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Bar News - March 18, 2015

Elder, Estate Planning & Probate Law: OPINION: Captain of the Lifeboat: Medicaid and Nursing Homes in NH


I recently read a concerning article in the Concord Monitor with the headline, “State officials to move ahead with plan to slice $7 million from nursing homes.” The article detailed the significant budget hole the NH Department of Health and Human Services is trying to fill before the end of the fiscal year, in part by cutting nursing home Medicaid reimbursement rates. Nursing home administrators “worry they will be hit hard.” Experience tells me they are probably angry, upset, and panicked.

As a board-certified elder law attorney, I have been down in the trenches on nursing home and Medicaid issues for years. I have seen many changes and some disturbing trends. I thought it might be helpful to take a look back to see where we have been, where we are, and where we might be headed. These long-term care issues are universal to all of us, without regard to socioeconomic class. I firmly believe you cannot be a good estate planner without thinking about how this applies to every client with whom you work.

I remember well what this system was like 15 years ago, when I first started working with families facing crisis situations. Let me give you an example, an amalgam of real people. Fifteen years ago I might have been helping the spouse of an 80 year-old gentleman, who had retired at age 65. Working backwards, that fellow was born around 1920. He would have been part of “the greatest generation.” He was a kid during the depression, knew hardship from first-hand experience, and served in the military during WWII. He married right after the war, had children, bought a home, and worked to support his family while his wife raised the kids. He paid off his mortgage, lived within his means, saved, and managed to make it to 80 with a home that was owned outright, and something like $430,000 in stocks, bonds, and other savings. Although his wife’s income was minimal, he had good Social Security income, plus a healthy pension from nearly 35 years with the same large employer.

Retirement was good... until his stroke. His wife of five decades is now in tears as her husband is severely impaired, in a nursing home, with an uncertain future. His Medicare and supplemental health insurance have run out. She is scared she will lose her home.

Fifteen years ago, families like this had options. Yes, the stroke and nursing home admission were emotionally devastating, but this couple was not going to be wiped out financially. Back then, the monthly nursing home bill might have been $4,500 a month. Maybe the Social Security and pension income only came to $3,200. They had a shortfall each month, but they could manage, at least for a while.

I remember many difficult discussions with these families about the reality of the uncertain medical prognosis and the financial impact of the care. Often, my advice was “let’s wait a year to see how he does, then reassess.” Maybe at the end of that year, we would wait another six months if the husband was not doing well, or we were coming into the difficult winter illness season. If the husband stabilized, and a year was going to turn into two, three, or more, we would begin to consider Medicaid. Back then, we only had to supply a year of records, and the asset transfer penalty rules were much less severe.

Fast forward to today. The legal and financial landscape is dramatically different. While I still meet 80-year-olds with long-term marriages, decent pension income, and healthy savings, the monthly cost of nursing home care is through the roof. Many nursing home residents pay a minimum of $10,000 each month.

As the cost of care has increased, the number of families who can privately pay for any length of time has dropped to near zero. Three years of care at these rates will exhaust nearly all resources for most couples and leave a community spouse in a desperate financial situation for the rest of her life, even after her ill spouse is gone.

This economic reality drives families into the Medicaid system sooner than ever before. Even though it still often makes sense to wait and see how a nursing home resident does medically, families are in panic mode. Conservative advice that they pay $60,000 or more to wait six months before becoming proactive is shocking and upsetting. Most families now see Medicaid benefits as a goal they must obtain, as soon as possible.

Today, families are required to provide every detail of the last five years of their financial lives, in black and white: every statement, every cancelled check, the source of every deposit. Those records are then heavily scrutinized. Transfer penalties are regularly imposed, often with disastrous consequences for the system, including additional delays and costs of appeals, while nursing facilities bear the burden of providing care without receiving any payment at all for sometimes lengthy periods of time. The facilities then have to make up the costs, private pay rates are increased, and the vicious cycle continues.

I regularly see personal estate planning clients in their late 50s and early 60s who, despite great incomes, have lived beyond their means. There is a demographic tidal wave of boomers hitting retirement in the next several years. Many are totally unprepared for the economic reality they will face. They will have no choice but to become dependent on others for the cost of their care as the inevitable medical situations arise.

As a personal planning attorney, I try to warn as many clients about long-term care issues as I possibly can so they can be proactive. As an elder law attorney, assisting families in crisis through a broken and dysfunctional nursing home Medicaid system, I try to minimize the damage. However, even a skilled estate planning/elder law attorney can only do so much, like the captain of a lifeboat on a turbulent sea. Keeping the boat upright is about all you can do these days.

David R. Craig

David R. Craig is the principal of a small firm trusts & estates practice in New Boston and a certified elder law attorney.

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