Update: CMS May NOT Force the Dying to Spend Their Final Days Jumping Through Hoops to Get Needed Medications

Following an outcry from patient advocates, the Centers for Medicare and Medicaid Services (CMS) has revised earlier guidance that required hospice patients covered by Medicare Part D plans to get prior authorization of all their drugs.

As previously reported on May 14, 2014, Part D plans sometimes pay for medications that should be covered under Medicare’s hospice benefit.  In an effort to prevent this, in March CMS issued guidance requiring Part D plans to initially deny payment for all prescribed medications for hospice patients, forcing dying patients or their families to appeal the denials in order to get Part D payment for their medications, many of which they were taking before they enrolled in hospice. 

“This burden-shifting to the dying patient is illogical and immoral,” concluded the Center for Medicare Advocacy.  On June 11, the Center joined 26 other organizations in calling on CMS to replace its guidance with a more suitable solution.

Their concerns were heard.  On June 25, 2014, CMS met with a number of these groups to discuss the implementation of the guidance, and on July 18 the agency issued new guidance that supersedes portions of the earlier guidance.  Now, rather than requiring prior authorization for all medications, CMS will only “strongly encourage” Part D programs to place prior authorization requirements on four categories of prescription drugs that are typically used to treat symptoms during the end of life: analgesics, antinauseants, laxatives, and antianxiety drugs.  In making the change, CMS said “we recognize that the operational challenges associated with prior authorizing all drugs for beneficiaries who have elected hospice to determine whether the drug is coverable under Part D have created difficulties for Part D sponsors and hospice providers, and in some cases, barriers to access for beneficiaries."

“This action by CMS will bring marked relief to hospice patients and their providers who have been dealing with the previous policy under which all drugs processed through Part D for hospice patients were subject to prior authorization,” said Andrea Devoti, board chair of the National Association for Home Care & Hospice, said in a press release.

However, the Center for Medicare Advocacy was somewhat more restrained in its praise.  While calling the replacement guidance "significantly better than the original," the Center said CMS still “relies upon the good will and prompt diligence of hospice providers, pharmacies, and Part D Plan Sponsors to ensure Medicare beneficiaries do not lose access to medications necessary to prevent pain, nausea, constipation, and anxiety.”  The Center also expressed concern that there are no time frames to ensure that these players act expeditiously, and there is no real appeal process for terminally ill patients whose medications are not meeting their needs. 

For the CMS memorandum containing the new guidance, click here. 

Ohio Supreme Court Hears Arguments in Medicaid Pre-Eligibility Transfer Case

Does federal Medicaid law allow the unlimited transfer of assets between spouses after one spouse is institutionalized, but before Medicaid eligibility is determined?  The answer to that question will greatly impact planning opportunities for Ohio families.  On Wednesday, August 20, 2014, the Supreme Court of Ohio heard oral arguments in a case that turns on this question.  Estate of Atkinson v. Ohio Department of Job and Family Services, No. 2013-1773.

In 2000 Marcella Atkinson and her husband transferred their home into a revocable living trust. In April 2011, Mrs. Atkinson entered a nursing home and soon applied for Medicaid benefits. In August 2011, the home was removed from the trust and placed in Mrs. Atkinson's name. The next day, Mrs. Atkinson transferred the house to her husband. The state determined an improper transfer had occurred and imposed a penalty period.  Mrs. Atkinson passed away, and her estate appealed to court, losing at both the trial court and the Ohio Court of Appeals. 

During the 40 minutes of oral arguments (available on video here) before the state’s high court, the attorney for the estate, Maura L. Hughes, maintained that both federal and state Medicaid law clearly allow unlimited transfers up to the point of Medicaid’s eligibility determination, and that both the Sixth Circuit Court of Appeals and the Department of Health and Human Services (HHS) support this reading of the statutes.    

Stephen P. Carney, the attorney for the state, told the justices that both the Sixth Circuit and HHS “got it wrong,” and that “the curtain comes down on unlimited transfers at the date of institutionalization.”  If couples are allowed to continue reallocating their assets after the date of institutionalization, he argues, they will be able to easily protect assets through “various tricks,” such as annuities. “If you can still do unlimited spousal transfers even after institutionalization, then you could take 200, 300, $400,000 as in some of our other cases and convert it from what’s a shared resource into this protected income stream for the community spouse.” 

Some justices appeared surprised at Carney’s suggestion that they should second-guess both the Sixth Circuit and HHS (which weighed in on the Sixth Circuit case).  One justice asked attorney Hughes whether the state is bound by the Sixth Circuit’s decision, in which, coincidentally, the appellant’s name was Hughes. 

“I believe they are, your honor,” said Hughes. “My understanding is that they are not actually following it now.  There was a U.S. district court case filed last week alleging that the state has been holding for this case in hopes of getting a second bite at the apple and having you come out in the opposite direction from the Hughes decision.”

