Governments at all levels are making applying for benefits of all kinds more accessible and easier than ever. In many cases, this facility is useful for those who need benefits. However, governments generally do not inform applicants about the dangers of submitting an incorrect application. The following are examples of how bad timing in particular circumstances can be disastrous for unsuspecting families.
Medicaid disaster
Let’s begin to illustrate such a disaster with the story of Bill and Martha. This type of scenario repeats itself over and over again every month throughout the state of Florida.
Bill and Martha had advanced in age. Now, in her late 70’s, Martha’s health was failing and a recent stroke was the final event that dictated that a nursing home would be required for the rest of her life. Bill and Martha worked hard throughout their lives, saved and invested wisely, educated their children, paid their taxes, and were upstanding and contributing members of society. As is often the case in life, it created challenges for Bill and Martha’s two children. The last economic downturn resulted in job losses for the children’s families and the new jobs, once found, were much lower paying. This difficulty created the need for the children to ask Bill and Martha for financial help. Loving their children and grandchildren, Bill and Martha agreed to give each family $50,000, which together represented nearly half of Bill and Martha’s savings and investments. At the time it was not a concern for Bill and Martha because they were living on less than their pension and Social Security income and only had the money saved for rainy days like the ones their children were now experiencing. Everyone involved was happy with the outcome of the giveaways that occurred 60 months ago.
Now that Martha was leaving rehab nursing home care and entering long-term care in a nursing home, the reality of massive spending to come was setting in. At nearly $9,000 a month, the need for financial assistance from the government was undeniable. The nursing home social worker agreed to apply for the family’s Medicaid long-term care benefits as a courtesy. Bill was relieved and grateful for the help. The social worker inquired about current assets and income, collected the appropriate documents, including bank statements for the last three months, and to all appearances, Martha would qualify for benefits. Unfortunately, the caseworker didn’t ask about past gifts and that’s where the problems started.
About 60 days passed and Medicaid was ready to approve Martha’s application. However, the last step in the approval process is to run an “AVS” (asset verification search). This search spans a number of databases and information access points, including banks, credit unions, brokerage houses, insurance companies, public records, etc. Find the last 60 months of balances prior to the date of the request. In the case of Bill and Martha, the AVS system generated an asset “hit” based on a $100,000 reduction in an annuity balance (the two $50,000 gifts) within the five years prior to the application date. The Medicaid system generated a Notice of Action (NOCA) requesting information about what happened to the annuity assets. Unfortunately, the response disqualified Martha from benefits for 12.5 months from the date of 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 date of the application. This expense was approximately $18,000 plus Bill would have needed to hire an attorney and possibly a Medicaid application service to fix the problem which would have likely cost another $10,000.
Had Bill instead sought expert advice, he could simply have waited a month (which would have made the donation 61 months prior to application), paid the nursing home approximately $9,000, and then asked the same social worker to apply for benefits that have been approved. To make matters worse, many lawyers don’t know how to fix these kinds of problems since the kids can’t pay the cash back. 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 probably think so!
VA disaster
Veterans Administration benefits for older veterans who need 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 requested in advance. Unfortunately, many veterans, who could qualify if expenses were handled properly, fail to get approved due to missteps.
Let’s illustrate such a disaster using Joe as an example. Joe is a Korean War veteran who meets all the necessary criteria for VA relief and aid benefits, except proof of expenses. Joe’s legal representative, Fred, misunderstood the program and filled out the application completely, except for proof of expenses. Fred’s plan for Joe was to apply for and obtain assisted living benefits and then move Joe from his private home to assisted living using VA Aid and Aid 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 been receiving assisted living care for over a year and received the benefit to reimburse his account for expenses. Unfortunately, given this application scenario, no benefit was available because no health care expense was incurred. In other words, Joe delayed the care he needed in exchange for possible benefits that he is now unable to receive due to delayed expenses and care. While this scenario may not have been a financial disaster, it was a health care disaster.
Resume
The purpose of this article is not to provide the technical aspects of any government program. Rather, it is to point out that the timing of an application can be just as important as making the application. While most enforcement professionals and attorneys are biased, they have seen these scenarios and dozens more needlessly creating real hardship for families. Can anyone apply for benefits for free? Absolutely! It’s the best that you can do? Probably not. Most attorneys and application services will be honest about whether or not you need professional help. Schedule an appointment, bring the facts to the appointment, and let someone experienced advise you accordingly.
Please note that in the state of Florida, an attorney must be involved in any Medicaid application that involves asset protection strategies or the recommendation or creation of legal documents.