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September 18, 2003 Saugus Advertiser
THE WHOLESALE ASSAULT ON THE FINANCES OF ELDERS
Last week, I discussed the new asset limits for a married couple when one needs nursing home care. These new limits cut in half or more the amount of money a spouse at home could keep. I have good news to report. Senators Montigny and Fargo have introduced bill S564 which would repeal this change and go back to the old limits that were more favorable to seniors.
On September 1, 2003, the Income First Regulations took effect. “Income First” is another of many changes that is having a drastic impact on our seniors. This combined with the reduced asset limit will have the effect of leaving many seniors, who have a spouse in a nursing home, with reduced assets and income.
Income First says that when one spouse goes into a nursing home they will allocate some of the sick spouse’s income to the spouse at home. This sounds like a good deal, you get to keep extra income, but this is one of the largest steps backwards this state has taken in many years.
Prior to September 1, 2003, if one spouse had to go to a nursing home, we would look at the income of the spouse at home. Frequently, the remaining spouse at home was the wife who spent her life raising a family and had around $500/month of social security for income. Since her income was less than the Minimum Monthly Maintenance Needs Allowance (MMMNA) of $1,493 (just raised to $1,515) we could give her a choice. The excess assets could be kept by the spouse at home and we would calculate what the monthly income from those excess assets would amount to. If the interest earned from the excess assets plus her social security still had her below the MMMNA amount she could keep a portion of her husband’s income to make up the shortfall. In order to keep the excess assets, a hearing was necessary.
The alternative was that she could elect to spend all of the excess assets and simply keep a larger portion of her spouse’s income. We always advise against that because often when the spouse dies, the income dies with him. Then she would be left with less assets and insufficient income to be able to maintain a home and live independently.
Let’s say that “Anna” has $500 per month social security and that “Paul”, her husband, has $1,100 social security and $900 from a GE pension. Together over their lives they have been able to save $100,000 in the bank and $80,000 of GE stock. Paul has to go to a nursing home.
Under the old rules, we would tell Anna that her house is safe because as long as one spouse lives there it is a non-countable asset. In addition we would tell Anna that she can keep all of her savings and all of the GE stock. She will even be able to keep a portion of her husband’s income ! As we tell Anna this story we can see the tension and nervousness ease. She will be able to sleep again and not worry that she will lose everything.
Governor Romney has changed this. Under the Governor’s changes, first we have to determine how much Anna can keep. Since Anna is living in the house we do not count the residence. Out of her $180,000 in countable assets she can keep $90,000. She can keep her social security of $500 plus about $1,000 of Paul’s income. She must spend $90,000 on Paul’s nursing home care or other allowable expenses such as prepaid funerals and health care. She must also liquidate much of the GE stock and pay whatever taxes may be due on those capital gains. Based upon current nursing home costs of $260-$300 per day, it will take less than 10 months to spend-down the $90,000. Usually the next thing to take place is Paul’s death. On his death his social security stops and unless Paul elected a survivor benefit for his GE pension, that income will stop too. Anna is left with $500 per month that will increase slightly after Paul’s death, but not nearly enough to cover her living expenses. If she is health enough she will eventually have to sell her home because she will not be able to afford to live there.
In Saugus we are lucky to have Representative Mark Falzone , Represantive Reinstein, Senator McGee and Senator Barios. All of whom are either a co-sponsor or supporter of the repeal of Outside Sec 329 and supporters of Senate Bill S564 which restores the higher asset limits to pre-January 1, 2003 levels.
And as if the changes that I have reported to you are not enough, Governor Romney filed a Waiver request with Medicaid on August 28, 2003. The waiver is a request to the federal government that Massachusetts not be required to follow all of the Federal Medicaid rules. The Governor would like to make his own rules. These will be discussed next week as well a recap of the 2003 changes that affect you. Coming soon… Long Term Care Insurance, is it the right choice for you?
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Ma. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys.