February 7, 2005


As with the last newsletter, I’ve been waiting to report the latest developments on the estate recovery front … and TODAY we received the news!  As of March 1, 2005 estate recovery will be a reality in Texas.  So I’m immediately sending this letter so you will be up to date. 

There are other developments to report on the Texas Medicaid front and I’ll include them in this letter.  And I hope you will find the other information included to be both informative and useful to you, your loved ones or your clients. 


Estate Recovery


Why is estate recovery such a big issue and why are we taking time to write to you about it in these newsletters?  For most Medicaid applicants, the most valuable property owned is usually their homestead.  This is because they are usually entitled to keep their homestead and sometimes an automobile when they qualify for Medicaid even though they must effectively be impoverished in all other respects.  The estate recovery rules enable the State of Texas to make a claim against the assets in the deceased Medicaid recipient’s estate.  The claim will be for all the Medicaid benefits paid on behalf of the deceased recipient up to the total value of the estate, including the homestead.  So Medicaid recipients and their families have been concerned about what will happen to their homestead and automobile, etc. after the new rules become effective. 


As I wrote last time, we fully expected the new estate recovery rules to be in place and effective by September 1.  However, this date was pushed back several times as Austin and Washington worked out the details.  Today a spokesman for the Health and Human Services Commission (HHSC) told one of the leaders of the Texas Chapter of the National Academy of Elder Law Attorneys that the start-up date for estate recovery will definitely be March 1, 2005.  The final rules are expected to be published in the February 18 edition of the Texas Register.  I expect they will also be published on the HHSC web site. 

While I have not seen these final rules, we understand that they will include a “grandfathering” provision.  Anyone who files an initial application for Medicaid before March 1, 2005, and the application results in approval for covered services, will be “grandfathered out” of estate recovery.  But anyone who files an initial application on or after March 1, 2005, resulting in approval for covered services, will be subject to estate recovery. 


Please note that anyone who is currently receiving Medicaid long-term-care benefits will not be subject to estate recovery in the future.  That should be a great relief to many people who have loved ones in nursing homes as their estates will not be claimed by the State of Texas to repay Medicaid benefits, both those paid on their behalf in the past and those paid from this point on.

When the final estate recovery rules are promulgated, we will update our commentary on our estate recovery web page http://www.ensignlaw.com/estate_recovery.htm and provide a link to the summary of the new rules and the final rules when they are posted. 


In the alphabet soup of Texas government, estate recovery will be a HHSC program but it will be run by DADS.  That means the Health And Human Services Commission will set the final rules, policies and procedures for the estate recovery program while the Department of Aging and Disability Services will be in charge of estate recovery operations, administration and claims.


Impact of Estate Recovery


In addition to the concern about the loss of the homestead, my colleagues in the Texas Chapter of the National Academy of Elder Law Attorneys are concerned about the serious risk of loss of the family farm or ranch in some cases.  While the current proposed rules would allow an undue hardship waiver of claims against the homestead and the family farm or ranch, the qualifications for such undue hardship waiver are onerous and not likely to be met by many families.  If this proves to be the case, virtually all farms or ranches belonging to Medicaid beneficiaries would be subject to estate recovery.  We can expect an uproar from those who lose their family farm or ranch that otherwise would have been passed from generation to generation.


So with estate recovery starting in Texas, those who were seeking qualification for Medicaid benefits will have more challenges to face, not in the actual application process but in planning to protect assets that would be in their estate at death from the claims of the State of Texas.  It is likely that many who qualify for Medicaid after March 1 will not have properly planned prior to their death.  As a result, their family will probably need legal counsel to guide them through the process of opposing the claims of the State of Texas against their loved one’s estate.


So the scope of our services will necessarily expand.  First, during the Medicaid application and qualification process, we will develop and implement specific strategies for protecting the estate assets so they will not be subject to estate recovery after the death of the Medicaid recipient.  Such strategies will be dependent upon the particular facts and circumstances of each case in order to maximize the benefit of our counsel.  Second, if proper planning was not done before the death of the Medicaid recipient, we may be engaged to assist the family through the estate recovery claim process and the estate administration in an attempt to minimize the impact of the State’s claim.  The likelihood of success will be uncertain but we can make the State properly document and backup its claim with sufficient evidence before the probate court will allow it.


