  
For many individuals, this means they first have to "spend down" their personal financial resources so that they can qualify.
Medicaid rules limit an individual’s ability to give away his resources in order to spend down to the qualification level. If an individual or his or her spouse has given away resources in order to get down to the required financial qualification level, the gift may create a waiting period during which the individual will be ineligible for Medicaid.  
This waiting period, often called the "penalty period," does not begin until the individual is otherwise qualified for Medicaid and files an application.  

How is the Penalty Period Determined

The length of the penalty period is determined by dividing the fair value of the income or assets given away by a "penalty divisor" which is roughly equivalent to the average monthly cost of a private nursing home room. The current penalty divisor in Pennsylvania (as of August 2013) is $276.17 per day.
Penalty periods are imposed on individuals who are applying for or already receiving Medicaid financed care in a nursing facility as well as to those receiving home and community care under Medicaid waivers such as the Aging Waiver program. Penalties are applied if there were non-exempt transfers during the 60 months prior to the date of application for Medicaid long term care (MA LTC) benefits.
Example: An Applicant for MA LTC
For an applicant for MA LTC benefits, the begin date for a period of ineligibility due to a transfer of assets is the date the applicant would otherwise qualify for benefits based on an approved application but for the transfer of assets.

Here is an illustration of how the penalty period is calculated for an applicant for benefits.
Mr. Gordon applies for MA LTC on August 9, 2013. He requests that MA LTC benefits start immediately on August 9, 2013. Mr. Gordon’s resources are below the MA LTC limits and except for the transfer penalty rules he would be eligible for benefits.
However, Mr. Gordon gifted $5,000 to his son on February 28, 2010. This results in a penalty period during which Mr. Gordon will not be eligible for MA LTC. The penalty is calculated by dividing the amount of the transfer ($5,000) by the penalty divisor ($276.17).
5,000/276.17 = 18.10.
Mr. Gordon will be ineligible for MA LTC benefits for 18 days. He will have to use some other source of payment for his care during that period of time.  

Variation For Current Recipients of MA LTC

For a current recipient of benefits, the begin date of the penalty period due to a non-exempt transfer of assets is the first day of the month after the date on the notice the recipient receives that states that his or her eligibility for benefits is being discontinued.
Note that transfer penalties are imposed only if cumulative gift transfers in excess of $500 are made in a calendar month. See 62 P.S. §441.5.

It's So Important to Get Expert Help

Be aware that in this article I have oversimplified the transfer penalty rules somewhat in order to make them more readily understandable by consumers. There are many nuances and a number of exceptions to the transfer penalty rules. And these rules can and will change over time.  Individuals who may need Medicaid financed long term care services should consult an experienced elder law attorney in their state for further information and assistance.  
Pennsylvania residents may consult one of the lawyers with my law firm, Marshall, Parker & Weber. For over 25 years my law firm has successfully helped people qualify for MA LTC benefits.
Further Reading:

Thursday, August 15, 2013

Tax Refunds Are Disregarded by Medicaid and SSI

You are on SSI and/or Medicaid and receive an income tax refund. Is your refund counted as income for purposes of your benefits? Is it a resource that might make you lose your benefits? If you give your refund away will it make you temporarily ineligible for continued benefits?

The answer is: “No problem” at least if it is a federal tax refund. 
Federal tax refunds are disregarded for 12 months from their receipt for purposes of determining eligibility for federally funded assistance programs like Medicaid or SSI. They are neither income nor resource.
Recently, the Pennsylvania Department of Public Welfare (DPW) issued a policy clarification (PMN16745350) verifying the disregard treatment. Here is a link to the policy clarification:
The federal agency in charge of Medicaid (CMS) has also issued a policy statement on the issue which says:
“[t]ax refunds and advance payments are not to be counted as income when determining eligibility under Medicaid or CHIP for the recipient of the payment, or for any other individual. Therefore, in addition to not counting the refund or payment as income to the individual, any payment made is not countable as income when determining Medicaid or CHIP eligibility for a spouse or other family members. Tax refunds and advance payments may not be counted as income to someone else even if they are given to that person.”
The CMS' Informational Bulletin also addresses what happens when an applicant seeking Medicaid long-term care benefits gives away the tax refund or places it into a trust. According to the Bulletin, the law  
"effectively precludes applying penalties under section 1917(c) of the Social Security Act to individuals who, in applying for long term care benefits under the Medicaid program during the period in which tax refunds or advance payments are not countable either as income or resources . . . dispose of part or all of the refunds or advance payments in a manner that normally would be considered a transfer of assets for less than fair market value."
The CMS statement was issued in reference to a provision of prior law which was made permanent by the American Taxpayer Relief Act of 2012. So it should continue to be applicable today.  
A question remains: Does this disregard policy also apply to state income tax refunds, or only federal? The DPW policy clarification specifically refers only to “federal tax refunds.” The implication may be that state refunds can be counted. The policy clarification doesn’t say. And the CMS policy statement says the issue of the treatment of state income tax refunds is left to the states.  

Sunday, August 11, 2013

Surviving Domestic Partner has Equitable Subrogation Claim Against Estate

A case decided by the Pennsylvania Superior Court this past week illustrates the kind of complicated estate administration issues that can arise when a “domestic partner” dies. In Re Estate of Devoe, 2013 PA Super 228 (August 8, 2013). 

In 1998 Richard Devoe (Decedent) and his domestic partner, James Mooney, purchased a residence as joint tenants with right of survivorship. In 2008 Decedent took out a bank loan to finance his separate business activities. Mooney had no interest in the Decedent’s business activities. But Mooney did agree to allow the residence to be used as security for Decedent’s loan.
Decedent died in 2009 at age 43 in an accidental fall. He had no will. Under the Pennsylvania laws of intestacy (dying without a will) his brother and sister were named as Co-Administrators of his estate.
The estate delayed paying off the bank loan and the bank foreclosed on the residence which was now owned solely by Mooney. Under the threat of the foreclosure, Mooney sold the residence and paid off the bank loan. He then sought reimbursement from the decedent’s estate.
The trial court denied Mooney’s claim, but the Superior Court reverses. It holds that Mooney had an equitable subrogation claim that the lower court should have considered.   
Due to the Estate’s refusal to pay the bank loan, Mooney had a legal duty to pay it. “The law will not penalize a surety for good faith conduct that resulted in a party being completely and promptly paid.” 
Estate Planning: A Priority for Committed Unmarried Couples
While the court’s opinion does not mention it directly, I suspect that animosity between Decedent’s siblings who administered the estate and their brother’s domestic partner played some role in this litigation.  In my experience a level of antagonism is common in estates involving non-traditional couples.
This problem could have been avoided if the decedent had prepared for the possibility of his unexpected death by having a will. Among other things, the will could have named either Mooney or an objective third party to administer the estate. 
Unmarried couples in long-term committed relationships need to have wills and other estate planning documents in place.  Wills, powers of attorney, health care directives and other legal planning may be even more important for them than for married couples.

Friday, August 9, 2013

Governor to Privatize Pennsylvania Estate Recovery Collections

The Corbett Administration is moving to privatize the collection of estate recoveries from the estates of older Medical Assistance (Medicaid) recipients. 

What is Estate Recovery?  
Federal law (42 U.S.C.§ 1396p(b)) requires Pennsylvania to seek to be repaid (“recover”) for money spent by the Medicaid program to provide long term care services to persons age 55 and older. Recoverable services include nursing home care and in-home care provided under the Aging Waiver program, as well as certain other services. The State is required to try to collect the money from the estates of benefit recipients after their deaths.
“Estate Recovery” is the name given to this collection program. Estate Recovery does NOT create a debt owed by the decedent’s family and heirs, but rather creates a claim against the assets in the recipient’s estate. The State Medicaid agency (the Department of Public Welfare also known as “DPW” in Pennsylvania) has a claim against the estate and can enforce it in the same manner as other creditors of the estate.
Assets that were exempt for purposes of determining Medicaid eligibility (most notably the home) are no longer exempt after the death of the benefit recipient. This provides a ready source of assets against which the State can recover.
The maximum amount of the claim is the value of the decedent’s estate, or the cost of the Medicaid long-term care provided to the recipient after age 55, whichever is less. If the assets of the estate are insufficient to fully pay the Medicaid claim, the remainder of the claim is extinguished.  
Medicaid is jointly funded by the Federal and State Governments. Over half of the money collected by Estate Recovery goes to the Federal Government, not to the State. In the 2012 fiscal year Pennsylvania collected over $36 million in estate recoveries.
For more information on the operation of the Estate Recovery program in Pennsylvania see my earlier posting Medicaid Estate Recovery - A Medicaid Death Tax.  