For the Supreme Court of Ohio’s oral argument preview on the case, click here.

For detailed case information, click here.

Is Health Care Reform Hazardous To Your Health?

Regardless of your position on the Affordable Health Care Act, it is at one time both fascinating, and troubling, to witness the scope and pace of the major transformations taking place in the medical system. The transition to greater utilization of Skilled Nursing Facilities for rehabilitation following expiration of Medicare Benefits has caused much concern, for example.

Now,  John C. Goodman, one of the nation’s leading thinkers on health policy suggests bluntly that some of these changes are hazardous to your health.  Mr. Goodman's opinions are worthy of consideration. He is a Senior Fellow at the Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal calls Dr. Goodman "the father of Health Savings Accounts."

Dr Goodman, in an article entitled, "Is Obamacare Hazardous to Your Health," and published 8/15/2014 in Forbes, writes:

The Obama administration wants to change the practice of medicine.  Marcus Welby is out. Working in teams is in – especially in large practices owned by hospitals. Along the way, doctors are being subjected to pay-for-performance protocols and other forms of managed/integrated/coordinated care. 

How is all that working?  Not well at all.

A new study, which will soon appear in Health Affairs, showed these unexpected results: Practices with 1-2 physicians had 33 percent fewer preventable hospital admissions than practices with 10-19 physicians. 

I say “unexpected” because virtually everyone in the health policy community has bought into the idea that good medicine is medicine practiced in teams – rather than solo – and it is medicine that centers on medical homes  and follows protocols where physicians are rewarded for the “value they create” not the number of things they do. “Value” of course is determined by some bureaucracy somewhere. 

When I say “everybody” has bought into this idea I really mean everybody who is anybody except for … well … except for doctors who actually treat real patients. Whereas two thirds of doctors worked in private practice a few years ago, more than half of all doctors work for hospitals today. Medicare pays doctors more for the same procedures if billed as a hospital employee than if billed directly by a solo practitioner, perhaps to encourage the demise of private practice. 

Yet the Health Affairs study couldn’t be clearer. Practices owned by hospitals had 50 percent more preventable admissions than practices owned by physicians (regardless of size). 

The larger practices as well as hospital-based practices made greater use of medical homes, were more likely to be rewarded by pay-for-performance formulas and did better on performance measures that focused on inputs, not outputs. So why were the results so bad?

For the full article, click here.

Entire Value of Property in Which Medicaid Recipient Had Life Estate is Recoverable in Idaho

The Idaho Supreme Court has ruled that the state may recover Medicaid benefits from the entire value of a property that a Medicaid recipient transferred to his daughter while retaining a life estate for himself. In re Estate of Peterson (Idaho, No. 40615, Aug. 13, 2014).

Melvin Peterson deeded property to his daughter, retaining a life estate for himself. He then applied for Medicaid benefits. When he died, Mr. Peterson had received a total of $171,386.94 in Medicaid benefits.

The state filed a claim against the estate to recover the Medicaid benefits it paid for Mr. Peterson's care. Under Idaho law, the state may recover any property that passes outside of probate, including any property that that the Medicaid recipient had a legal interest in that passes to a survivor through a life estate or "other arrangement." The trial court ruled that the life estate remainder interest, but not the retained life estate, was an estate asset, and the appeals court affirmed. The estate appealed, arguing Mr. Peterson had no interest in the life estate at his death, so it could not be subject to recovery.

The Idaho Supreme Court affirms in part holding that both the life estate and the remainder interest were estate assets subject to Medicaid recovery. The court determines that Mr. Peterson's life estate interest in the property was transferred to his daughter when he died, and under state law "when assets of a Medicaid recipient are conveyed to a survivor, heir or assign by the termination of a 'life estate,' the assets remain part of the recipient’s 'estate'" for purposes of Medicaid recovery. In addition, the court rules that the remainder interest Mr. Peterson's daughter received is also part of Mr. Peterson's estate as an "other arrangement."

For the full text of this decision, go to: http://www.isc.idaho.gov/opinions/40615.pdf

Former Resident Liable to Nursing Home for Unjust Enrichment

A New York trial court has held that a nursing home is entitled to summary judgment on an unjust enrichment claim against a former resident who did not pay for care, but the court denied summary judgment on a breach of contract claim against the resident's daughter.Blossom View Nursing Home v. Denner (N.Y. Sup. Ct., Wayne Cty., No. 76117, July 3, 2014).

Arnold Denner entered a nursing home, but refused to sign the admission agreement. His daughter, Linda Clevenger, eventually signed as the "responsible party." The contract stated that the responsible party was required to use the resident's resources to pay for care. Mr. Denner's co-insurance and Social Security paid for some of his care at the facility, but he left a balance of $31,318.23 when he moved out.

The nursing home sued Mr. Denner and Ms. Clevenger for breach of contract. It also stated a claim for unjust enrichment against Mr. Denner. Ms. Clevenger argued that the nursing home pressured her into signing the agreement and that her father told her not to use his resources to pay for his care. The nursing home asked for summary judgment.

