There are few planning tasks more daunting than applying for Medicaid. The process is intimidating and can quickly become overwhelming, not merely because it’s complicated but also because it opens up a Pandora’s Box of legally nuanced questions and concerns.
This is not a task anyone can afford to botch, and it’s something that you have to get right on the first try.
Because of the challenges, most people seek help navigating the Medicaid labyrinth. While there are many reputable Connecticut elder law attorneys who assist with Medicaid applications and asset protection planning, there is also a dangerous new breed of “senior planning” providers that is preying on elderly nursing home residents, often reducing them to financial ruin.
These “Medicaid shops,” which have sprung up all across the country, promise quick and inexpensive processing of Medicaid applications.
Often, these outside providers work closely with the nursing home’s finance office, making it appear as if the Medicaid shops are officially associated with these facilities.
Unfortunately, far from being helpful, these shops lack any legal skills or legal licensing and—worse—are often colluding with long-term care providers to make sure that all of a client’s assets are handed over to such facilities as quickly as possible.
As these shops infiltrate the long-term care industry, they are becoming more and more of a problem. In fact, they have become such a threat to seniors that some states (Florida, New Jersey, Ohio, and Tennessee) have passed consumer protection laws prohibiting non-attorney “senior planners” from processing Medicaid applications. These states have concluded that such activity constitutes an act of engaging in the unauthorized practice of law, an offense, which is punishable by up to eighteen months in prison and a $10,000 fine.
What’s at Risk
While we fully expect that consumers will eventually file lawsuits against these entities, for now Medicaid shops are free to peddle their cut-rate “senior planning” and Medicaid application services to nursing home residents, who comprise a very vulnerable sector of our population. As a result, many such individuals will find themselves in dire financial straits. The worst part is that such crises could be avoided with the help of a licensed elder law attorney.
Take, for example, these scenarios, based on stories people in the legal profession are hearing about from colleagues as well as from clients who turn to attorneys after being misinformed by a nursing home or Medicaid shop.
Assume a married couple owns a house and has savings of $500,000. Under the federal Medicaid rules, if one spouse resides in a nursing home, the healthy spouse can keep the home and $128,640. But what could be done with the remaining $371,360?
A Connecticut elder law attorney could implement a variety of legal strategies to help the couple preserve ALL of the assets. Not only would a Medicaid shop be unable to provide such legal services, they would also very likely—in part because they are coordinating with the nursing home—recommend that the couple spend the remaining savings (the $371,360) down by paying privately toward the cost of long-term care. Employing the Medicaid shop in this instance, then, is a $371,360 mistake!
If, in the scenario above, the healthy individual predeceases the institutionalized spouse, things get even more complex. Since Medicaid shops do not employ attorneys, they may not draft estate planning documents, such as Wills. This inability puts all of a client’s assets in jeopardy.
Consequently, if the healthy spouse has a traditional Will that leaves all of her assets to her husband, he will inherit the home and $371,360. At this point, he is a single individual who is receiving Medicaid benefits in a nursing home. This means he may retain no more than $1,600 and therefore, must spend down all of the assets paying privately for his care at the nursing home. We, and any qualified elder law attorney, would recommend changing the healthy spouse’s Will by either bypassing the institutionalized spouse (leaving the assets to the children) or by creating a trust for the surviving spouse that would preserve his Medicaid benefits.
On a smaller scale, while attorneys regularly recommend taking advantage of the $10,000 allowed for prepayment of funeral expenses as part of a spend-down strategy, Medicaid shops will often overlook this detail and leave family members to pay for burial costs that come at the least convenient and most emotional time.
The fact is that all a Medicaid shop can really do is identify that a client’s assets exceed the allowable maximum and then advise the client to spend it down—usually by giving it to the nursing home—before applying for Medicaid. The Medicaid shop is not qualified, licensed, or motivated to do anything more than that.
What You Need to Know to Protect Yourself
While we wait for Connecticut to get on board with consumer protection laws aimed at stopping the questionable practices of these Medicaid shops, there are proactive steps individuals can take to protect themselves.
1. Avoid being taken in by low fees.
It’s very common for Medicaid shops to lure people in with the promise of no-fee or low-fee offers. They promise an inexpensive solution and warn against exorbitant lawyers’ fees, but the truth of the situation is often the exact opposite. It’s a matter of being penny wise and pound foolish. While it might seem smart to choose a less expensive way to apply for Medicaid, in the long run it’s extremely likely that working with a Medicaid shop will wind up costing you thousands of dollars or more because they are unable to help you protect your assets.
2. Evaluate any advice, demand, or claim very carefully.
In other words, don’t take anything at face value or for granted. Often, the tactics of nursing homes and Medicaid shops can become aggressive. It’s important not to let them coerce you into making any decisions or signing any documents until you’ve had the chance to fully vet what they are telling you.
3. Understand the difference between attorneys and non-attorneys.
The most important thing you can do to arm yourself against the danger of inadequate or outright manipulative “services” is to educate yourself on the difference between non-attorney providers and licensed elder law attorneys. Here are just a few of the most important ways in which they are very different:
- Non-attorneys are often working with nursing homes, which creates a dangerous conflict of interest. Attorneys, on the other hand, work for you and are not beholden to any other entity.
- While non-attorneys are unable to represent you in court, should your Medicaid application be denied, attorneys can prepare for an appeal to superior or federal court and fight to get the denial overturned.
- Non-attorneys routinely will tell you to spend down all of their assets, in part to satisfy their arrangement with long-term care facilities and in part because they are unable to offer the legal services needed to protect assets. However, attorneys have all the estate planning knowledge and skills to protect your home and fiscal assets.
- If you have investment accounts or annuities, you won’t be able to turn to a non-attorney for legal advice on how to manage the complex tax consequences of liquidating such assets. An attorney can help you minimize any risk or penalties associated with those kinds of issues.
The list of reasons to work with an attorney rather than a non-attorney provider is long, but the bottom line is this: only an elder law attorney has the knowledge and license to practice law and provide you with the kind of guidance, support, and advocacy that can truly protect your assets and your family’s future security.
Why It’s Always Important to Get a Second Opinion
It’s easy to be led astray as you try to navigate the confusing process of applying for Medicaid. It’s easy to take the advice of a nursing home, hospital, or the Medicaid “expert” they referred you to see. And it’s easy to suddenly find yourself in a very bad decision with a lot of regret.
But, it doesn’t have to be that way. Please don’t put yourself in a precarious situation. You have more options than you realize. Give us a call and we can show you how to effectively protect your assets while still providing for long-term care and qualifying for Medicaid.
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