Author(s): Tara L. Velting

Fall 2007

From the Estate Planning & Settlement Group

PERSONAL PLANNING

Meet Tara L. Velting:

Tara L. Velting is an associate in the firm’s Grand Rapids office, serving West Michigan. Her areas of practice include estate planning and settlement, probate, wills and trusts, Medicaid planning, and special needs planning. Previously, she was in private practice.

Ms. Velting is a member of the National Academy of Elder Law Attorneys, Michigan Bar Association and the Grand Rapids Bar Association. She earned her J.D. from George Mason University School of Law in Arlington, Virginia in 2004. Her B.A. is in Political Science and History from Hillsdale College.

You can reach Ms. Velting at 616-742-5500 or by email: tvelting@garanlucow.com.

Long Term Care Partnership Programs and Estate Recovery By: Tara L. Velting

On February 8, 2006, President Bush signed the Deficit Reduction Act of 2005 (“DRA”). Michigan has since dragged its feet on implementing the new federal regulations. But not for long. The Department of Human Services published its policy changes with an effective date of July 1, 2007. Unfortunately, it failed to address the need for a Long-Term Care Partnership Program.

The Long-Term Care Partnership Program (“LTCPP”) is part of the DRA. It gives states the option of implementing a LTCPP. It provides an incentive for people to purchase long-term care insurance by allowing those people to protect the amount of their policy when applying for Medicaid. It also allows people to protect their estates from estate recovery in an amount equal to the amount of insurance purchased. For example, a person who buys a $100,000 long-term care insurance policy and uses it, can then apply for Medicaid while keeping an extra $100,000 (above the $2,000 asset limit), instead of having to spend that money down or pay privately for his care. This total of $102,000 is exempt not only for purposes of determining eligibility, but also exempt from estate recovery. This is a significant change from previous law.

When Congress passed the Omnibus Budget Reconciliation act of 1993 (OBRA ’93), it mandated Medicaid estate recovery. In other words, if you used state money to pay for your nursing home stay, the state could recover its’ costs against your estate. Only a handful of states were excepted from this requirement. Thus, the LTCPP failed to produce great results because even though the amount of your long-term care insurance provided you assets that were exempt during the eligibility process, they were not exempt for purposes of estate recovery. The DRA, however, provides that the amount of your long-term care insurance is exempt for both purposes – eligibility and estate recovery. That is real incentive for people to buy long-term care insurance because they have protected the equivalent amount of the policy for themselves and their heirs.

The question for Michigan residents is why have we failed to adopt a LTCPP? The state’s economy is lagging behind most other states. Michigan is the only state that

has not implemented estate recovery in compliance with OBRA ‘93. Currently, legislation has been introduced that would mandate estate recovery. It is no surprise the state needs money and the state’s expenditures on long-term care continues to increase. From 1991 to 2001, Michigan saw an average annual growth increase in Medicaid spending of 10%. In 2004, Michigan ranked 7th among all states on Medicaid per capita spending on nursing facilities.

There is a better way to lower long-term care costs for the state. Implementing a LTCPP would give the residents of Michigan an incentive to purchase long-term care insurance by ensuring that the amount of the policy is the amount that would be protected when applying for eligibility, as well as for purposes of estate recovery, which may arrive in Michigan soon.

An Amendment to the Social Welfare Act, Act 280 of 2939, became effective on January 10 of this year. The Amendment directs the Department of Community Health, the Office of Financial and Insurance Services and the Department of Human Services to establish a LTCPP. This is good news, but the state has yet to act upon it.

The Center for Health Care Strategies, Inc. (CHCS), a non-profit organization, recently announced that Michigan is one of 10 states it selected to receive a grant and participate in the Long-Term Care Partnership Expansion Project. Michigan will receive training, support and education from this initiative. Michigan has not yet implemented the LTCPP section of the DRA; however, the grant and involvement of the CHCS may spur the state to action on this. The Michigan Department of Community Health hopes to have the LTCPP in place sometime in 2008.

The expected implementation of the LTCPP in Michigan, likely estate recovery, and other pending changes affecting Medicaid eligibility in Michigan, will vastly change what assets might have to be spent down in order to qualify for Medicaid in Michigan.

Our professionals at Garan Lucow Miller P.C. are available to assist you with planning your estate to maximize the Medicaid benefits. We understand the rules and statutes, and how to best position your estate to protect it for your loved ones. Contact us today for more information.

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To schedule a FREE seminar, contact the Estate Planning & Settlement Group director, Thomas Doyle, today at 1-800-910-0300 or email him at tdoyle@garanlucow.com.