The New York Supreme Court, a trial court, denied the nursing home summary judgment on the breach of contract claim, but granted it on the unjust enrichment claim. According to the court, there are triable issues of fact regarding whether the nursing home used duress in getting Ms. Clevenger to sign the admissions agreement and whether she actually had access to her father's resources. But, the court held that although the nursing home can't state a claim for breach of a contract that Mr. Denner did not sign, he is liable to the nursing home for unjust enrichment because he received and accepted its services. 

For the full text of this decision, go to: http://law.justia.com/cases/new-york/other-courts/2014/2014-ny-slip-op-31734-u.html

A Walk on the Wild Side of Estate Planning

Reed performing at the
Hop Farm Festival in Kent, 2011
http://en.wikipedia.org/wiki/Lou_Reed

Danielle and Andy Mayoras wonder, in an article written for Crain's Wealth, why Lou Reed, late lead singer and guitarist of The Velvet Underground, a musician and songwriter with a successful solo career, "would be so careless with his estate plan."  According to the article, probate filings available to the public paint a vivid picture of Lou Reed's estate:

Recent filings with the Surrogate's Court in Manhattan show that Reed's estate has already earned more than $20 million since he passed away from liver disease at the age of 71, on Oct. 27. This is only the income that Reed's estate has brought in since his death, primarily from royalties.

The executors filed a report recently with the court, listing the income and providing an updated inventory of estate assets. There is other property worth around $10 million in Reed's estate. Reed's wife and his sister are the primary beneficiaries, along with a half million dollars set aside for the care of Reed's 93-year old mother. Reed's widow and his sister receive 75 percent and 25 percent, respectively, of the residue, while all of the personal property and almost $9 million worth of real estate in New York will go to his widow alone.

Reed relied on a 34-page will he signed in April 2012.  Apparently Reed was aware he was suffering from liver disease, and he signed his will a year-and-a-half before he passed. 

The article continues:

Why would someone with assets worth tens of millions rely on a will, instead of a revocable living trust, if not even more sophisticated estate planning?  

That's the question that doesn't appear to have a good answer.  If Reed had used a revocable living trust, and transferred his assets into the trust during his life, then all of this information would have been kept private. That's a key difference between wills and trusts. Wills have to pass through probate court (called Surrogate's Court in New York), which is a public process. Trusts, when used the right way, avoid probate court entirely. 

While most people don't have to worry about the press leaking details of their financial worth, everyone should strive to avoid probate court. On top of being public, it's also expensive, stressful, time-consuming, and more prone to fighting.  

It's much easier for disgruntled family members to file will challenges in probate court, as opposed to a trust that is administered privately, outside of court. In fact, trusts can even help you when you are alive by addressing who and how your assets are managed if you are no longer able to do so. Wills can't help with that.

The The authors conclude that Lou Reed should have updated his plan to include a revocable living trust, thereby protecting his family's privacy, and avoiding the aggravation of probate court:

It's a lesson for everyone … even those who don't have more than $30 million. So let Reed stick to walking on the wild side when it comes to estate planning. Talk to your loved ones about the benefits of a revocable living trust.

To read the whole article, click here.

GAO Report: The Myth of Millionaires on Medicaid

A new U.S. Government Accountability Office (GAO) report examining Medicaid planning strategies finds that that only 14 percent of Medicaid applicants had more than $100,000 in total resources and that only 5 percent transferred assets, adding support to assertions that Medicaid planning has a negligible impact on program outlays. 

The Report means hard evidence to rebut the assertions of some that perpetuate the myth that Medicaid for long term care provides benefits to "Millionaires on Medicaid"  The arguments ordinarily come from academics who have little real experience how Medicaid works, or the wide array of options available to the wealthy, other than reliance upon Medicaid, that better protect assets from long term care costs.  

The GAO reviewed 294 approved Medicaid nursing home applications in three states – Florida, New York and South Carolina -- to study the extent to which individuals are using available methods to qualify for Medicaid coverage. To identify the methods used to reduce countable assets to qualify for Medicaid coverage for nursing home care, the agency spoke with officials from the Centers for Medicare & Medicaid Services (CMS), interviewed nine attorneys recommended to it by the Director of the American Bar Association’s Commission on Law and Aging, and conducted undercover calls with representatives from 17 law offices whose websites indicated that they provided assistance with Medicaid planning.

During the undercover calls, the investigator posed as an adult child seeking advice on obtaining Medicaid coverage for his parent while preserving the parent’s assets. Two scenarios involved a parent with immediate need for care (one married and one widowed) and one scenario involved a parent who would need care in the future.

