FINANCING ALS

by

Jackson S. Stroud
318 Carnation Drive
Clarks Summit, PA 18411

January 4,1998

This account describes my experience paying for my wife's care after she got ALS (Amyotrophic Lateral Sclerosis, or Lou Gehrig's disease). It is hoped that others can use this account to deal with similar situations. Included is information about obtaining financial and other kinds of aid, managing and conserving assets to provide long term care, legal and financial advice that we found helpful, bureaucratic problems that we encountered, and some ethical issues. Persons with financial resources, life styles, and philosophies different from ours will approach financing ALS differently from the way that we did. Regardless of the differences, this account should be helpful for any couple, one of whom needs long term medical and nursing home care.

Our personal experience is limited to one couple, ourselves, in one state, Pennsylvania, and with one insurance company, Blue Cross/Blue Shield of Northeastern Pennsylvania. Joyce chose to have a gastrostomy and a tracheostomy. We have no relatives living near us. Our ties to the community are too weak to set up a volunteer support system. We rely primarily on paid services for her care. I cared for Joyce, with help from nurses and nurses' aides, at home for 3 months after the tracheostomy. Joyce then moved to a nursing home because she was so weak that caring for her at home became physically too difficult. Private insurance paid for Joyce's care in the nursing home for 3.3 years. Joyce was then so poor that she qualified for Medicaid, which now pays for her care at the nursing home.

COST OF CARE

Care for a person with ALS is enormously expensive once the person is on full time ventilation and is fed through a gastric tube. The cost of skilled nursing care in a nursing home is about $155,000 per year for Joyce. There are other costs, such as ambulance rides to and from a hospital, hospital charges, and visits by health-care professionals (ophthalmologist, optician, dentist, personal physician, etc.).

In addition to this essential care, there is supplemental care that greatly increases the quality of Joyce's life. The supplemental care is mainly private duty nurses' aides who supplement the care provided by the nursing home. The nurses' aides cost about $50,000 a year for 12 hours of care a day. The supplemental care also includes things such as an augmentative speech device (a computer for communication), a television with VCR, a tape recorder to play books on tape, a combination speaker-phone and answering machine, a dynamic air mattress to increase comfort and prevent bed sores, and assorted personal supplies like soft facial tissues, baby powder, A&D ointment, shampoo, etc.

The total cost is over $200,000 per year.

TYPES OF RESOURCES

We had 3 kinds of resources to pay for this care:

  • Major resources (over $100,000 each):
    • Medical insurance
    • Personal assets
    • Government (welfare)

  • Lesser resources ($1,000 to $100,000 each)
    • Disability payments from Social Security,
    • Medical deductions on income taxes,
    • The tax liabilities of assets,
    • Medicare insurance.

  • Minor resources (less than $1000 each).


STAGES IN THE FINANCING OF ALS

There are 3 stages in the financing of ALS. They are not mutually exclusive. The length of each stage depends on individual circumstances. During each stage, the financing is done primarily by one of the major resources with some assistance from other resources. These 3 stages are:

  1. Private medical insurance pays until it is exhausted.
  2. When the private medical insurance is exhausted, the spouse with ALS pays until poor enough to qualify for Medicaid.
  3. When the spouse with ALS can no longer pay the full cost, the government pays part of the cost with Medicaid. The nursing home may absorb part of the cost as a financial loss.

Stage 1 -- Private Medical Insurance Pays

The first resource we used was private medical insurance provided by my employer's group policy. The insurance company set up a benefit adaptation program that paid most costs. A benefit adaptation program pays for care not covered by the medical insurance policy. An insurance company sets up a benefit adaptation program in order to avoid still higher costs. For example, the insurance company may pay hundreds of dollars a day for tube feeding, rental of a ventilator, "trach" supplies, nurses, etc. for care at home in order to avoid hospitalization at a cost of well over $1000 per day.