New Numbers for 2005


At the beginning of each year the U.S. Government’s Center for Medicare & Medicaid Services updates the eligibility amounts.  Here are some of the most important for Texas.

On the income side of qualification, the maximum “countable” income – the cap – for Medicaid qualification by an individual has increased from $1,692 per month to $1,737.  In some circumstances, some or all of the institutionalized spouse's income may be paid to the spouse who is not institutionalized, the “community spouse.”  This minimum monthly maintenance needs allowance has increased from $2,319 per month to $2,377.50. 


On the resources side of qualification, some of the resources of the community spouse can be protected for the benefit of that spouse.  This is called the protected resource allowance (PRA).  The maximum PRA in Texas has increased from $92,760 to $95,100.  In some restricted cases, the PRA may be increased (expanded) above this maximum amount if the non-countable resource income of both spouses was below the minimum monthly maintenance needs allowance above.  The minimum protected resource amount has risen from $18,552 to $19,020. 


The actual PRA is calculated by dividing the couple's countable resources at the snapshot date (the first day of the first month in which the institutionalized spouse began to receive at least 30 days of continuous skilled care) by 2.  The result is the PRA unless it is above the maximum PRA or below the minimum PRA.  Thus the community spouse is allowed to keep one half of the couple's countable resources if that amount is less than the maximum (or expanded) PRA.  The remaining resources will have to be “spent down” before the institutionalized spouse will be eligible for Medicaid.  But precisely how that “spend down” is accomplished is important to maximize the benefit of asset preservation to both the community spouse and the remaining family members.  The proper design and implementation of the “spend down” process is one reason why engaging a qualified Elder Law attorney is important in Medicaid planning. 


The average cost of nursing home care remains at $2,908.  This is the amount that is used to determine if gifts are penalized and for how long.  This amount may be increased later in 2005 as it does not have to be effective at January 1.


Texas Annuity Rules Follow-up


As I reported in the last newsletter, one of the last acts of the lame-duck Texas Department of Human Services Board was to change the annuity rule to substantially tighten the restriction on the use of annuities to obtain Medicaid eligibility. 


Since I reported this development, I have become more acutely aware of the serious problems many seniors are exposing themselves to when they purchase annuities.  Often they think they will be able to qualify for Medicaid if they just buy this annuity.  Sadly and all too often, this is precisely the sales pitch made to innocent seniors by unscrupulous annuity salespersons.  These predators often don't know the law or don't care about the consequences to the unknowing senior once the sale is made and the high commission has been earned.  To be sure, there are many capable, competent, and honest investment advisers who sell annuities.  My caution is not against them but against those who take advantage of the seniors. 


If you have a loved one who is considering the purchase of an annuity ostensibly to receive a higher level of income, please assist them in evaluating these investments taking into account the potential penalties for early withdrawal of the funds from the annuity.  Those penalties can be devastating to the investment principal and the return on investment.  My colleagues have told me of horror stories about seniors in their eighties and nineties who have been sold annuities that consumed their entire investment portfolio with penalties of 15% for the first five years and declining penalties for perhaps 15 years.  And such annuities may not have clauses that permit early withdrawal when the person enters a nursing home and needs Medicaid qualification. 


So for seniors who are considering annuity investments, that old Latin term I learned many years ago - “Caveat Emptor” - Buyer Beware - is still applicable today and should be heeded by the seniors and their families.  Careful due diligence must be applied to any such investment. 


Avoiding Guardianship Proceedings


When a person lacks capacity to make decisions for himself or herself, the law provides a mechanism for selection and appointment of a surrogate, one who can act in the place of another.  In Texas, a person appointed by a court to handle financial matters for an incapacitated adult (the ward) is called the guardian of the estate.  And the person appointed to make medical, placement and other personal decisions is called the guardian of the person.  The court may decide to appoint only one or the other with different persons.  Or the court may appoint the same person to both positions.  The court will require annual or more frequent accountings and status reports. And some major decisions may need to be submitted to the court for approval in advance.


