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Coastal Senior is a monthly periodical published in Savannah, Georgia and circulated throughout the Georgia and South Carolina low country. Bob Mason is its legal columnist.

Medicare can be confusing enough as it is. The past few years Medicare has gotten even more confusing with new “Part D Drug Plans” and the somewhat older “Medicare Advantage Plans” (which until recently had been called Medicare+Choice Plans). Whew.

To the chagrin of some insurance professionals, I am going to take a two-part swipe at Medicare Advantage Plans in this and my next column. Medicare Advantage Plans have been under scrutiny lately, and for a reason. If you are covered by one (and I bet you are not thrilled with it) or if you are thinking of switching to one read my words carefully.

Very aggressive (as in illegal) sales tactics have lured some seniors to switch to Advantage Plans, and then when the bloom is off the rose (and they realize they’ve been hoodwinked) many have difficulty backing out.

First, a bit of background on Medicare (I’ll try to keep this simple). The law divides Medicare into four parts. Part A and Part B are what many think of as “traditional” Medicare. Tried and true, they’ve been around for years. Part C covers Medicare Advantage Plans (under my knife below). Part D constitutes the newer prescription drug plans (I will not touch that here).

Medicare Part A has been the traditional route for medical coverage needed by the elderly and disabled in medical facilities. Part B applies to services provided by physicians and other medical practitioners, home health services, durable medical equipment and other services not covered by Part A. (For a more complete discussion of Medicare simply Google “Medicare” and read until you drop).

When combined with good Medicare supplemental insurance policies (popularly called Medigap policies) and the new Part D Drug plans, Part A and Part B provide fairly complete coverage. There are gaps, however.

Traditional Medicare, for example will not pay for most dental care, vision care, hearing care and preventive care. On the other hand, many Medicare Advantage plans offer to fill some of those gaps. But at a cost (and often hidden). For example there may be higher coinsurance amounts or deductibles, or other restrictions on who may provide services.

Some of the newer Medicare Advantage Plans may be patterned after health maintenance organizations, which offer a wide variety of services as long as the member uses participating providers.

Other Advantage plans may be patterned after preferred provider organizations and managed care organizations that offer broader service but hold down costs by preapproving services or placing other restrictions on the medical providers.

Most of the abuses do not involve these plans; they usually involve a type called a “Private Fee-for-Service” plan. These are sometimes called “PFFS Plans”.

So what IS a PFFS Plan? A PFFS Plan is a health plan offered by a private insurance company under contract with the Medicare program. This insurance plan is not a Medigap plan, and it works very differently. You must continue to pay the Medicare Part B premium to participate in the PFFS plan in addition to any additional premium the Private-Fee-for-Service plan may charge.

You may receive services from any doctor, hospital or other provider willing to accept your PFFS plan’s terms of payment. You may get, say, dental coverage . . . but end up paying very high co-insurance amounts for other services. Or you may find that your favorite doctor does not participate in your Medicare Advantage Plan. Or you may find that you no longer have drug coverage that you need.

Even though the marketing problems have involved PFFS Plans, do think very carefully before switching to any type of Advantage Plan; the deal may not be as “advantageous” as it first seemed.

Recently Medicare Advantage plans have come under close scrutiny by authorities after discovery of abusive PFFS hard-sell tactics by private insurers. In April, two Wellcare insurance salesmen were arrested in Columbus, Georgia, for a variety of aggressive and fraudulent sales tactics, including forging the signatures of elderly customers. Shortly after that authorities arrested another salesman after a series of forgeries and misrepresentations by the salesman to residents of a Suwanee (just north of Atlanta) nursing facility.

As a result of the increased “heat” from regulators, UnitedHealth Group Inc., Humana Inc., Wellcare Health Plans Inc., Universal American Financial Corp., Coventry Health Care Inc., Sterling Life Insurance Co. and BlueCross BlueShield of Tennessee recently agreed to suspend marketing of private fee-for-service Medicare plans because of complaints of deceptive practices by some of their agents. The suspensions will remain in effect until regulators are convinced that the companies have cleaned up their sales act.

That’s good news. The problem is that many seniors who are in Medicare Advantage Plans and who may want out are having a terrible time trying to get to the exit.

Stay tuned . . . I’ll cover that in next month’s column. In the meantime: Be careful. Look carefully before switching from traditional Medicare to a Medicare Advantage Plan.

Bob Mason, certified elder law attorney by the National Elder Law Foundation, practices in Savannah, Georgia, and Asheboro, North Carolina. Email Bob at ram@masonlawpc.com or visit www.masonlawpc.com.

Filed Under: Coastal Senior, Medicare Tagged With: ,

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Coastal Senior is a monthly periodical published in Savannah, Georgia and circulated throughout the Georgia and South Carolina low country. Bob Mason is its legal columnist.


