June 2, 2011

For those of us who do not regularly practice elder law and Medicaid planning, there was a significant change to the State Medicaid policy, referred to as the Bridges Eligibility Manual, or the BEM’s.  The rules are all easily accessible on-line at www.mich.gov or simply google search Bridges Eligibility Manual and the proper site will be at the top.

There were two major changes to the BEMs which became effective April 1, 2011 that effect the inaccessibility of jointly owned property and the ability to fund a pooled special needs trust for individuals over age 65.  Another major proposed policy was recently announced which is anticipated to become effective July 1, 2011 which effectively incorporates estate recovery into the Medicaid program.  These changes will greatly impact the need for even general estate planners to become familiar with elder law planning techniques to prevent an unnecessary and devastating result for clients and their families.

The rules governing jointly owned property is under BEM 400-Assets.  Formerly, a jointly owned parcel of real estate was rendered “unavailable” and therefore not counted  as a resource as long as the joint owners were not added within the 60 month look-back period and were unwilling to sell their share.  The most common applicability to this rule was when mom or dad is applying for long term care Medicaid assistance.  This rule prevented the family cottage up north or condo down south from being a countable asset or forcing the sale of the property.

However, as of April 1, 2011 the new rule governing joint property is as follows:

“BEM 400 9 of 42 ASSETS
BRIDGES ELIGIBILITY MANUAL STATE OF MICHIGAN
DEPARTMENT OF HUMAN SERVICES

An asset is unavailable if an owner cannot sell or spend his share of an asset:

• Without another owner’s consent, and
• The other owner is not in the asset group, and
• The other owner refuses consent.

Exception: In SSI-related MA, when ownership is shared by an SSI related child and his parent(s) and parental asset deeming applies, refusal to sell by either the child or the parent(s) does not make an asset unavailable.

Exception: Jointly owned real property is only excludable if it creates a hardship for the other owners; see hardship in this item.”

The problem is proving a hardship exists for the remaining owners.  It is akin to seeing a unicorn.

The second major change in the BEMs which became effective April 1, 2011 is particularly troublesome to my practice as it effects the ability for disabled individuals over age 65 to fund a pooled trust.

Historically, Michigan was very liberal in allowing pooled trust funding.  However, that general policy seemed to change in late 2008 when a worker in the Medicaid Policy Unit began advising eligibility specialists to assess a divestment penalty for the funding of the trust.  The penalty determinations were infrequent and generally successful on appeal.

Perhaps in response to the many successes at the ALJ level, DHS issued a policy change effective April 1, 2011 as follows:

“The trust contains the resources of a person who is disabled (not blind), and under age 65 per BEM 260. See Transfers to an Exception B trust in this item.”

There are several problems with the new policy.  First, the state policy is supposed to follow and implement the federal policy in 42USC§1396(p)(d)(4)(C), which does not reference an age limit for individuals funding a pooled trust.  Further, BEM 260 defines disability and does not contain a reference to age either.

In response, the Elder Law and Disability Rights Section (ELDRS) of the State Bar is working with legislators to develop a statute to allow funding into a pooled trust without penalty and working with policy makers, lobbyists and families in an attempt to remedy this policy.  The ELDRS section is fresh from a victory regarding enforcement of PEME (pre-eligibility medical  eligibility policy and may take up this issue next.

Other states are facing the same issues.  The State of Maryland will implement their pooled trust act which will be effective October 1st of this year.  The bill is simple and to the point, and allows execution and funding of a pooled trust regardless of age.  This issue was also successfully litigated in Wisconsin.  A federal district court in North Dakota also weighed in on this issue, but it was not directly on point as the issue in that case was really centered on the ability of the non-profit trustee to retain trust assets after death.

Finally, the long awaited and highly dreaded estate recovery act has come to Michigan in the form of BEM 400.  The proposed BEM was recently issued as indicated below, comments are to be forwarded to DHS no later than June 6, 2011 and will become effective July 1, 2011 as follows:

“BEM 400 7 of 42 ASSETS
BRIDGES ELIGIBILITY MANUAL STATE OF MICHIGAN
DEPARTMENT OF HUMAN SERVICES
ESTATE
RECOVERY MA ONLY


The federal government requires Medicaid to recover money that it paid for services from the estates of Medicaid beneficiaries who have died. Medicaid will only recover the amount Medicaid paid for a beneficiary. This is estate recovery. The state will not seek recovery of certain Medicare cost-sharing benefits.

What is an estate?

An estate includes all property and assets that pass through probate court.

Example: homes, cars, insurance money and bank accounts.

Who is subject to estate recovery?

Medicaid beneficiaries who are age 55 or older.

Are there exceptions to estate recovery?

The state may decide not to recover money if it creates an “Undue Hardship” or if any of the following people lawfully live in the beneficiary’s home

• Beneficiary’s spouse.

• Beneficiary’s child who is under the age of 21, blind, or permanently disabled.

• Beneficiary’s sibling who has an equity interest in the home and was living in the home for at least 1 year immediately before the beneficiary’s death.

• A survivor who:

•• was living in the beneficiary’s home for at least 2 years immediately before the beneficiary went into a medical facility: and

•• provided care so the beneficiary could stay at home during that period.

What is an undue hardship?

An undue hardship exists when:

• The estate is the sole source of income for the survivors, such as a family farm or business; or

• The estate is a home of modest value; or

BEM 400 8 of 42 ASSETS
BRIDGES ELIGIBILITY MANUAL STATE OF MICHIGAN
DEPARTMENT OF HUMAN SERVICES

• A survivor would become or remain eligible for Medicaid if recovery occurred.

How does estate recovery work?

When a Medicaid beneficiary age 55 or older dies, the state sends an estate recovery notice to the estate representative or heirs. The estate recovery notice tells them:

• the state plans to file a claim;

• how much the state will claim;

• how to apply for an undue hardship waiver.

If no exceptions apply, then the state will file a claim with the estate.

How to apply for an undue hardship waiver?

An Undue Hardship application must be completed. Applications are available from the following sources:

• online at www.michigan.gov/estaterecovery

• by email at miestaterecovery@hms.com

• by sending a letter to P.O. Box XXXX.

The completed application must be received no later than 60 days from the date of the estate recovery notice. Send copies of any documents the notice specified. The state will determine if a waiver is warranted.”

This new rule will certainly prompt administrative changes in probate court filings and DHS will likely be an interested party on probate estates for individuals over age 55.  Interestingly, this new rule may in fact revitalize a sagging estate planning practice as estate recovery can be completely avoided through a well-crafted, but simple plan. Proper drafting of Lady Bird deeds and other historically “elder” law techniques will need to be mastered by even the general practitioner in order to prevent the State of Michigan from becoming the unintended primary beneficiary of an estate.

The governor’s budget has assessed approximately Ten Million Dollars in potential revenue for the state.  While the estate recovery bill was being debated in the state legislature, there was varying statistical analyses of state revenue generate through estate recovery.  All states except Michigan have some form of estate recovery.  In our discussions at the Elder Law council and probate council meetings, after state employees and overhead is paid for to collect these assets, there is generally a loss to the state.  The state may end up being the largest homeowner in Michigan.

If you wish to submit comments to DHS regarding the implementation of the policy, please forward your comments to

Attn: Lisa Trumbell
MDCH/MSA
PO Box 30479
Lansing, Michigan 48909-7979
Or
E-mail: trumbelll@michigan.gov


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