Income-Only Trust Upheld Notwithstanding Trustee Power to Purchase Annuity

The Massachusetts Court of Appeals recently ruled that the state Medicaid agency erred when it determined that the assets in an irrevocable income-only trust were countable because, in the agency's opinion, the trustee's ability to purchase an annuity with trust assets allowed the trustee to distribute trust principal to the beneficiary.  Heyn v. Director of the Office of Medicaid (Mass. App. Ct., No. 15-P-166, April 15, 2016).

Everlenna Roche transferred her home into an irrevocable income-only trust in 2003.  In 2011, Ms. Roche moved to a nursing home and began receiving Medicaid benefits.  Two years later, the Office of Medicaid terminated Ms. Roche's benefits after determining that the assets of the trust should be considered a countable resource.  Although the trust allowed the trustee to distribute only trust income, not principal, to Ms. Roche, the Office of Medicaid took the position that the trustee's ability to purchase an annuity with trust funds, in effect, allowed the trustee to distribute to Ms. Roche the principal used to purchase the annuity, rendering the trust countable.

Ms. Roche passed away and her estate appealed the Office of Medicaid's decision, but the appeal was rejected at an administrative level and upon review by the Superior Court.  On appeal to the Appeals Court, Ms. Roche's estate argued that state law prohibited the trustee from changing principal payments from the annuity into income and that the returned principal payments from the annuity were required to be retained in the trust. 

The court agreed with Ms. Roche's estate's claim that state law prohibits an allocation of principal to income that would circumvent the trust's prohibition on principal distributions.   The Court also went out of its way to reject two other alternative arguments even though the trial judge did not rely on them: (1) that the ability of the trustee to distribute principal to Ms. Roche’s children made the trust assets countable, and (2) that Ms. Roche’s power under the terms of the trust to direct a substitution of assets made the trust assets countable.  The Court determined that both arguments lacked support in law or logic, as neither would allow for distribution of principal to Ms. Roche which was the only relevant issue.

The Massachusetts Court of Appeals overturned the Office of Medicaid's decision.  The court wrote that:

"[o]ut of each annuity payment, only the investment income portion would be available for distribution to the grantor from the trust; that portion of each payment representing a return of capital would be required by the trust instrument to be retained in the trust.  The income portion available for distribution in such circumstances would be no different in character than interest earned on a certificate of deposit . . . In all events, the trust principal is preserved in the trust, and is not available for distribution to the grantor under the governing provisions of the trust."

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One in Five SNF Residents Abused By Another Resident

McKnight's reports the results of a new study which reveals that at least one in five seniors living in nursing homes has experienced some sort of resident-on-resident abuse:

Researchers tracked reports of resident-to-resident mistreatment over a one-month period at five urban and five suburban New York nursing homes through resident and staff interviews, observations and incident reports. Of the 2,011 residents included in the study, 407 — or more than 20% — said they had experienced at least one abusive event over the course of the month. The study was released Tuesday in Annals of Internal Medicine [hyperlink added].

The most common forms of resident-on-resident mistreatment were verbal at 9.1% and miscellaneous instances, including invasion of privacy or menacing gestures, at 5.3%. Physical and sexual abuse incidents followed at 5.2% and 0.6%, respectively. 

Factors such as a resident's level of cognitive impairment, whether the residents resided in a dementia unit and higher nurse aide caseload were linked to higher rates of resident-on-resident mistreatment, results showed.

The findings indicate that traditional efforts to curb nursing home abuse may be disproportionately aimed at staff mistreatment instead of resident-on-resident events, researchers noted. 

In an editorial article accompanying the study, XinQi Dong, M.D., Ph.D., with the Rush Institute for Health Aging, pointed out that while further research is needed to develop “evidence-based, culturally appropriate” interventions for resident-on-resident mistreatment, providers and government entities “cannot wait” to advocate for better protections for residents. 

“We must recognize that residents may be both victims and perpetrators of [elder abuse], and avoid blaming victims or resorting to interventions of convenience, such as the use of chemical sedation or physical restraints,” Dong wrote. 

Providers also should look into ways that technology like cameras and data collection can help measure and prevent abuse, Dong added.

Resident on resident abuse has recently made headlines in Kentucky, where a resident of a residential care facility was charged with another resident's murder, in Texas, where a nursing home changed its name in the wake of a resident-on-resident double homicide, in New Hampshire, where a resident suffering from Alzheimer's strangled and killed another during an assault, and in Florida, where a resident died from injuries inflicted by another resident suffering from dementia.  In 2014, a female resident in Georgia strangled and killed her resident roommate, and in 2006, a resident in a Toledo, Ohio, nursing home beat and killed his roommate in a dispute over sleeping arrangements.  