You may have heard that Congress has imposed drastic restrictions on long term care assistance under Medicaid. Don’t lose hope. Plenty of options remain for married couples, and many remain for disabled individuals and their families.

The parents of a disabled child must ensure that the child will receive adequate financial protection, probably for the child’s entire lifetime, while at the same time providing equitably for other family members. Maybe a parent is worrying about her own nursing home care but wants to insure her assets can be used for her disabled child.

In many cases access to government entitlement benefits — whether Supplemental Security Income, state supplemental assistance programs, or Medicaid – is critical. How does one remain eligible for these valuable resources without first becoming impoverished?

An inheritance left directly to a disabled child will soon be gone. If a disabled individual comes into a “windfall”, such as a personal injury settlement, those assets, too, will quickly disappear.

Sadly, many parents (with inadequate or no advice) simply leave everything to the “non-disabled” children with the hope those children will “look after” their disabled sibling. Unfortunately, greed, divorce, lawsuits or carelessness can throw this plan awry.

A “special needs trust” might be a great alternative. Because someone other than the beneficiary provides the trust assets, and the trust holds the assets for “supplemental needs” only, the trust should not affect the disabled individual’s eligibility for entitlement benefits or be accessible to the individual’s creditors, including the government.

A “special needs trust” will supplement, not reduce or replace, entitlement benefits that may be available to the disabled individual. If no benefits are available, the trust assets stand ready to help. If the available benefits do not provide adequately for the beneficiary’s needs, the trust assets will fill in that gap. Even if the available benefits adequately cover material needs, the trust assets may be used to enrich the beneficiary’s quality of life without jeopardizing the much-needed benefits. Finally, to the extent that the assets are not used during the beneficiary’s lifetime, they may pass to other family members.

What happens, however, if the disabled individual has assets, but these are inadequate to meet his or her needs? What if a will or a trust names the individual without providing for a trust in the event of disability? And what if the individual is about to receive a settlement or award in a personal injury lawsuit?

By placing his or her property in another kind of special needs trust, a so-called “OBRA ’93 Trust” or “payback” trust, the individual will remain eligible for many important benefits, including Medicaid. The catch is that upon the beneficiary’s death, the Medicaid benefits must be repaid, with only the balance passing to other family members. During the individual’s lifetime, however, the difference between an OBRA ’93 Trust and no trust can be the difference between having training and educational opportunities, a computer, music, regular outings and a vacation, and living a life of poverty or dependency.

The requirements of an OBRA ’93 Trust are simple. It must be established for the lifetime benefit of someone under age 65 who is disabled or blind. It must also provide for pay-back of Medicaid benefits paid by the state. In addition, only parents, grandparents, courts, or “guardians”, not the disabled individual directly, may establish a pay-back trust.

When deciding to establish an OBRA ’93 trust, the disabled beneficiary’s specific needs and the effect of the trust on the individual’s benefits must be taken into account. Also, in the context of a personal injury settlement, many common settlement options (such as annuities) may render an OBRA ’93 trust impossible. Because of this, early planning is a must when damages for a personal injury are involved.

For the trusts I’ve just described, administration can be difficult. Also, for people over 65, or for people with no parents, grandparents, or guardians available to establish a trust, these trusts may be unavailable. In that case, a community or pooled trust may be the answer. They work very much like pay-back trusts, but are administered by non-profit community-based trustees and are “pooled” with the trusts of other disabled beneficiaries. When the beneficiary dies, the assets either “pay-back” Medicaid or can be retained in the trust to provide for other beneficiaries in the community.

This is an exceedingly complex area of the law. I’ve tried to simplify it. Whatever you do, get good advice!

Bob Mason

Filed Under: Coastal Senior, Special Needs Planning Tagged With:

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Safe handing out moneyA Special Needs Trust, also referred to as a Supplemental Needs Trust, is a trust specially designed to hold assets on behalf of a disabled individual in a manner that will benefit the individual without jeopardizing SSI, Medicaid or other government benefits. Further, transfers in to a properly designed Special Needs Trust (also referred to as an “SNT”) will not be a disqualifying or sanctionable transfer for the person transferring assets in to the trust.

Before discussing SNTs further, however, having a basic understanding of what a trust is will be helpful.

What is a Trust?

A trust is a separate legal entity that results from an agreement between someone who sets up the trust (variously called a settlor, donor, or grantor) and a trustee who administers (conserves, invests and expends) the property in the trust for the benefit of a third party (called the beneficiary.