The following are some of the key findings in the report:

• Applicants most commonly owned financial and investment resources (95 percent), burial contracts and prepaid funeral arrangements (39 percent), life insurance policies (34 percent), their primary residence (31 percent), and vehicles (26 percent). Only nine applicants owned a trust and three applicants owned annuities.
• Sixty-five percent of applicants had annual gross incomes of $20,000 or less.  
• 30 percent had annual gross incomes between $20,001 and $50,000, and 5 percent had annual gross incomes of more than $50,000.Five percent of applicants transferred assets for less than fair market value.
• The median amount of assets transferred was $24,608, and the amounts ranged from $5,780 to $296,221. All but one of the applicants found to have transferred assets were from New York; the remaining applicant was from South Carolina.
• Five percent of applicants had a personal service contract that was determined to be for fair market value. The median value of the personal service contracts was $37,000; the value of the contracts ranged from $4,460 to $250,004.
• Two percent of applicants (5 applicants) used the “reverse half-a-loaf” method of transferring assets (in which the applicant gifts assets, incurs a penalty period, and then either converts other countable assets into an income stream or accepts a partial return of the assets). Four of those applicants transferred money in exchange for a promissory note and gifted between $20,150 and $227,250 worth of resources, resulting in penalty periods of between 2 months and 22 months.
• Thirteen applicants were able to use spousal refusal to allow the community spouse to retain assets. The median value of non-housing assets retained was $291,888, and two spouses were able to retain more than $1 million.
• According to state Medicaid officials, county eligibility workers, and attorneys interviewed, the value of annuities for the community spouse have average values ranging from $50,000 to $300,000.

To read the full report, "Medicaid: Financial Characteristics of Approved Applicants and Methods Used to Reduce Assets to Qualify for Nursing Home Coverage," click here.

For a National Academy of Elder Law Attorneys' press release responding to the GAO report, click here.

Father May Evict Based on Allegations of Elder Abuse

A New York housing court has ruled that a 72-year-old man may evict his son and his son’s girlfriend from his apartment because of the man’s fear of elder abuse. Huggins v Randolph (N.Y. Civ. Ct., Kings Cty., No. 91343/13, July 10, 2014).

Norris Huggins, the tenant of record in a Brooklyn apartment, sought to evict his son, Julian Randolph, and his son’s girlfriend, Ashley Richmond, alleging that he had been forced to flee his apartment because he was afraid of Mr. Randolph.  In an affidavit, Huggins said that "my son has in the past threatened my health and safety, forced me to sign a power of attorney and taken other steps to put me in fear of him."

Earlier this year the court granted Mr. Huggins’ motion for summary judgment against Mr. Randolph and Ms. Richmond.  Mr. Randolph subsequently moved out and Ms. Richmond tried to stay the eviction, arguing that Mr. Huggins lied in saying he feared his son, and that in any case he is free to return to the premises because his son is no longer there.

In rejecting Ms. Richmond’s motion, housing court judge Susan Avery finds that “in light of the many forms of elder abuse,” Ms. Richmond’s argument that Mr. Huggins no longer has anything to fear is “quite disturbing.” 

“[I]t is incumbent upon judges and court personnel to recognize the signs of possible elder abuse and act to protect society's vulnerable seniors," Judge Avery writes.  ". . . Mr. Huggins has the right to live in his home with the occupants of his choosing, or if he so chooses, no other occupants at all. Mr. Huggins is entitled to be the sole decision maker as to which guests, if any, are invited into his home."

For the full text of this decision, go to: http://law.justia.com/cases/new-york/other-courts/2014/2014-ny-slip-op-24184.html

SSA's Guide for Evaluating Special Needs Trusts Problematic

The Social Security Administration (SSA) recently instituted a nationally uniform procedure for review of special needs trusts for Supplemental Security Income (SSI) eligibility, routing all applications that feature trusts through Regional Trust Reviewer Teams (RTRTs) staffed with specialists who will review the trusts for compliance with SSI regulations. 

The SSA has also released its Trust Training Fact Guide, which will be used by the RTRTs and field offices when they evaluate special needs trusts.  In an article in the July/August 2014 issue of The ElderLaw Report, New Jersey attorney Thomas D. Begley, Jr., and Massachusetts attorney Neal A. Winston, both CELAs, discuss the 31-page guide in detail and caution that while it is a significant step forward in trust review consistency, it contains “a few notable omissions or terminology that might cause review problems.”  Following is the authors’ discussion of the problematic areas:  

• Structured Settlements. The guide states that additions/augmentations to a trust at/after age 65 would violate the rule that requires assets to be transferred to the trust prior to the individual attaining age 65. It does not mention that the POMS specifically authorizes such payments after age 65, so long as the structure was in place prior to age 65. [POMS SI 01120.203.B.1.c].

• First-/Third-Party Trust Distinction. Throughout the guide, there are numerous references to first-party trust terms or lack of terms that would make the trust defective and thus countable. These references do not distinguish between the substantial differences in requirements for first-party and third-party trusts.