Our insurance policy had a "cap", a maximum amount that would be paid. Joyce's maximum was originally about $300,000, which is not much for ALS. The "cap" was later increased to about $550,000 when my employer doubled the major medical coverage for all employees. After the maximum was reached, I continued Joyce's coverage. The insurance still pays a few bills even though most remaining benefits are inaccessible to Joyce.

Because of the "cap" on the insurance, we did not try to collect every last penny that the insurance might pay during the early stages of her illness. We felt that all of the insurance probably would be used up ( it was), at which time we would pay for everything. It mattered little if we paid some costs because such payments only postponed exhaustion of the insurance by a short time. If Joyce needed something that cost a $1000 and insurance payment was uncertain, or would delay acquisition, then I bought it; a $1000 is only 2 days of care in the nursing home. We elected to spend the $1000 at the time of need instead of a year or 2 later, after the insurance was exhausted.

An example of when we used our own funds instead of the insurance occurred when Joyce was still home. Joyce was on gastric tube feeding and full time ventilation. The private medical insurance would pay $16.25 per hour for a licensed practical nurse (LPN) to care for Joyce but would not pay $10 per hour for a nurses' aide because nurses' aides are not formally trained to care for ventilator patients or for gastric tubes. We elected to have nurses' aides and to pay them ourselves rather than have LPN's paid $16.25 per hour by the insurance. We taught the nurses' aides to do the necessary care. The quality of care with the nurses' aides was considerably less than that provided by a nurse but was adequate at that time. The insurance money that we saved was spent later for care by the nursing home, a time when greater skills were needed. By paying the nurses' aides ourselves, we bought more care for the total pool of insurance money and personal assets.

Nurses' aides and nurses cost most when obtained from an agency, less when gotten through a registry, and least when obtained privately (through newspaper advertisements). An agency provides the best care because their aides and nurses are screened and supervised. An agency will not let their nurses' aides care for a ventilator, a tracheostomy, or a gastric feeding tube. A registry does little screening and supervising but may let its aides service the ventilator, tracheostomy, and gastric feeding tube. The principal care giver must have the time and skills to supervise and administer a care program based on privately obtained aides.

It is important to plan for the next 2 financial stages as soon as private medical insurance begins to pay. We needed to learn about the legal and ethical aspects of the next 2 stages. We needed a lawyer knowledgeable in the laws dealing with elder care. A few consultations with an accountant were important and saved money that was spent later on Joyce's care.

Stage 2 -- The Spouse with ALS Pays

We did not go through this stage. The cost of private duty aides to supplement the care provided by the nursing home was so large that Joyce qualified for Medicaid as soon as the private insurance was exhausted.

When the private medical insurance is exhausted, the spouse with ALS pays for everything until poor enough to qualify for public assistance (welfare). The community spouse (the well spouse who remains within the community when the spouse with ALS enters the nursing home) is not legally obligated to pay any of these costs. This period is called the "spend down". During the "spend down", the nursing home may charge more than they did the insurance company. The couple has little bargaining power to negotiate cost with nursing homes for two reasons: first, the couple has little business to give the nursing home in terms of the overall business activity of the home; second, very few nursing homes take persons with advanced ALS.

In Pennsylvania, the public assistance is Medicaid. Medicaid pays for care in the nursing home. It is administered by the Dept. of Public Welfare. Some of the couple's assets can be kept by the community spouse. The rest must be spent on the spouse with ALS before Medicaid starts to pay. Because Medicaid is partly state funded and is administered by the states, the rules of what can be spent and what can be kept vary from state-to-state. Also, the interpretation of the rules seems to vary from one welfare office to another within Pennsylvania.

If the "spend down" is done badly, both the spouse with ALS and the community spouse are impoverished by spending everything they own. If the "spend down" is done properly, by taking advantage of the spousal impoverishment provisions of Medicaid, then the community spouse is not impoverished. The spousal impoverishment provisions are intended to keep the community spouse a productive member of the community. After a properly done "spend down", the community spouse still has substantial assets that can be used for personal needs or to supplement the care provided by Medicaid.