Paramedics Often Obstructed, Provided Insufficient Information On Nursing Home Calls

McKnight's reported recently the results of a new survey which finds that paramedics often receive little direction from nurses or medical records when handling end-of-life situations at nursing homes.  Results published in the Emergency Medical Journal conclude that the lack of direction was heavily associated with a lack of clarity in residents' wishes. Paramedics said records providing residents' end-of-life preferences are uncommon and are typically limited to resuscitation. 

Without proper records, paramedics are forced to make decisions based on perceived preferences when a patient is incapable of making a decision.  Differing opinions on how to handle end-of-life situations also were reported to have contributed to paramedics' uncertainty.

Researchers said several paramedics spoke of situations where nursing staffs attempted to influence the paramedics on whether to hospitalize residents. One paramedic mentioned that once he arranged for a patient to be treated at a nursing home and the “staff were unhappy because it meant they had to provide one-to-one care and actually look after someone dying.”

Another paramedic told researchers of a situation where a relative's opposition contributed to a patient being submitted to the hospital against her wishes.  Differing opinions and directives have lead to several deaths, including a 2015 incident in Minnesota, where an unconscious nursing home resident died after her husband told paramedics not to take her to the hospital. Firefighters attempted to resuscitate the resident, and were about to transport her to the hospital when her husband arrived and requested they stop their efforts. The woman was taken back into the nursing home, where she died 20 minutes later, resulting in a police investigation whether the emergency responders met legal requirements when they stopped trying to resuscitate the resident since she did not have a “do not resuscitate” directive. 

Simple Advanced Directives, such as a Living Will, are not enough for patients who are seriously ill of nearing the end of their lives.  Susan Tolle, director of the Oregon Health and Science University Center for Ethics in Health Care agrees, telling Reuter's Health that “[p]atients nearing the end of their lives who wish to set limits on treatments need to turn preferences into action with orders on a POLST,” or Physician Orders for Life Sustaining Treatment.  This is particularly true in Ohio, where Advanced Directives specifically require physician certification of a patient being either permanently unconscious or terminally ill as those terms are defined under Ohio law, in order to permit withholding or withdrawing life sustaining treatment, including CPR.   

"It's important for all nursing homes to clarify residents' preferences regarding resuscitation and intubation,” The Hastings Center research scholar Nancy Berlinger told Reuters. “Even more important: a facilitated discussion of values and goals that can be transcribed into instructions for every employee.”  “It is owed to the patient, the family and to that aide at three o'clock in the morning. It is owed to the paramedic,” Berlinger added.

The survey was conducted by Georgina Murphy-Jones of the London Ambulance Service NHS Trust and Professor Stephen Timmons of the University of Nottingham.

Care Providers for the Disabled Get Reprieve From New Wage Rule

Disability providers are getting extra leeway as the Obama administration moves forward with a new rule that many worried could force service cuts for people with special needs.

The U.S. Department of Labor said this week that it’s finalizing a rule that will require far more American workers to receive extra pay for working over 40 hours per week.

Currently, salaried workers earning at least $23,660 are exempt from overtime pay. Under the new rule, which will take effect Dec. 1, that threshold will double to $47,476 with automatic increases in the future.

But heeding widespread concerns from providers of home and community based services to people with developmental disabilities, the administration is committing to delay enforcement of the new mandate for such providers through March 17, 2019.  The Labor Department said that the non-enforcement period will apply to providers of Medicaid-funded services to people with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.

The special exemption comes after intense lobbying by the American Network of Community Options and Resources, or ANCOR, a trade group that represents over 1,000 private agencies providing disability services across the country.

The group argued that the new rule could prompt service cuts for people with developmental disabilities, because many of the agencies’ workers would be newly eligible for overtime under the rule.  Medicaid payments, however, which account for the agencies’ main source of income have not adjusted to account for the new wage mandate. 

For more information, click here. 

Parents May Be Refused Details of Adult Child's Medical Care

Michelle Andrews, from Kaiser Health News, has penned an excellent article explaining why many adult children should execute health care powers of attorney and a HIPAA release in favor of a parent or parents.  The article, entitled, "Parents May Be Refused Details of Adult Child's Medical Care," was recently reported by Health News from NPR:

When Sean Meyers was in a car accident on a November evening three years ago, he was flown by air ambulance to the emergency department at Inova Fairfax Hospital, in Northern Virginia. With his arm broken in four places, a busted knee and severe bruising to his upper body, Meyers, 29, was admitted to the hospital. Though he was badly hurt, his injuries didn't seem life threatening.

When his car went off the road, Meyers had been on his way to visit his parents, who live nearby in Sterling. They rushed to the hospital that night to wait for news and to be available if Sean or the hospital staff needed anything. But beyond the barest details, no one from the hospital talked with them about their son's condition or care, not that night nor during the next 10 days while he was hospitalized.

