Note:  This blog was written prior to the publication of the Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits rule by the Veterans Affairs Department effective October 18, 2018.  As such, any strategies outlined in this blog post may no longer be advisable.  For more information, read our blog post on the subject, or read the full Federal Register document text here.

It is often difficult to determine the best action to take for clients facing the financial burden of long term care. This is just part of the job for Medicaid and VA benefits planners. The Krause Agency previously explored scenarios for choosing between Medicaid benefits, VA Aid & Attendance benefits, or working between the two.

The VA Aid & Attendance benefit is a tax-free, monthly pension, available to surviving spouses who have low income and little assets. Medicaid is a joint federal and state means-tested program that assists with helping individuals cover their healthcare costs. It is administered at the state level, creating specific rules and regulations that vary from state to state.

We’re here to help you better understand which benefit or if the coordination of benefits is the right choice for married clients. Consider these following scenarios and case studies.

VA Benefit is Appropriate if the Clients…

• are not residing in a Medicaid-approved facility
• meet the VA Aid & Attendance eligibility
• receive care at home and intend to remain at home

Case Example

Consider the case of Woody. He’s an 82 year old Korean War veterans that suffers from Parkinson’s disease. Woody and his wife, Fran, feel it is best he moves into an assisted living facility. In Woody’s state, Medicaid does not offer a waiver program that will pay for his cost of care.

Here’s the breakdown:

• Woody’s monthly medical expenses: $4,000.00
• Woody’s monthly income: $1,100.00
• Fran’s monthly income: $900.00
• Total countable assets: $140,000.00
• Based on the figures above, Woody and Fran have a combined monthly income shortfall of $2,000.00
• For VA purposes, Woody’s IVAP is ($2,000.00), making woody eligible for the full Aid & Attendance benefit of $2,127.00

Though Woody’s unreimbursed medical expenses (UMEs) outweigh his overall household income, Woody and Fran must have “nominal assets” to qualify for VA benefits. There is no explicit asset limit, but it is recommended that Woody and Fran retain no more than $25,000.00 of countable assets.

In that the couple currently has assets of $140,000.000, the excess amount of $115,000.00 will be placed into an annuity that will pay out over Woody’s life expectancy of 7.19 years or 86.28 months. Woody will receive $1,360 per month for the next 86 months, making his total income $2,460.00 and the couples combined income to $3,360.00. Woody’s IVAP is now ($640.00). As Woody’s IVAP is still less than zero, he is still entitled to the full Aid & Attendance benefit of $2,127.00 to help pay for his monthly medical expenses, as well as Fran’s expenses while she remains at home.

Medicaid is Appropriate if the Clients…

• are not veterans
• are in a Medicaid-approved facility
• are seeking financial assistance to cover the entire cost of care

Case Example

At 80 years old, Mary suffers from dementia.  She and her husband, Ron, who is 81-years old, decide Mary should enter into a skilled nursing facility.  Neither Ron nor Mary have ever served in the military.

• Mary’s monthly medical expenses: $8,000.00
• Ron’s monthly income: $2,000.00
• Mary’s monthly income: $1,500.00
• Total countable assets: $300,000.00
• Based on the figures above, Ron and Mary have a combined monthly income shortfall of $4,500.00
• Medicaid will cover Mary’s entire cost of care at the facility

Because Mary is married, Ron, as the community spouse, is entitled to retain a Community Spouse Resource Allowance (“CSRA”).

With the couple residing in a minimum / maximum state for CSRA purposes, Ron will be able to retain the maximum CSRA allowed which is $120,900.00. As the institutionalized individual, Mary will be able to retain $2,000.00 for her resource allowance. The total spend-down amount equals $177,100.00.  In order to reduce Ron and Mary’s assets to the allowable limit, the excess $177,100.00 will be put into an annuity for the benefit of Ron and is structured over life expectancy (7.68 years/92.16 months).