We needed a lawyer knowledgeable about the laws concerning elder care in order to take advantage of the spousal impoverishment provisions. Lawyers who specialize in elder care can be found by looking in the yellow pages of the telephone book, by asking lawyers for recommendations, by recommendations from some volunteer social service organizations, or by asking the local bar association. When I asked the welfare department, social workers, or the nursing home about the spousal impoverishment provisions of Medicaid, I often got bad or incomplete advice. Some of the bad advice could have cost us several $100,000. The help of a lawyer was worth many times its cost.

For the community spouse to retain some assets, there must be a determination of resources and a division of assets between the community spouse and the spouse with ALS. We got this division by filing a "Resource Assessment" form, Form No. PA 1572 (10-89), with the Lackawanna County Office of Assistance. This form is published by the Dept. of Public Welfare of the Commonwealth of Pennsylvania. On this form one lists the value of all assets owned jointly or individually by the spouses on the day of admission to the nursing home. An option is to list the assets on the date of application for Medicaid.

On the basis of this completed form and their own investigation, the Lackawanna County Office of Assistance told us how much of our assets had to be spent on Joyce's care before Joyce would be eligible for Medicaid. This was done in July, 1995, well before Joyce qualified for Medicaid.

To qualify for Medicaid assistance for nursing home care in Pennsylvania, all of our assets except the following had to be spent on Joyce's care.

  1. The house was retained by me, the community spouse.
  2. Joyce could keep $2000.
  3. Joyce could have an irrevocable burial account worth up to $6250.
  4. Assets (inheritances, salary, interest, dividends, etc.) acquired by me after Joyce entered the nursing home were retained by me. I was not obligated to spend any of these assets on Joyce’s care.
  5. My car was kept by me.
  6. I could keep up to 1/2, but not over about $75,000, of our other assets (savings accounts, checking accounts, bonds, stocks, and Joyce's retirement funds). The exact amount changes each year. All assets that I kept had to be in my name alone. The community spouse may or may not be allowed to keep all of their own retirement funds (IRA's, Keogh funds, 401K funds), depending on the state and on the interpretation of the law by the local welfare office. Our resource assessment let me keep all of mine.

The rest of our assets had to be spent on Joyce’s care and on some of my needs (A new roof on the house and a new car needed to continue working) before Joyce could get Medicaid.

It is essential that the assets fulfill 2 requirements in order to qualify for Medicaid. The first requirement is that the assets to be spent must, indeed, be spent in appropriate ways. The second requirement is that the assets of the spouse with ALS must be reduced to $2000 or less. If the required amount of money is spent but more than $2000 is left in the name of the spouse with ALS, then the qualifications for Medicaid are not met. The spouse with ALS must "spend down" her or his remaining assets to $2000 or less. It may be best to transfer all assets into the name of the community spouse as soon as possible, preferably, as soon as ALS is diagnosed.

We needed a lawyer's help with the resource assessment for several reasons:

  1. It was exceedingly difficult to get a resource assessment. A resource assessment should be easy to get because Medicaid rules require the nursing home to notify a new resident of their right to request a resource assessment. My experience, and that of others to whom I talked, was that nursing homes were unaware of the importance of an early resource assessment. We needed a lawyer's guidance to get the forms.
  2. The lawyer's guidance of what to include on the resource assessment form was valuable. The lawyer's advice helped avoid overstating or understating the resources. Deliberate understating of the resources could be fraud.
  3. Some states interpret the Medicaid laws in apparently improper ways. One attorney told me that the interpretation varies from one welfare office to another within Pennsylvania. We would have needed a lawyer if we had wanted to challenge the welfare department's interpretation.
  4. If the division of assets had not been to our liking, then we might have wanted to negotiate a different division. We would have needed an experienced lawyer to do the negotiating.
  5. The rules change frequently. Even a lawyer knowledgeable in elder care may not have the latest rules and may not have a way of being automatically informed of changes in the rules. Our attorney tried to get these updates automatically but was not able to do so.
  6. Because the resource assessment was such a murky affair, because Joyce was changing so rapidly, and because I was working full time, there was not enough time for me to educate myself enough to get through the bureaucratic tangle. The lawyer's expertise and the time that he supplied were important aids.