Almost any sort of property can be held in trust. This includes real estate, stocks, bonds, cash, mutual funds or insurance policies. In order to get the property in to the trust, however, someone must transfer the property to the trustee. In the case of real estate, for example, the settlor (or other property owner) simply prepares a deed naming the trustee as the grantee (and legal owner) of the property. Similarly, the settlor can change the name of the ownership on a bank or investment account. Finally, the trustee establishes a checking account to which parties can make deposits and from which the trustee can make distributions. In summary, one client asked me how to transfer assets to a trust, and I told her that basically it was done in the same way she would transfer assets to an individual.

While the trustee becomes the legal owner of the property, the law holds the trustee accountable for the property and the trustee must hold (or distribute) the property according to the terms originally put in the trust agreement by the settlor.

A trustee is what is known as a fiduciary. This means the trustee must use the property only for the beneficiary. The trust agreement (or trust document) should explain how the settlor wants the trustee to use the property for the beneficiary. Sometimes the trustee is given discretion to make decisions as to how the trust fund should be used.

Trusts may be either revocable or irrevocable. If the trust is revocable, it means that the trust may be amended, changed or revoked by the settlor. If the trust is irrevocable, it means that the settlor cannot revoke or modify the trust. Some trusts, especially SNTs, can contain language that allows the trustee or some other special person known as a “trust advisor” to amend the trust if it becomes necessary to do so because of changed circumstances. Nevertheless, the settlor would not be able to make those changes. For example, it might be necessary to amend the trust to comply with changes in state or federal law.

Why a Special Needs Trust?

Bob Talking About Trusts

As noted above, an SNT is a special type of trust designed to supplement benefits received by the beneficiary (such as SSI or Medicaid) without disqualifying the beneficiary for those benefits.

Disabled individuals often receive government assistance to help them maintain themselves. Of course, the most common of these programs are Supplemental Security Income (SSI) and Medicaid. Both of those programs require a person to be impoverished in order to receive benefits. If a person has too many assets or income that is too high, then he or she will not qualify for SSI benefits even if disabled. However, with an SNT, the assets being held in the trust will enable the person to continue to qualify for those programs.

Parents with disabled children also use SNTs to their advantage. Many are concerned that if they leave assets directly to their children who are disabled, the disabled children will fail to qualify for most government benefit programs and will quickly spend through whatever inheritance they receive. Some parents, often unwisely, try to work around this problem by leaving their entire estates to their non-disabled children with the hope that the non-disabled children will care for their disabled sibling. This does not always work.

An SNT can allow a person with disabilities to receive government benefits and continue to have a source of funds to pay for other goods and services that the government programs will not provide. Common examples are specially equipped vans with lifts, certain medical procedures that are not covered, travel to visit relatives in distant parts of the country, and various types of entertainment. These all enhance the quality of life of the disabled individual.

A disabled person can also fund an SNT for himself or herself. These sorts of trusts can hold a person’s assets (for example, an inheritance, a significant settlement from an injury or some sort of retroactive award of benefits). These will be discussed further below.

How Does an SNT Work?

As discussed above, the trustee is the person who makes distributions from the trust according to the instructions that are contained in the trust agreement. In the case of an SNT, the trust agreement must specify that distributions will be made in a way that does not jeopardize the beneficiary’s entitlement to SSI, Medicaid or other public benefits. All of these programs have stringent rules about how distributions from an SNT could affect the beneficiary’s eligibility for continuing benefits.

As discussed above, the assets contained in a properly drafted SNT will not “count against” the beneficiary for continuing benefit eligibility. On the other hand, if the trustee makes a cash distribution directly to the beneficiary, that payment will be considered income to the beneficiary which could jeopardize his or her continuing eligibility for benefits. Also, there are very complex rules regarding payments for food and shelter which are considered under SSI to be “in-kind support and maintenance”. This sort of income could reduce the beneficiary’s SSI benefits . . . or potentially eliminate them all together. Accordingly, it is extremely important the trustees be careful not to distribute any money in a way that will cause a problem with SSI or any benefit programs.  Read HERE for more on how SNT distributions could affect SSI benefits (HUMOR ALERT: Funny article).

Some SNTs, however, might be drafted in such a way that a trustee could distribute money even if it eliminates the beneficiary’s public benefits. For example, the trustee may determine that the beneficiary’s needs for housing outweigh his or her needs for continuing SSI. In any event, the importance of adequate advice available to the trustee cannot be stressed too much.

What are the Different Types of SNTs?

Generally, there are two basic types of SNTs. First, there are self-settled trusts, and second, there are third party trusts.