• Court-Established Trusts/Petitions. This issue is more a reflection of an absurd SSA policy that is reflected accurately as agency policy in the guide, rather than an error or omission in the guide itself. This section, F.1.E.3, is titled “Who can establish the trust?” The guide states that creation of the trust may be required by a court order. This is consistent with the POMS. It would appear from the POMS that the court should simply order the trust to be created based upon a petition from an interested party. The potential pitfall described by the guide highlights is who may or may not petition the court to create a trust for the beneficiary. It states that if an “appointed representative” petitions the court to create a trust for the beneficiary, the trust would be improperly created and, thus, countable. Since the representative would be considered as acting as an agent of the beneficiary, the beneficiary would have improperly established the trust himself.

In order for a court to properly create a trust according to the guide, the court should order creation of a trust totally on its own motion and without request or prompting by any party related to the beneficiary. If so, who else could petition the court for approval? The plaintiff’s personal injury attorney or trustee would be considered an “appointed representative.” Would a guardian ad litem meet the test under the guardian creation authority? How about the attorney for the defendant, or is there any other person? If an unrelated homeless person was offered $100 to petition the court, would that make the homeless person an “appointed representative” and render the trust invalid? The authors have requested clarification from the SSA and are awaiting a response.

Until this issue is resolved, it might be prudent to try to have self-settled special needs trusts established by a parent, grandparent, or guardian whenever possible.

• Medicaid Payback/Administrative Fees and Costs. Another area of omission involves Medicaid reimbursement. The guide states that “the only items that may be paid prior to the Medicaid repayment on the death of the beneficiary of the trust are taxes due from the trust at the time of death and court filing fees associated with the trust. The POMS, [POMS SI 01120.203.B.1.h. and 203B.3.a], specifically states that upon the death of the trust beneficiary, the trust may pay prior to Medicaid reimbursement taxes due from the trust to the state or federal government because of the death of the beneficiary and reasonable fees for administration of the trust estate such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with the termination and wrapping up of the trust.

While noting that the guide, in coordination with training, “is a marked improvement for program consistency for trust review,” Begley and Winston caution advocates that “the guide should be considered as a summarized desk reference and training manual and not a definitive statement of SSA policy if inconsistent with the POMS.”

Annuities Purchased by a Medicaid Applicant Must Name State as Remainder Beneficiary

The Georgia Supreme Court recently issued an opinion regarding the requirement that an annuity purchased by a Medicaid applicant must name the state as a remainder beneficiary.  The opinion, though, is instructive as much for its deference to CMS and state agency statutory interpretations, as it is for its holding. Reversing an appeals court decision, the court ruled that, because it finds that the federal statute is ambiguous, annuities benefitting a Medicaid applicant need to name the state as a remainder beneficiary in order to avoid a transfer penalty. Cook v. Glover (Ga., No. S13G1127, July 11, 2014).

Jerry Glover purchased an annuity for himself shortly before applying for Medicaid. He later refused to name the state as a remainder beneficiary on the annuity, the state approved his application but assessed a seven-month transfer-of-assets penalty against him.

Mr. Glover appealed, arguing he wasn’t required to name the state as a remainder beneficiary. After a hearing, an administrative law judge upheld the penalty, and a trial court affirmed the decision. The Georgia Court of Appeals reversed. Although agreeing that a plain reading of 42 U. S. C. § 1396p (c) (1) (F) standing alone clearly required that the state be named a remainder beneficiary of any annuity, the Court of Appeals interpreted subsection (G) to unambiguously remove actuarially sound annuities benefitting Medicaid applicants from the requirements of subsection (F) by removing them from the definition of “assets” with respect to a transfer of assets.  

The Georgia Supreme Court reversed, holding that the penalty period is valid. The court examined the statutory language regarding annuities and found that the relationship between the two subsections is not clear and unambiguous.  Because the federal law was vague and ambiguous, the court ruled that the state Medicaid agency's interpretation, which is consistent with the Centers for Medicare and Medicaid Services' interpretation of the statute, is "reasonable and entitled to deference."

For the full text of this decision, go to: http://www.gasupreme.us/sc-op/pdf/s13g1127.pdf

California Heir Liable to Reimburse State for Mother's Medicaid Benefits

A California appeals court has ruled that the heir of an estate who sold her interest in her mother’s house to her brother is liable to the state for reimbursement of her mother’s Medicaid expenses. Estate of Mays (Cal. App., 3d, No. C070568, June 30, 2014).

Medi-Cal (Medicaid) recipient Merver Mays died, leaving her house as her only asset. Ms. Mays’ daughter, Betty Bedford, petitioned the court to be appointed administrator of the estate, but she was never formally appointed because she didn’t pay the surety bond. The state filed a creditor’s claim against the estate for reimbursement of Medi-Cal expenses, and the court determined the claim was valid.  A dispute arose between Ms. Bedford and her brother, Roy Flemons, over ownership of the house. After the court determined Mr. Flemons owned a one-half interest in the property, Ms. Bedford and Mr. Flemons entered into an agreement in which Mr. Flemons paid Ms. Bedford $75,000 and transferred the house to his name.