"All the time he was there, the hospital staff was very curt with us," says Sam Meyers, Sean's dad. "We couldn't understand why we were being ignored."

After leaving the hospital, Sean moved into his parents' spare bedroom temporarily to continue his recovery. About a week later, he was in their kitchen one evening with his girlfriend when suddenly he collapsed. He was rushed to the nearest hospital, where he died. An autopsy revealed that he had several blood clots as well as an enlarged heart.

For Sean's parents, the results were particularly wrenching because there's a history of blood clots on his mother's side of the family. How much did the hospital staff know?

"It might have saved his life if they'd talked to us," Sam Meyers says. 

 A spokeswoman for Inova Fairfax says, "We cannot comment on specific patients or cases." But she noted that information about a patient's care can be shared in a number of circumstances.

These days when people think about patient privacy problems, it's usually because someone's medical record has been breached and information has been released without his consent. But issues can also arise when patient information isn't shared with family and friends, either because medical staff decides to withhold it or patients themselves choose to restrict who can receive information about their care.

The federal Health Insurance Portability and Accountability Act of 1996 — HIPAA — established rules to protect the privacy of patients' health information while setting standards for hospitals, doctors, insurers and others sharing health care information.

Stepped-up enforcement in recent years and increased penalties for improper disclosure of patient information under HIPAA may lead hospitals and others to err on the side of caution, says Jane Hyatt Thorpe, an associate professor at George Washington University's department of health policy and an expert on patient privacy.

"For a provider who's uncertain about what information a provider may or may not be able to share, the easiest and safest route is to say no," Thorpe says.

Go here to read the remainder of the article.

In Ohio a Medicaid Lien Can Be Placed Against a Life Estate to Real Property Even After the Death of the Medicaid Recipient

An Ohio appeals court recently ruled that a deceased Medicaid recipient's life estate does not extinguish at death for the purposes of Medicaid estate recovery. Accordingly, the state may place a lien on the property after the death of the life tenant. Phillips v. McCarthy (Ohio Ct. App., 12th Dist., No. CA2015-08-01, May 16, 2016).

Lawrence Hesse transferred ownership in his farm to his three daughters, retaining a life estate for himself. Mr. Hesse later moved to a nursing home and received Medicaid benefits for one year before he died. After his death, the state filed a lien on the property for Medicaid benefits paid on Mr. Hesse's behalf.

Mr. Hesse's daughters filed a quiet title action against the state, arguing that because Mr. Hesse's life estate extinguished when Mr. Hesse died, the state could not assert a lien against the property after his death. The trial court granted summary judgment to the state, and Mr. Hesse's daughters appealed.

The Ohio Court of Appeals affirmed, holding that the state could place a lien on the property after Mr. Hesse died. According to the court, with regard to Medicaid estate recovery "a life estate interest held by a Medicaid recipient does not extinguish upon his or her death. Rather, for purposes of Medicaid recovery, a life estate interest endures post mortem and represents a quantifiable asset which the state may encumber by virtue of a properly filed lien."

Although this holding might seem irrational, it was the obvious intent of House Bill 66 passed in 2005.  I wrote about the effects of this "seemingly" innocuous change in the law over eleven years ago:

The new law also expands the State’s rights to place liens on property. As part of the State Budget bill passed on June 30, 2005, the State of Ohio now has authority to place a lien on the assets of the Medicaid recipient or the recipient's spouse...The liens, which are being placed on these properties, are akin to the "Liens for the Aged" process which was in place in many states in the 1950s and 1960. These laws were ultimately rejected by courts on various constitutional grounds. There is no guarantee that a challenge to the current law will meet with similar success. More importantly, for every family that challenges these liens, other families will simply repay the state, or the spouse will sell the family home which may result in insufficient funds to continue living independently. 

The new law also turns upside-down traditional property rights. Traditionally, right and title to property held jointly with a right of survivorship or pursuant to a transfer on death designation [or conveyed subject to a life estate] vested in the survivor (or beneficiary as the case may be) at the time of death. This “vesting” is apparently thought to create a hardship for the state, since it could undermine its lien rights. As a result, in order to prevent the vesting at death, the statute actually redefines death as follows:

• “Time of death” shall not be construed to mean a time after which a legal title or interest in real or personal property or other asset may pass by survivorship or other operation of law due to the death of the decedent or terminate by reason of the decedent's death.” See O.R.C.§5111.11 (A)(5).

So, for the purposes of the State of Ohio, a person does not "die" upon physical demise, and property interests that traditionally "vested" in and to another person upon death never really vest so long as the State also has an interest in the property.  

I have for more than a decade encouraged clients to adopt modern and more effective property transfers utilizing irrevocable trusts.  "I told you so," rings hollow and ominous given the consequences for Ohioans that want to pass to their heirs the assets they have worked so hard to protect.