What’s a Responsible Party? (Part 2)
Last week we were discussing Jenny’s problem. She spent down Dad’s assets. The nursing home filed the Medicaid application and Dad was approved, but with a 4 month penalty. The nursing home was pursuing payment for those 4 months from Jenny.
Jenny hired us to work things out with the facility. It was not clear that she was responsible to pay the bill from her own assets since the agreement was filled out improperly. We could go to court and let a judge decide that. Maybe we win, maybe the nursing home wins. Either way, a lot of money is spent and time wasted. Both sides end up losing.
A negotiated resolution was the better option. Jenny talked to her brother about repaying the loan. He claimed he had, over the years, repaid much of it but, of course, that didn’t help us now. Unfortunately Jenny missed her opportunity to present her case to Medicaid. They made their decision and she was stuck with the penalty.
Legally, Jenny would have had a tough time compelling her brother to repay it since there was no written agreement (there rarely is amongst family) and, again, that would have cost time and money to file a lawsuit. She also didn’t enjoy the thought of suing her brother. Her brother, on the other hand, didn’t want Jenny to be held responsible to pay out of her own pocket since she did not benefit from Dad’s loan. Luckily, he agreed to give more money back.
So, we went back to the nursing facility and negotiated a settlement in an amount that would compensate the facility for what they would have received from Medicaid if the State had covered the cost of care during the 4 month penalty. Jenny was happy she didn’t have to pay the $40,000 and the nursing facility received what they would have gotten from Medicaid. Quite frankly, they were lucky. Things worked out even though everyone involved made a colossal blunder.
The result could have been much better for both sides. If Jenny had hired us to file the Medicaid application we would have gone through Dad’s financial records before we applied for Medicaid and found the loan. Jenny’s brother would have had an opportunity to provide us with proof of what he paid back. In that case, we would have been dealing with a number less than $40,000 and thus a smaller potential penalty.
And, now I will tell you the biggest mistake the nursing facility made – filing the Medicaid application with a penalty. It is often better to return the money and spend it down before filing. Why? Because, the penalty is calculated on the State’s assertion that one month of nursing home care costs $7282, not on the actual cost to Jenny of $10,000 a month.
So, let’s say that Jenny’s brother still owed Dad $20,000. If he had returned the money before we filed, Jenny would have been able to pay another month of nursing care at $10,000, hired us to file the Medicaid application, set up a prepaid irrevocable burial and spend down the balance of the funds on clothes, etc. to less than $2000 before we applied.
The nursing facility would have received an extra month’s payment of $10,000 and there would have been no Medicaid penalty. So instead of negotiating a settlement with the facility to pay them what they would have received from Medicaid for the 4 month penalty, they would have received private pay for 1 of those months and Medicaid coverage for the other 3. More money for them and less aggravation for Jenny.
Once again, an example of why the Medicaid rules are so complicated and why you need the guidance of a professional who knows the rules.