The state petitioned the court for an order requiring Ms. Bedford to account for her administration of Ms. Mays’s estate. The court determined Ms. Bedford was liable to the state for the amount she received from Mr. Flemons because although she wasn’t formally appointed administrator, she was acting as administrator. Ms. Bedford appealed.

The California Court of Appeal, 3rd Appellate District, affirmed on different grounds. The court ruled that Ms. Bedford cannot be held liable due to her failure as administrator of the estate because she was never formally appointed administrator. The court held, however, that Ms. Bedford is liable as an heir of the estate who received estate property. According to the court, Ms. Bedford’s settlement with Mr. Flemons was “essentially an end-run around the creditor’s claim and the estate process” and “the $75,000 payment represented proceeds of the estate that would otherwise be available to satisfy creditors’ claims.” 

For the full text of this decision, go to:http://www.courts.ca.gov/opinions/nonpub/C070568.pdf

Caregiver Payroll Service

More and more families are hiring private-duty caregivers, meaning that an increasing number are facing a new dilemma – how to deal with the payroll, tax, and labor law aspects of household employment.  While everyone wants to follow the law and do the right thing for the caregiver, it’s a tall task because of the complexities and administrative burdens of being an employer.

Luckily, there is a service -- Care.com® HomePaysm, Provided by Breedlove -- that can guide busy families through all the complex tax and payroll requirements of hiring outside help while eliminating every piece of tedious paperwork.  For more than 20 years, HomePaysm has been handling payroll, tax and Human Resources (HR) obligations for families -- more than 55,000 families to date -- with guaranteed accuracy.  From paydays to tax time and all points in between, these folks take care of—and assume full accountability for—every payroll obligation, including, but not limited to:

• Manage payroll calculations, prepare paystubs, and process Direct Deposit payroll each payday;
• Prepare and file state and federal employment tax returns;
• Prepare and distribute Form W-2;
• Prepare and file Form W-2 Copy A/Form W-3 each January;
• Prepare Schedule H to be filed with Form 1040.

If you would like more information, or would like to receive one of a limited number of coupons that my office received so that clients can start using HomePaysm and receive a waiver of the registration fee (a$100 value), please email us.

There are also many fine bookkeepers, accountants, and payroll services locally.  If you would like a local referral, please let us know! 

Inherited IRA's are not Exempt from Creditors in Bankruptcy

In a unanimous opinion, the U.S. Supreme Court has ruled that funds held in an inherited individual retirement account (IRA) are not exempt from creditors in a bankruptcy proceeding because they are not retirement funds. Clark v. Rameker (U.S., No. 13-299, June 13, 2014).

Heidi Heffron-Clark inherited an IRA from her mother. Her inherited IRA had to be distributed within five years, and Ms. Heffron-Clark opted to take monthly distributions. During the five-year period, Ms. Heffron-Clark and her husband filed for bankruptcy and claimed that the IRA, worth around $300,000, was exempt from creditors because bankruptcy law protects retirement funds.

The bankruptcy court found that the IRA was not exempt because an inherited IRA does not contain anyone's retirement funds. Ms. Heffron-Clark appealed, and the district court reversed, ruling that the exemption applies to any account containing funds originally accumulated for retirement. The Seventh Circuit Court of Appeals reversed, holding that the money in the IRA no longer constituted retirement funds, while the Fifth Circuit Court of Appeals decided in In re Chilton (674 F.3d 486 (2012)) that funds from an inherited IRA should be exempt. The U.S. Supreme Court agreed to resolve the conflict.

The U.S. Supreme Court affirmed the Seventh Circuit's decision in Clark, holding that the funds held in inherited IRAs are not "retirement funds." In a unanimous opinion delivered by Justice Sotomayor, the Court finds that funds in an inherited IRA are not set aside for retirement because the holders of inherited IRAs cannot invest additional money in the account, are required to withdraw money from the account even though they aren't close to retirement age, and may withdraw the entire balance of the account at one time.

If you want to ensure that your IRA's are inherited by your heirs and remain exempt from their creditors, see an elder law attorney.  

For the full text of this decision, go to: http://www.supremecourt.gov/opinions/13pdf/13-299_mjn0.pdf

New Guides Help Those Appointed to Manage Someone Else's Money

Have you been officially asked to manage someone else's money? For example, have you been named as an agent under a power of attorney or appointed trustee of a trust? As our society ages, more and more people are being asked to take on these roles, but they come with both powers and responsibilities, and problems can arise.

If you're not a lawyer (and even if you are), the responsibilities of these positions can seem daunting. Luckily, the federal Consumer Financial Protection Bureau – the only federal office dedicated to the financial health of Americans age 62 and over -- recently released four guides for people who have been given the responsibility of managing money or property for someone else. The guides, which are free, are collectively called “Managing Someone Else's Money.”