Since its inception in 1994, the Pennsylvania Estate Recovery program has been administered by employees of DPW’s Division of Third Party Liability. Now, the Corbett administration is moving to hire a private contractor to administer the program.
The proposal to turn estate recovery collections over to the private sector was noted in the budget the Governor proposed in February of this year. It does not appear that Legislative approval is required. On July 18th, DPW published a solicitation for bids on the project.  See:  DPW is also seeking to privatize other functions of its Division of Third Party Liability, which handles other claims in addition to estate recoveries.     

The Department’s Bid Solicitation (Request for Proposal)

DPW’s Request for Proposal (RFP) states that purposes of the outsourcing are “to increase recoveries, provide timely statements of claim to liable third parties and personal representatives of the affected probate estates and enhance existing processes to ensure all liable third parties and all probate estates subject to recovery are being pursued.”
The Corbett Administration projects savings of $1,462,000 for the Department’s programs from the outsourcing. My reading of the Governor’s Proposed Executive Budget 2013-2014 is that $219,000 of savings are projected for the Medical Assistance Inpatient program (page E37.16) and $1,243,000 for the Income Maintenance program (page E37.23).
A concerning aspect of the outsourcing is that it will be a contingency fee contract. The RFP states that bidders must provide their proposed estate recovery contingency fee. That fee is to be inclusive of all costs of the costs of performing the services and meeting the Department’s requirements.
Paying a private contractor a percentage of the funds recovered raises the potential for over-aggressive collection efforts. It is not clear how the Department intends to monitor the contractor to limit abusive collection practices. Query: will the Fair Debt Collection Practices Act apply to the actions of the selected contractor?
The selected contractor will refer claims related to estate recovery and annuities to attorneys approved by DPW’s Office of General Counsel. Those legal fees will be paid by the contractor. The  attorneys will litigate claims that DPW has determined are cost effective to pursue in cases where:
a)   The amount of the Department’s claim is contested;
b)   The personal representative has claimed excessive fees or has proposed an improper distribution;
c)   The personal representative or other responsible party has not acted to pay the Department’s claim in a timely manner;
d)   It is determined that an overpayment exists and the Office of Inspector General has declined to pursue it due to the recipient’s death.   

My Two-Cents

I have to admit that I am no fan of the estate recovery program. I know that people who need Medicaid funded long-term care sometimes decline such services for fear that their home will be lost to the government. Without Medicaid long-term care benefits, they may require repeated hospitalizations, may not be able to get proper medications, and may be unable to take care of themselves or their homes. They and their families are faced with very difficult choices.
If they do accept Medicaid-funded care seniors are often depressed by the prospect of the eventual loss of their home to estate recovery. Some are ashamed that their inability to care for themselves in the last years of an otherwise productive life means that their children will lose the right to inherit the home. Heirs who were depending on, and may feel they have earned, their inheritance are surprised by estate recovery, and angry that the State is taking a home that is so financially and emotionally important to them.
And it has always troubled me that the program discriminates against seniors since it only applies to the estates persons who were age 55 when they received long-term care.
So, I have always felt that estate recovery was a nasty business. The State is forced to become a collection agency primarily for the federal government.
But putting those feelings aside, I have to admit that in my dealings the DPW estate recovery staff since 1994 I have found them to be knowledgeable, professional and consistent. It seems to me that this is an area where DPW has done a good job of performing the unpleasant task of collecting money for the government from small estates.
I fear that a private collection firm, especially one operating on a contingent fee basis, will hire aggressive debt collectors who are less knowledgeable, professional, and consistent than DPW employees. I fear that the profit motive may lead to abuses against families who are ill prepared to defend themselves, and may be still recovering from the lengthy disability and death of their father or mother. Estate recovery collections may indeed increase if profit driven inappropriate debt collection is allowed.
I hope my worries are ill-founded. Time will tell. It looks like privatization is about to happen. Still, it couldn’t hurt if concerned seniors and their families expressed that concern to their legislative representatives.
Overall, my view is that DPW’s internal administration of the estate recovery program isn’t broken. But a lot of other functions of state government are. The Governor should look elsewhere for something to fix.