The division of assets should be done before, or immediately after, the spouse with ALS enters the nursing home so that long range financial plans can be made. The division of assets can be used for this planning. The worst time to get the division of assets is after "spend down" starts. Far more may be spent than is necessary to qualify for Medicaid.

Our experience provides an example of how disastrous lack of a division of assets might be. I was once advised to tell the nursing home one month before I could not pay for Joyce's care and the nursing home would then help apply for Medicaid. If I had taken that advice literally, I would have spent everything, including all savings, the equity in the house, all money that I earned and inherited after Joyce's admission to a nursing home, and possibly my retirement funds. In fact, our resource assessment and division of assets let me keep most of those assets. Because I had the division of assets, I was able to inform the nursing home one month before Joyce was eligible for Medicaid instead of when we were already impoverished. The assets that I retained are buying supplemental care for Joyce as well as making my life easier.

Assets kept by the community spouse may be vulnerable. Examples are: retirement funds, such as a company sponsored retirement, if available in a lump sum; Keogh funds; SEP accounts; and IRA's. Because federal law is vague about the status of the community spouse's retirement funds, some states require that these assets be spent before the ill spouse is eligible for Medicaid. A possible way to protect vulnerable assets is to convert them into a stream of payments by purchasing annuities for the community spouse. One must be careful with this approach. It may not work in all circumstances. It may be fraudulent in some situations. Also, a lot of investments called "annuities" are not truly annuities. They are mutual funds with the assets remaining available in a lump sum. The assets must be annuitized and the stream of payments started in order to get protection.

At the end of the "spend down" period, the spouse with ALS qualifies for public assistance (Medicaid) for nursing home care.

Stage 3 -- Medicaid Pays

The welfare department establishes a rate of payment to the nursing home. This rate may be less than the rate paid by private medical insurance and by the spouse with ALS. The nursing home absorbs the rest of the cost as a loss. This loss is at least partly reimbursed in the rates that Medicaid pays to the nursing home in the following year. The nursing home cannot make the community spouse, or anyone else, pay the difference between their costs and the amount that Medicaid allows. Neither can the nursing home evict the ill spouse. This is a big advantage of Medicaid; charges by the nursing home are capped. The cap can be an important asset if the spouse with ALS has a large income.

This stage, where the nursing home may lose money, has an important effect on timing admission to a nursing home. Joyce entered the nursing home when there was a large amount of medical insurance and our assets to pay for the care. If one waits until one is destitute to apply for entrance to a nursing home, one may not get in because the nursing home may lose money from the start. Since most nursing homes are not equipped to care for a person with advanced ALS, they have a perfect excuse for rejecting the ALS applicant.

Despite being eligible for Medicaid, the person in the nursing home may still have to pay some or all of the bill from the nursing home. Their income (disability, social security, annuities, pension, trust payments, etc.) is allocated as follows:

  1. $30 per month is kept for incidentals by the person in the nursing home.
  2. Some income may be transferred to the community spouse if that spouse's income is not large enough to maintain reasonable living conditions.
  3. The balance of the income must be used to pay for nursing home care, up to the maximum that Medicaid allows the nursing home to charge. If the income is not large enough to pay all of the charges from the nursing home, then Medicaid pays the balance.
  4. Income that exceeds the items 2 and 3 above may be spent as the person in the nursing home sees fit.

Medicaid allows the community spouse to keep all income and other assets acquired after the date for which the resource assessment is done. Part of the income of the spouse with ALS may also be transferred to the community spouse if necessary to provide adequate income. The community spouse's income combined with the allowance from the spouse with ALS may not support the community spouse's life style or house. In that case, the community spouse needs to negotiate a higher allowance with the welfare department. Good documentation of living costs is needed. A lawyer is helpful. If, after negotiations, the community spouse still can't afford to maintain the house, there is a difficult choice. If the house is sold, the money received becomes an asset, Medicaid stops, charges from the nursing home may increase, and "spend down" starts again. A better way to get more money might be to borrow against the equity in the house. A reverse mortgage might be useful.

Medicaid is the last financial stage. It continues for life.

LESSER RESOURCES


1. Disability

This is a relatively small resource, compared to overall costs, but worth while because it is easy to get, can be gotten early, and continues for life. The rules and procedures for getting disability payments are simple.

  1. To be eligible for disability payments, the person with ALS must have paid into the social security system for a number of years. The number of years and their distribution over time depends on the age at which disability starts. The local office of the Social Security Administration can tell you whether sufficient payments were made.
  2. Telephone the local office of the Social Security Administration and make an appointment to apply for disability as soon as a written diagnosis is obtained. Joyce and I took to the appointment copies of all medical tests as well as a copy of the written diagnosis.
  3. The Social Security Administration then determines that the person with ALS is disabled (A diagnosis of ALS automatically qualifies one for disability.) and that the disability started at a particular time in the past. The determination can be appealed if it is not to your liking. The Social Security Administration will advise you of your right to appeal and will tell you how to appeal.
  4. The disabled person starts receiving disability checks 5 months after the date on which the disability was determined to have started. This date for starting payments may have passed, in which case one receives payments retroactively to the date on which they should have started. The size of the payments depends on how much social security one has paid over the years. It will be at least $433.80 per month.
  5. Two years after starting to receive disability checks, the disabled person is eligible for Medicare, an important asset since there may be little or no private medical insurance left. A disabled person cannot be refused Medicare.


2. Medical deductions on income taxes

Uncle Sam will pay part of the cost. The cost of nurses' aides and nurses paid privately to give supplemental care in a nursing home is a deductible medical expense on federal income taxes. The aides and nurses can be considered self-employed. You don't have to withhold income taxes or pay social security taxes for them; it is their responsibility to pay income taxes and self-employment taxes. I document all payments by paying with checks. Payments must be reported to the Internal Revenue Service (IRS) on form 1099-MISC, one form for each care giver, if the total amount paid to a given care-giver is $600 or more. The care giver's social security number and address are needed to complete the form. A copy of form 1099-MISC must be given to the care-giver. The originals of the 1099-MISC forms are sent to the IRS together with a form 1096. I attach a copy of the form 1096 to our income tax form to justify the large medical deduction.

Some self-employed people prefer to be paid in cash because they don't pay taxes on income from self-employment. They don't want any record of the payment. If there is no record of payment, then the IRS can't prove that they owe taxes on the money and you can't prove to the IRS that you made the payment when you claim a medical deduction for it. I avoid problems by telling potential care givers that I consider them self-employed, that I pay by check, that I give them a summary of their earnings at the end of the year, and that I report their earnings to the IRS in order to claim an income tax deduction.

The cost of nurses' aides and nurses paid to care for the person with ALS in the home is also a medical deduction. There is a tendency for the aides and nurses to do some house work, such as laundry and cooking. This may compromise their status so that at least part of their time is classified as domestic help. A wholly different set of income tax rules applies to domestic help. If this situation arises, one should consult an accountant. One may have to pay social security taxes and withhold income taxes.


3. Tax liabilities of assets

Some more costs can be shifted to Uncle Sam. Some assets, such as IRA's, US savings bonds, and stocks that have appreciated in value, have large tax liabilities because income taxes have not been paid on all of their initial cost, on the accrued interest, or on the capital gains. The second financial stage, when the person with ALS pays, is a good time to cash in these assets. If the medical costs exceed current taxable income, then part of the medical deduction is lost because it cannot be carried over to the next year. A way to make use of the whole medical deduction is to increase income by cashing in assets with large tax liabilities. Even if current, taxable income exceeds the medical deductions, it may still be advantageous to cash assets with large tax liabilities in order to have the liabilities taxed at a rate lower than would otherwise occur. If all of these assets aren't needed to pay medical costs, they can be reinvested, after payment of taxes, free from any tax liability.