Ron will receive $1,960.00 per month for the next 92 months in addition to his current income, and Mary will become immediately eligible for Medicaid benefits.  This means Ron will have sufficient income while he remains at home, and Mary’s entire cost of care will be covered by Medicaid benefits.

Both VA Benefit And Medicaid Are Appropriate If The Clients…

• meet the VA Aid & Attendance eligibility standards
• have placed non-veteran spouse in a Medicaid-approved facility, including assisted living facilities or at-home programs covered by a state Medicaid waiver program
• both have significant unreimbursed medical expenses
• have nominal assets below the state’s CSRA

Case Study

Sue, who is 79-years old, suffers from Alzheimer’s and must enter a skilled nursing facility.  Her husband, Mark, who is 82-years old, is a Vietnam War veteran and suffers severe arthritis, and finds it difficult to get around on his own.  Mark and the children decide it best Mark enter an assisted living facility.

The Facts

• Mark’s monthly medical expenses are $3,500.00
• Sue’s monthly medical expenses are $7,000.00
• Mark’s monthly income is $1,200.00
• Sue’s monthly income is $1,000.00
• Mark and Sue’s total countable assets are $20,000.00
• Based on the figures above, Mark and Sue have a combined monthly income shortfall of $8,300.00
• For VA purposes, Mark’s current IVAP is $8,300.00, therefore Mark is eligible for the full Aid & Attendance benefit of $2,127.00

How We Accelerate Eligibility

Because Sue and Mark have such nominal assets, and Mark is able to retain the minimum CSRA of $24,180.00, he is entitled to keep the entire $20,000.00 of assets.

In this case, they would be eligible for Sue to receive Medicaid without the use of any crisis planning strategies.  Though Medicaid will pay Sue’s entire cost at the skilled nursing facility, Mark will still need assistance with his monthly medical expenses of $3,500.00.  As the UMEs still outweigh the remaining monthly cost of care, Mark’s IVAP will equal $1,300.00.  As the IVAP is still less than zero, Mark is still entitled to the full Aid & Attendance benefit of $2,127.00.

Again, Mark is eligible to receive these benefits without the use of any crisis planning strategies.  As such, neither Mark nor Sue’s eligibility needs to be “accelerated.”

Mark and Sue’s situation is rare.  In order for a married couple to qualify for both Medicaid and VA, they often must have circumstances similar to those described in this section.

What if Mark and Sue had $300,000 of Assets

Let’s say Mark and Sue had $300,000.00 in countable assets.  With the couple residing in a minimum/maximum state for CSRA purposes, and the couple having significant countable assets, Mark would be able to retain the full CSRA of $120,900.00, meaning they have a spend-down amount of $179,100.00. Because they are also interested in applying for the VA benefits, the most they should only retain is $25,000.00.  The spend-down will then increase to $275,000.00.

In order to accelerate eligibility for both benefits, the spend-down amount of $275,000.00 is put into an annuity for the benefit of Mark and structured over his life expectancy of 7.19 years or 86.28 months.  Mark will receive $3,265.00 per month for the next 86 months, increasing his income to $4,465.00.  Because of Mark’s own UMEs of $3,500, he will have a positive IVAP of $965.00.  Because his IVAP is positive, his VA benefit will be reduced dollar-for-dollar until he is no longer eligible for any benefit.  Because his IVAP is still below the maximum benefit available of $2,127.00, he will receive the difference which is $1,162.00.  The reason being is that Mark and Sue had to spend-down an additional $95,900.00 than if they had just applied for Medicaid for Sue’s benefit, thus reducing the liquid resources available to Mark.  Also, due to his significant monthly income, Mark is not entitled to the full VA benefit.

Choosing the best path for your client is dependent upon many factors. The Krause Agency is the expert in accelerating benefits to assist your clients in paying for longterm care, and we are here to assist you in determining the most beneficial plan for your client.  Contact The Krause Agency today to learn more!