The Managing Someone Else's Money guides are designed to help non-lawyers; they walk you through your new responsibilities, teach you how to protect the person in your care from financial exploitation, and give you links to additional resources. For example, the guides tell you, the agent, what to do to avoid problems with family and friends who think you are doing a bad job. The guides also help you coordinate with other agents who may have been assigned to work with you and any outside professionals whose help you may need (such as lawyers, brokers, and financial planners).

The guides include help for agents under a power of attorney, court-appointed guardians of property and conservators, trustees under a revocable living trust, and representative payees and VA fiduciaries (a person who manages someone else's government benefit checks). All four types of agents are fiduciaries, which means they owe four special duties to the people for whom they are managing money or resources: the duty to act in the individual’s best interest, the duty to manage the individual’s money and property carefully, the duty to keep the individual’s money and property separate from their own, and the duty to keep good records. Every guide includes detailed information about these four duties.

If you have been assigned to be an agent for someone, that assignment should come with a document (power of attorney, trust document, court order, etc.) that will tell you what you can and cannot do. It is important to stay within the limits that document sets for you. These four guides, which were developed for the Bureau by the American Bar Association Commission on Law and Aging, are not a substitute for legal counsel, but they can help keep you on the straight and narrow.

To download one or more of the guides, go to:
 http://www.consumerfinance.gov/blog/managing-someone-elses-money/

The Obligations of a Fiduciary

When you need someone else to care for money or property on your behalf, that person (or organization) is called a fiduciary.  A fiduciary is a person or entity entrusted with the power to act for someone else, and this power comes with the legal obligation to act for the benefit of that other person.

Many types of positions involve being a fiduciary, including that of a broker, trustee, agent under a power of attorney, guardian, executor and representative payee. An individual becomes a fiduciary by entering into an agreement to do so or by being appointed by a court or by a legal document.

Being a fiduciary calls for the highest standard of care under the law. For example, a trustee must pay even more attention to the trust investments and disbursements than for his or her own accounts. No matter what their role is or how they are appointed, all fiduciaries owe four special duties to the people for whom they are managing money or resources. A fiduciary’s duties are:

• to act only in the interest of the person they are helping;
• to manage that person's money or property carefully;
• to keep that person's money and property separate from their own; and
• to keep good records and report them as required. Any agent appointed by a court or government agency, for example, must report regularly to that court or agency.

Remember, your fiduciary exists to protect you and your interests. If your fiduciary fails to perform any of those four duties or generally mismanages your money or affairs, you can take legal action. The fiduciary will probably be required to compensate you for any loss you suffered because of his or her mismanagement.

Medicaid Applicant's Retirement Benefits May Be Counted as Available Income Despite Contrary Court Ruling

A New York trial court upheld a Medicaid agency's finding that an applicant's Social Security and pension benefits should be included in the applicant's available income even though the court had ruled in a guardianship proceeding that the benefits were unavailable for Medicaid eligibility purposes. Freedman v. Commissioner of the State of New York Dept. of Health (N.Y. Sup. Ct., Richmond Cty., No. 85037/13, March 6, 2014.

The court appointed Gay Lee Freedman as guardian of the person and property of her sister, Mary Backer. The court ordered that the funds in the guardianship account and any income the guardian received, including Social Security and pension benefits, would be "deemed" unavailable for purposes of Medicaid eligibility.

Ms. Freedman applied for Medicaid benefits on Ms. Backer's behalf. The state determined she was eligible subject to a net available income that included her Social Security and pension benefits. Ms. Freedman appealed, arguing her net available income should not include those benefits. After a hearing, the state upheld the decision, and Ms. Freedman appealed.

The New York Supreme Court, a trial court, affirmed the decision, holding that the court must show deference to the state's interpretation of its rules. According to the court, as long as the agency's decision is neither legally impermissible nor violates "the petitioner's constitutional rights and protections, the court is powerless to alter that determination on the strength of what...the court might do in a similar situation."

For the full text of this decision, click here.

Elderly Couple Awarded $1.6 Million over Failed Investments

A financial arbitration panel has ordered  a subsidiary of John Hancock Financial Network to pay nearly $1.6 million to an elderly California couple and the estate of their now-deceased mother.  The sum includes a $454,000 award for attorneys’ fees under California’s elder abuse statutes.

Edward Blank and Doreen Baker Blank, along with Della Baker, who died in 2012 at age 103, placed their entire retirement savings in the hands of James Glover, a broker with Signator Investors, owned by John Hancock. Glover invested $1 million of the money in a Texas real estate venture that Glover said would generate a steady income but that suspended payments in 2012.  Glover did not disclose that he was a managing member of the venture. 

The Blanks are among more than 40 clients who claimed they were hurt financially by Glover. Signator has maintained that it was unaware that Glover was investing in securities not held or offered by them, a practice called “selling away,” and that it was not responsible for his actions.