4. Medicare and medigap insurance

A disabled person automatically gets Medicare A (hospitalization insurance), which is "free", and Medicare B (medical insurance), for which one pays a small amount, 2 years after the start of disability payments. The cost of Medicare B is a tax deductible medical expense. Medicare B can be postponed at a saving if one still has private insurance. After depletion of the private insurance, one has a 7 month special enrollment period in which to enroll in Medicare B without paying a penalty in the form of higher premiums.

I estimated that Medicare A would pay about $35,000 of Joyce's nursing home costs over a 100 day period. To start payments, Joyce must be hospitalized for 3 days. After the 100 days, Joyce must be discharged for 60 days, in order to start a new benefit period, before Medicare would pay for another 100 days of care by a nursing home. Because Joyce is too weak to be discharged, a second 100 days would never occur and Medicare would pay no more for care by a nursing home. In practice, Joyce has not been hospitalized; Medicare has not paid for care by the nursing home.

When Medicare B started, I tried unsuccessfully to get medigap insurance for Joyce. Medigap insurance supplements Medicare by paying costs not covered by Medicare. I estimate that medigap would pay about $7000 of Joyce's nursing home costs per benefit period. As with Medicare A, there would be, at most, one benefit period for Joyce. Joyce was not eligible at that time because she had private insurance that paid nearly all of her bills. When the private insurance was exhausted, I tried again, unsuccessfully, to get a medigap policy.

Private insurers sell medigap insurance policies. They are not obligated to sell medigap policies to disabled persons less than 65 years old. The only option was to buy a medigap policy from the company that provided Joyce's private medical insurance. That company reportedly had a policy of selling medigap insurance to their clients if there were no lapse in medical insurance coverage. The insurer said that Joyce was ineligible for their medigap policy because she already had Medicaid. I still pay for the private medical insurance but it pays few costs.

MINOR RESOURCES

We found a number of minor resources that may by helpful if ALS progresses slowly. Joyce's ALS progressed so rapidly that they were of little use. The amount of help was too small and too short lived to be worth the scarce time needed to arrange for it. Only one, an income tax deduction for a noncash charitable gift, was marginally helpful.

These minor resources are:

  • The Muscular Dystrophy Association and the ALS Association have equipment loan programs in some areas. We were not aware of the local Muscular Dystrophy program. The nearest ALS program was too far away.
  • The Muscular Dystrophy Association supports a number of services, such as purchase of augmentative communication equipment. The support for an augmentative communication device was too small ($350 compared to an ultimate cost of $6000) and required too much waiting and effort for us to get.
  • Various volunteer and government-paid social services may provide some help in the home. The local welfare department and social workers in hospitals can tell you how to get in touch with these groups. The amount of time per week and the level of expertise were too small to help us.
  • An income tax deduction for medical equipment no longer useful to Joyce was of some benefit. As Joyce changed, some of her equipment could no longer be used. Such equipment can be sold or can be given to a charitable organization in order to claim a tax deduction. I chose the latter because I thought that the equipment would be hard to sell, especially a customized, tilt-in-space wheelchair. I had little time in which to peddle the equipment.

One gets a tax deduction for a charitable gift of equipment by the following procedure:

  1. Make an itemized list, without prices or evaluation, of the equipment.
  2. Give the equipment to an organization to which gifts qualify for an income tax deduction. Get a receipt for the itemized list. The organization will give a receipt for the equipment but will say nothing about its value. Its value and justification of that value to the IRS is the donor's responsibility.
  3. An accountant advised me that depreciable, used equipment such as this should be valued at flea market prices, about 1/4 to 1/3 of its purchase price.
  4. Complete and file form 8283, "Noncash Charitable Contributions", with your federal income tax form.
  5. I included with form 8283 some additional documentation and explanations that I felt would answer potential questions from the IRS. I tried to give the IRS enough well organized information so that there was no need to ask questions about the deduction.

Our experience showed that giving used medical equipment for a tax deduction is hardly worthwhile. It requires a lot of scarce time to do all the paper work. We gave equipment that cost $7008 to the Muscular Dystrophy Association. For tax purposes, we valued the equipment at $3083, which was high because 2 expensive items were new and unused. Since our medical deduction was already high, this charitable gift was deducted from income taxed at only 15%. We saved $462 in taxes, 6.6% of the initial cost of the equipment. A lot of paper work was needed to document the gift. The saving in taxes was hardly worth the scarce time spent.


THE RATE OF PROGRESSION OF ALS

The rate of progression of ALS varies enormously from person-to-person. Complete paralysis may occur in one year or only after 20 years.

A big consideration when deciding whether to use minor resources and planning how to use major resources is the rapidity with which ALS progresses. As the ailment progresses, the person with ALS becomes continually weaker and continually modifies their life style to compensate. If the person with ALS and the principal care-giver can barely keep up with the changes in life style, then the rate of progression is rapid. This was our situation. In quantitative terms, we found that each adaptation, such as a mafo to prevent foot drop, a walker, or a power wheel chair, was abandoned as ineffective in 2-3 months. Because of this rapid change, we ignored most minor resources. We felt that they would not last long enough and were not valuable enough to be worth the very scarce time needed to get them.


WILLS

Wills may need to be changed.

If I had died before Joyce became eligible for Medicaid, then all property inherited by Joyce would have become an asset that would have had to be spent before Medicaid started. If I were to die now, when Joyce already has Medicaid, and leave my assets to Joyce, then Medicaid would cease. The charges from the nursing home would increase. Joyce's assets would have to be spent down once more before she qualified for Medicaid. Any property that was jointly held, such as our house, would have to be sold, the money from the sale becoming an asset that must be spent on her care. The house need not be sold if Joyce planned to return to it. Since the ALS has progressed so far that skilled nursing care is needed, returning to the house is not possible.

Any stream of payments (an annuity, income from a trust, social security) inherited by Joyce after qualifying for Medicaid may benefit only the government. It will not benefit Joyce unless the stream is larger than the charges allowed by Medicaid. For example, if Joyce were to inherit income from a trust, then the state would require that the income be used to pay the costs of the nursing home up to the maximum established by the department of welfare. This requirement reduces the state's share of the costs. The nursing home doesn't benefit because its charges are still capped. Neither does Joyce benefit unless the stream of payments exceeds the charges allowed by Medicaid.

How one deals with this situation depends on how the community spouse wants to care for the person with ALS. I want all assets reserved to me by the spousal impoverishment provisions of Medicaid to be used for Joyce's supplemental care if I should die before her. To do this, I transferred all of our assets to my name alone and set up a "bubble gum" trust for Joyce. If I die before Joyce, then all assets go into the "bubble gum" trust. "Bubble gum" trusts are commonly used to provide for enrichment of the lives of disabled children. The trust has restrictions on the use of the assets so that they may not be used for any type of care that would be provided by the state or others in the absence of the trust. For disabled children, such trusts provide for recreation, television, vacations, educational trips, candy, bubble gum, etc. Hence the name. The "bubble gum" trust may not succeed. It is the best that I could do to protect Joyce if I should die before her.


POWER OF ATTORNEY

Joyce gave me a durable power of attorney. It was the last document she signed, and that with a shaky hand. It proved essential in conducting business for her. I needed it to file joint income tax returns, to change the deed of our house, and to handle her IRA, credit card, and bank accounts. I used it when I paid bills and did other financial transactions as Joyce's agent. My word was seldom questioned when I showed the durable power of attorney.


