MEDICAID AND OWNERSHIP

This memorandum is intended to supplement the previous memorandum entitled "Medicaid Law and The Elderly". Before reviewing this memorandum, I would suggest that the reader review the general principles of Medicaid law in the memorandum entitled "Medicaid Law And The Elderly".

You will recall that a person may qualify for Medicaid assistance in the payment of their nursing home care if they have a total amount of resources which are less than $4,000.00 for a single person. (See Medicaid Law And The Elderly II B 1). You will also recall that certain resources are excluded from consideration when determining this $4,000.00 amount (See Medicaid Law And The Elderly II B 2).

I. Determining Who Owns The Asset.

The applicant for Medicaid assistance must have less than $4,000.00 in assets (less the excluded assets which are not considered) in order to qualify for Medicaid. The Department of Social Services, as the administrator of the Medicaid program, will look at the title or wording on the ownership of the asset in determining whether or not that asset will be included in the $4,000.00 limit. The following examples help to illustrate how the title to an asset for a legal contract may be important:

A. Jointly Owned Resources.

As a general rule, the words "and/or" or "or" appearing on a title or other legal contract denotes joint tenancy ownership. This means that either owner could sign and turn the asset to cash without the other's consent. Therefore, the total asset is considered available to either owner and if one of the owners is applying for Medicaid, the total value of the asset will be attributable toward him or her when determining whether he or she meets the resource guidelines.

B. Tenancy In Common.

The word "and" appearing on a title or other legal contract refers to "tenancy in common". This means that each
owner holds an undivided interest in the resource without rights of survivorship to the other owners. Only the proportionate share based upon the number of owners of the asset is available to each owner.

C. Payable On Death Or Beneficiary.

An asset that is titled or a legal contract that lists a beneficiary or a person that the asset is to be paid to upon the death of the owner will be considered the sole asset of the owner.

NOTE: In joint ownership and tenancy in common
ownership cases, the applicant for Medicaid may
prove to the Department of Social Services that
he or she is not the true owner of the asset, and,
the Department of Social Services will allow the
applicant to remove his or her name from the title
of ownership in order to reflect the true ownership.

Examples.

1. John Smith, a widower, titles a CD in his name and his son's name, jointly, with right of survivorship. Ten years later, the CD, now worth $30,000.00, is the only asset that John Smith has. Under Medicaid law, $26,000.00 of the $30,000.00 CD must be used to pay for John Smith's nursing home care before Medicaid will assist in the payment.

2. Assume the same example as number one above, however, John Smith titles the CD in his name "and" his son's name as "tenants in common". In that situation, John Smith will only have to apply $11,000.00 of that CD toward his nursing home care ($15,000.00 or one-half less $4,000.00 in excluded assets) before Medicaid will begin payment on his nursing home care.

3. Assume the same example as number one above, however, John Smith's son is the one that set up the CD. In this situation, John Smith would prove to the Department of Social Services that he did not contribute any money to the CD and he is not the "true owner". If John Smith is successful, his name will have to be removed from the CD and then he will qualify for Medicaid assistance in the payment of his nursing home care.

II. The Treatment Of Various Investment Vehicles Under Medicaid
Law.

A. Certificate of Deposit.

The entire amount of a certificate of deposit will be included as a resource in determining whether or not a person
will qualify for Medicaid. This is true regardless whether there are penalties for early withdrawal.

B. Mutual Fund.

The entire amount of the mutual fund will be included as a resource in determining whether or not a person qualifies for Medicaid. This is true even though there may be some penalty for early withdrawal of the mutual fund.

C. Stocks.

The entire amount of the stocks will be included as a resource in determining whether or not a person will qualify for Medicaid.

D. Life Insurance.

Term insurance is not included as an asset in determining whether someone qualifies for Medicaid. This is true because there is not "cash value" to a term insurance policy. However, the cash value of a "whole" or "investment" life insurance policy will be considered as a resource when determining whether or not a person qualifies for Medicaid. This is true because most (whole or investment) life insurance policies have a "cash value".

E. Variable Annuity.

The cash value of a variable annuity will be considered a resource when determining whether or not a person qualifies for Medicaid. This is true because at any point during the term of the annuity the annuitant may withdraw a portion or all of the funds that were placed in the annuity.

F. Fixed Annuity.

There are basically two types of fixed annuities available to an investor. The first type of fixed annuity is set up on a deferred basis and still has cash value sometimes called a single premium deferred annuity (SPDA). The second type of fixed annuity is immediately annuitized or paid out on an immediate systematic or monthly basis or any annuity contract that guarantees the payment to an annuitant of a sum certain for the remainder of his or her life. This type of investment is sometimes called an immediate annuity contract. The following discussion deals with how Medicaid law applies to these two types of fixed annuities:

1. A fixed annuity that is set up on a deferred basis and has cash value to the investor, sometimes referred to as a
single premium deferred annuity (SPDA), will be considered as a resource when determining whether or not a person qualifies for Medicaid. This type of annuity arrangement is similar to a certificate of deposit in that a lump sum is invested and earns interest over a time certain and no systematic payments are made to the investor pursuant to the annuity contract until that time certain expires. The reason this type of annuity is considered as a resource under Medicaid law is that the annuity has a "cash value" to the investor during the term of the annuity contract.

2. On the other hand, a fixed annuity in which a lump sum is invested that is immediately annuitized or paid out on an immediate systematic or monthly basis or any other immediate annuity contract that guarantees the payment to the annuitant of a sum certain for the remainder of his or her life, will not be considered an asset when determining whether or not a person qualifies for Medicaid**. This is true because under the annuity contract, the annuitant may not withdraw more than the fixed amount that he or she is entitled to. This type of investment vehicle is also called fully "annuitizing" an asset. This type of annuity has no real cash value to the investor which allows the investor to withdraw his or her initial investment with interest during the term of the annuity contract.

Concerning this type of immediate fixed annuity arrangement, it is very important to note that any payments made from the annuity while the person is in the nursing home care and while the person is being assisted by Medicaid will have to be assigned directly to the nursing home for the payment of that person's nursing home care. Any remaining amount owed will be paid by Medicaid. However, if the Medicaid recipient is married, and the annuity is owned by the non-nursing home spouse, the non-nursing home spouse will be entitled to 100% of the income received from the annuity.

**The Wisconsin Department of Health recently changed its policy and is now including most annuities as an available resource. Many financial companies are now willing to purchase and place a cash value on fixed annuities, and as a result, the annuity may be sold and used for nursing home expense. Nebraska Health and Human Services could change their policy in the future.