The cost, the continuing court oversight and the full public disclosure in all the guardianship proceedings may seem overwhelming to both the ward and the guardian(s).  But the system operates as if every participant might be acting inappropriately in order to minimize any such improper acts.  If they knew the cost and public nature of the guardianship process, I think we would agree that most individuals who are planning for the possibility of their own incapacity would prefer to entirely avoid the involvement of the legal system if that is possible.


Fortunately for them, there are often good alternatives to guardianship.  Well-drafted Durable Powers of Attorney for financial affairs and Medical Powers of Attorney for medical decision making can reduce the need for later court proceedings.  However, if the wrong person is given these powers, there may be a significant risk of harm to the incapacitated person.  In the wrong hands, powers of attorney can literally be licenses to steal.  Sadly, even trusted family members may abuse the authority given to them.  A power of attorney also requires that the signer be competent at the time.  So if incapacity has already sufficiently set in, it will be too late to use powers of attorney to avoid court involvement.  That is why we encourage anyone whose loved one is beginning to show the initial signs or senility, dementia or Alzheimer's disease to take immediate action to get proper and well-drafted powers of attorney in place before they have lost the legal capacity to understand and sign them. 


Another legal tool some people use to plan for their own incapacity is a living trust.  This can be a good mechanism for orderly transition of financial management, at least, to children or other trusted relatives when incapacity sets in.  As with powers of attorney, without some third-party oversight, such arrangements may be risky.  There are ways to increase the level of oversight by third-parties to reduce the risk.  Whether or not these are implemented, the benefits to a person about to be incapacitated and to their loved ones as a whole may outweigh the risks.


While Texas permits some family members to make some health care decisions for an incapacitated patient without a Medical Power of Attorney or a guardian, those situations are difficult at best.  The proper creation and use of a well-drafted Medical Power of Attorney and Advance Directive to Physicians (formerly a Living Will) will greatly increase the likelihood that the medical decisions you make in advance and the wishes you communicate to your care givers will be carried out when you are no longer able to communicate them directly.


When we are consulted about the possible need for a guardianship, our first efforts are almost always focused on finding less-expensive and less-intrusive alternatives.  Sometimes, though, the best (or only) choice is appropriate court action to protect the incapacitated person and their property for their future need.  If such cases do arise in your family or your clients, we can assist you, your loved ones or your clients in this important process.  


In helping seniors prepare for their future that may include incapacity and the Medicaid qualification planning process, we find the combination of a comprehensive, detailed power of attorney coupled with the short power of attorney created by the Texas Legislature is an excellent tool.  As our older clients may never be able to understand and sign new powers of attorney in the future, we believe it is vital to get the best ones in place for them presently.  This is also true for their medical documents. 

If the need for Medicaid qualification is likely in the future, the use of trusts, including the living trust, must be carefully weighed.  There can be substantial disadvantages to having a living trust in such circumstances.  So we do not believe that a living trust is necessarily the best estate planning tool for seniors.  It may be right for some but not for others.  In the planning process we explore these possibilities with our clients.


Elder Abuse and Mandatory Reporting


In the last newsletter, I wrote about the serious, and often tragic, problem of elder abuse, neglect and exploitation.  I described the Texas law that mandates reporting of such abuse to the State with a possible penalty of jail time for failure to report.  As our population continues to age, the incidence of abuse, neglect and exploitation of elders continues to escalate, particularly abuse perpetrated by children, grand-children or other relatives.  And the downturn in economic conditions for many families has motivated otherwise loving children, grand-children or relatives to take advantage of their elderly loved ones.  The Texas Adult Protective Services caseworkers are overwhelmed and overworked trying to deal with all complaints they receive on a daily basis.