ETHICAL ISSUES

I faced two ethical issues that I resolved in the following ways.

  • Welfare

I hated to have Joyce use Medicaid, which is welfare. Being on welfare is considered disreputable among our friends.

This issue was resolved when I realized that welfare is a kind of insurance purchased through taxes instead of from an insurance company. Like our house insurance, we paid for it all of our lives and never needed it. We expect to continue paying for house insurance and hope that we will never need it. Unfortunately, Joyce now needs the welfare that we paid for with taxes for such a long time. She is using it.

  • Spousal Impoverishment Provisions of Medicaid.

I felt that making use of these provisions was depriving Joyce of resources that would ease her plight. It seemed like I was grabbing a lot of her money for myself, especially when I impoverished her by transferring all of her assets to me.

This issue was resolved when I realized that I was just preserving some of our assets by shifting the major cost of Joyce's care to the government. The assets that I preserve can be spent on the supplemental care that greatly improves Joyce's quality of life as well as on my needs.


EPILOGUE

In January, 1997, I notified the nursing home that the insurance was about to run out and that Joyce could not pay for her care. The nursing home filed an application for Medicaid. I was interviewed by a case worker in the Lackawanna County Office of Public Assistance in order to determine whether Joyce was eligible for Medicaid. After a brief investigation by the Office of Public Assistance, Medicaid was granted.

Despite my long preparation, I had some surprises and some opportunities to lose large amounts of money at this time. Just before the application was filed, I learned that, despite having spent the required amount on Joyce's care, we would have to spend over $15,000 that was still in Joyce's IRA accounts. I closed the accounts before filing the application for Medicaid. Because Joyce was disabled, the banks waived the penalties for early cashing of the CD's in those accounts and the IRS will not charge the 10% penalty for early withdrawal from an IRA. The money was used to reimburse me for money that I had informally loaned to Joyce to pay for her supplemental care. The cost of Joyce's care is, legally, her responsibility, not mine. This illustrates the importance of impoverishing the spouse with ALS early on by transferring all assets to the community spouse.

Another surprise was that the cost ($8,000) of a new roof on the house, the cost ($17,000) of a new car for me to commute to work, and the cost ($6,250) of an irrevocable burial account for Joyce, all purchased after the determination of resources, counted as part of the "spend down".

The interviews went smoothly. I had lots of well organized documentation and some understanding of the rules for eligibility for Medicaid. A knowledge of the rules saved a great deal of money twice during the interviews,.

The first situation occurred when the case worker wanted to do a current resource assessment. The case worker did not tell me that the person in the nursing home has the option of having the resource assessment done for the date at which they entered the nursing home or for the date of application for Medicaid. I knew about this option. I said that the determination of resources and the division of assets had already been done for the date that Joyce entered the nursing home and that we wanted to use that date. I gave the case worker a copy of this determination. It had been done 18 months before by the head of the Office of Public Assistance. This resource assessment was accepted. I chose this option because we had already spent enough money for Joyce to qualify for Medicaid. If the resource assessment had been done on the date of application, then all liquid assets that we still had, about $100,000, would have been divided between us. Half would have had to be spent before Joyce qualified for Medicaid. By choosing the date of entrance to the nursing home for the resource assessment, we saved an additional $50,000 for spending on supplemental care.

The second situation occurred when the case worker learned that I had inherited $47,000 in savings bonds after Joyce entered the nursing home. I had not listed these bonds in the resource assessment because assets acquired by the community spouse after the spouse with ALS enters the nursing home are not deemable to (not required to be spent on care for) the spouse with ALS. The case worker was not aware of this spousal impoverishment provision. She wanted me to include the $47,000 in the determination of resources. I explained my understanding of the rules to her. The case worker consulted her supervisor and they agreed with me. If I had not known about this provision of the spousal impoverishment rules, then we would have had to spend that $47,000 before Joyce obtained Medicaid.