In March, an arbitration panel of the Financial Industry Regulatory Authority (FINRA) awarded the Banks $954,000 in compensatory damages and $181,000 in interest, plus the legal fee award. The binding award also granted Signator's cross-claim against Glover for breach of contract, fraud and negligence and ordered him to pay Signator $1.35 million.

“The FINRA arbitration panel awarded our clients almost $1.6 million for the losses they suffered in this selling-away case,” said the Banks’ attorney, Lance McCardle, as reported in Investment News. “Our clients lost all of their retirement savings as a result of Glover's breach of fiduciary duty and fraud and Signator's failure to supervise Mr. Glover during the 14 years he worked at Signator in the Towson, Md., office.”

To read the arbitration panel’s ruling, Docket No. 13-00579, click here.

For a Wall Street Journal article on the award, click here.

For a discussion of the award by Prof. Katherine Pearson of Penn State Dickinson Law School, click here.

CMS to Force the Dying to Spend Their Final Days Jumping Through Hoops to Get Needed Medications

To spare Medicare Part D insurance companies the risk of initially paying for prescriptions they don't have to cover, the Centers for Medicare and Medicaid Services (CMS) has designed a protocol that forces dying Medicare beneficiaries to navigate an onerous appeals process just to get medically necessary medications.  “This burden-shifting to the dying patient is illogical and immoral,” concludes the Center for Medicare Advocacy, which broke the story.

The protocol stems from an oversight in how Part D interfaces with Medicare’s hospice benefit.  When a Medicare beneficiary elects the program’s hospice benefit, the hospice provider, not the Medicare Part D insurer, becomes responsible for covering medications related to the patient’s terminal illness.  The Part D insurer continues to cover drugs the patient is taking that are not related to the terminal illness – for example, blood pressure medications to prevent a stroke.

The problem is that when Medicare Part D was created, no process was set up to inform the insurance companies when Medicare beneficiaries elected hospice.  This means that sometimes a Part D insurer could inappropriately pay for a drug that the hospice provider should be covering.

CMS’s solution? According to the agency’s memorandum to Part D Plan Sponsors and Medicare Hospice Providers entitled, "Part D Payment for Drugs for Beneficiaries Enrolled in Hospice – Final 2014 Guidance," all prescribed medications for hospice patients billed to Medicare Part D will initially be denied coverage as of May 1, 2014.  Pharmacies will need to check to make sure that a prescription is related to the patient’s terminal illness, and if it is not, the pharmacist can’t fill it. Instead, hospice patients will have to file a Medicare appeal, triggering a protracted bureaucratic dance, detailed in a recent Alert by the Center for Medicare Advocacy, involving the dying patient and his or her pharmacist and medical provider.  

The Center points out that it is not necessary to force dying patients to jump through bureaucratic hoops just to get necessary medications.  “The insurance companies that administer Medicare Part D plans can easily design a system to retroactively review medications covered for hospice patients,” the Center writes.  “If appropriate, the Part D plans can seek reimbursement from hospice providers.” 

The Center plans a second Alert on the protocol’s implications for beneficiaries.  Keep an eye out for it here.

Many Skilled Care Providers Still Unaware of New Medicare Rules

Even though Medicare is now covering skilled care for beneficiaries who are not improving, many are still being denied coverage, according to Judith Stein, director of the Center for Medicare Advocacy.  Stein told Reuters columnist Mark Miller that despite a nationwide educational campaign mandated by the recent settlement of a lawsuit, many providers don't have information about the settlement or understand the new rules.

Under the settlement agreement in Jimmo v. Sebelius, the federal government agreed to end Medicare’s longstanding practice of requiring that beneficiaries with chronic conditions and disabilities show a likelihood of improvement in order to receive coverage of skilled care and therapy services. The new rules require that Medicare cover skilled care as long as the beneficiary needs skilled care, even if it would simply maintain the beneficiary's current condition or slow further deterioration. 

As part of the implementation of the settlement, the Centers for Medicare & Medicaid Services (CMS) has posted online resources and updated its Medicare manual to reflect the changes. CMS launched an educational campaign in January to explain the settlement and the revised manual provisions to providers, but many providers remain unaware of what is covered or how to bill Medicare for the services. The campaign was not aimed at beneficiaries, so few are aware of the rules and that they can fight a denial of coverage.

Miller focuses on one beneficiary, Robert Kleiber, 78, who receives weekly visits from a physical therapist to alleviate symptoms of his Parkinson’s disease.  Kleiber’s wife recently learned that the treatments should be covered under Medicare’s new rules but so far she has been unable to convince the home health care provider of this.

Stein said she is getting "a lot of inquiries from people who have had problems getting access to care. There’s still a great deal of education that healthcare providers need to get on this. Many of them just aren’t aware of what they need to do to proceed."

For Miller’s column, click here.

For the Center for Medicare Advocacy’s page of self-help packets for improvement standard denials and appeals, click here.