Sadly, the tragic reality of elder abuse has entered my office on several occasions in the last few months.  The stories I have heard are heart-wrenching.  The effects on the elderly victims, both financially and psychologically, can be devastating, especially when a cherished loved one has betrayed their trust.  The potential consequences to those who perpetrate such abuse, neglect or exploitation can be severe including prison time.  Sometimes family counseling and mediation in the legal context can bring the parties to reality and reconciliation that may prevent the direst of consequences to the perpetrators.  But reporting to Adult Protective Services is still required.  And regardless of how this all plays out, there are likely to be enduring consequences and psychological scarring that may devastate prior loving relationships within the family. 


I am revisiting and emphasizing this topic so there will be no doubt about how one’s suspicion or knowledge of elder abuse, neglect or exploitation is to be handled under Texas law.  If anyone believes a person 65 years or older or an adult with disabilities has been abused or mistreated, physically, mentally or financially, they are required to report it to the Texas Department of Family and Protective Services or to any law enforcement agency.  If there has been or is likely to be physical abuse and/or the possibility of immediate physical harm to the victim, the police or sheriff should be called.  One may also file a report using https://www.txabusehotline.org  Any person making a report is immune from civil or criminal liability, and the name of that person is kept confidential.  Failure to report abuse, neglect and exploitation is a crime in Texas that can lead to time in jail!  There are NO exemptions for family members, clergy, doctors, nurses, accountants, and even lawyers.  So, would you please do the right thing if you become aware of elder abuse, neglect or exploitation?  Making a report may save a life. 


While Adult Protective Services is empowered to investigate such situations, they do not have the ability or authority to reclaim assets that may have been taken from the elder by exploitation.  If the value of the property taken is sufficient to justify legal action, consultation with a qualified attorney is warranted and recommended to explore the possibilities of retrieving those assets. 


Continuing Education, Speaking and Teaching


Two weeks ago I attended the Annual UnProgram of the National Academy of Elder Law Attorneys held in Houston.  The day before the UnProgram, Joy (my wife and legal assistant) and I attended a day-long private seminar designed to enhance and maximize the benefits our clients receive from our firm as we assist them with Elder Law and Estate Planning issues.  We both returned with a renewed commitment to deliver quality service to every client efficiently and effectively.


The next two days were well spent in one-on-one and small-group discussions with my NAELA colleagues from across the country.  We shared our concerns and information to enhance our technical legal skills such as estate recovery strategies, to consider the future of Medicaid and long-term care for our aging population both nationally and in Texas, and to develop more practical ideas about delivering quality elder-law services under changing circumstances. 


The Amarillo Area Agency on Aging is a wonderful resource for seniors who need assistance with the issues of life that arise in the course of aging.  I am a member of the Senior Ambassadors Coalition that is an adjunct and support arm for the Amarillo Area Agency on Aging.  We meet monthly with other professionals who are serving seniors in the community to establish working relationships that enhance our abilities to serve our aging population and their families. 


The Amarillo Area Agency on Aging staff invited me to teach two sessions of their Volunteer Benefits Counselor Training Course.  One session was about Advance Directives (the health care documents known as the Advance Directive to Physicians, Medical Power of Attorney and Do Not Resuscitate Order) as these volunteers are authorized with proper training and testing to assist the clients of the Agency in the completion of such documents.  The second session was about Medicaid qualification in relation to living trust and Miller trusts.  We also taught them about how to be aware of and avoid the annuity scams and predatory salespersons.


The Amarillo Chapter of the National Association of Legal Secretaries afforded me the opportunity to speak to the top legal secretaries in Amarillo about Elder Law and Medicaid.  The Canyon Rotary club has extended an invitation to speak in March.  The topic is pending. 


If you are a member of a group that would be interested in a presentation on any topic regarding Estate Planning or Elder Law, please call or ask your Program Chairman to call me. 


Whenever we may be of service with any elder law or estate planning matter pertaining to you, your family, your friends or clients, please don’t hesitate to call for an appointment to discuss it.  We sincerely appreciate your referrals and will do our best to serve well all whom you refer.


Before we know it, Spring will be here, renewing and revitalizing our beautiful country.  We hope this will be a time of renewal and revitalizing of your life and all that is precious to you.