As the name implies, a self-settled trust is set up using the disabled beneficiary’s own assets. For example, a disabled person who receives an inheritance or has some other property that disqualifies him for public benefits might have the property transferred in to a self-settled trust for his own use. Of course, a self-settled trust established to obtain SSI must meet stringent requirements. First, it must be irrevocable. That means the settlor cannot cancel or amend it. Also, the trust must be established by a parent, grandparent, legal guardian or a court (don’t ask why, it is a strange quirk in the law and makes no sense). Notwithstanding the term “self-settled”, the beneficiary cannot establish the trust for himself. Quite often seeking the appointment of a guardian who can establish the trust becomes necessary. Finally, the trust must contain a Medicaid “payback” provision, which will be discussed further below.

The second type of SNT is a third party trust. As the name implies, these types of trusts contain assets that belonged to some other party at the time of transfer in to the trust. Of course, the main example of this type of trust is one established by a parent for a disabled child. A parent could establish such a trust either while alive or under his or her will or living trust. The main advantage to these types of trusts is that there is no requirement for a Medicaid “payback” provision. In other words, the trust may hold assets for the benefit of a disabled child until that child’s death or some future point in time whereupon the assets are distributed to the other children of the settlor.

For further reading on the differences between various types of SNTs, click HERE.

What are Medicaid “Payback” Provisions?

Medicaid payback provisions are those provisions in certain types of SNTs that require any remaining funds in the trust upon the death of the beneficiary to be distributed to the state. As mentioned above, not all trusts require these provisions.

Usually the funds remaining in a self-settled trust (the first type discussed above) upon the death of the beneficiary must be used to repay the state for benefits that the state had paid out while the beneficiary was alive. Any funds remaining in the trust after paying back the state, however, may be paid to other people specified in the trust document. These people are usually other family members. If a self-settled trust does not contain these Medicaid payback provisions, it will very likely be considered a “countable” asset for the beneficiary.

As mentioned above, funds contained in a third party trust do not have to go to the state.

Filed Under: Special Needs Planning, Trusts generally Tagged With: , ,

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Administrator. A court-appointed person who will manage your estate if you die without a will.

Attorney-in-fact. An individual designated in a power of attorney to act as the agent of the person who executed the document. Often referred to as an Agent.

Beneficiary. A person who receives benefits or funds from a will, contract, or insurance policy.

Durable Power of Attorney for Health Care. A written document in which an individual designates another person to make health care and health-related decisions in the event that the individual becomes incapacitated.

Durable Power of Attorney for Property. A written document (often referred to simply as a “Power of Attorney”) in which an individual designates another person to make his or her property and property-related decisions in the event that the individual becomes incapacitated and is unable to do so.

Estate. An individual’s property and assets.

Estate tax. A tax that is imposed at one’s death on the transfers of some types of property. This is both a federal tax and, in North Carolina, a state tax.

Executor. A person named in a will who is authorized to manage your estate when you die. The executor will collect the property, pay off any debts, and distribute your property and assets according to the terms of your will.

Fiduciary. A person or institution that is legally responsible for the management, investment, and distribution of funds. Executors, Agents, Attorneys-in-fact, and Trustees are common examples of Fiduciaries.

Gift Tax. A tax that is imposed on the transfers of some types of property as gifts or for less than full consideration. This is both a federal tax and, in North Carolina, a state tax. See discussion at Gift and Estate Tax Basics.

Grantor. The person who transfers assets to another, usually into a trust. In the context of Trusts, often referred to as a Settlor or Trustor. The terms are synonymous.

Gross estate. The total property and assets that an individual has or with respect to which the individual had the requisite level of control.

Guardian. An individual with the legal authority to care for another.

Incapacity. The lack of ability to act on your own behalf. A court or often the clerk of the superior court makes a finding of incapacity. Estate planning and Elder Law attorneys must also be adept at assessing the capacity of clients, and must be able to advise health care providers with respect to the legal standards of incapacity.

Inter vivos trust. A trust that is created during a person’s lifetime that holds property for the benefit of another.

Intestate. This is a term used to refer to a person who dies without a will.

Joint tenancy with right of survivorship. A title that is often placed on co-owned property. At the death of one owner, the other owner will be legally entitled to sole possession of the property, regardless of what provisions are made in a will.

Life estate. Also popularly called “lifetime rights”. A method of holding real property in which a person has a right to the use of the property for his life (the “life tenant”) and another person automatically receives title to the property on the death of the life tenant (the “remainderman”). There may be more than one life tenant or remainderman.

Living trust. A revocable trust established during a grantor’s lifetime that is used for the placement of some or all of the grantor’s property.

Living will. A legal document that declares what your wishes with respect to extraordinary treatment if you should become terminally ill or permanently unconscious. Synonymous with a Declaration of a Desire for a Natural Death. See discussion at Advance Directives.

Marital deduction. A federal tax deduction that allows one spouse to pass his or her estate to the other spouse without having to pay estate or gift taxes.

Power of appointment. A right given to another that allows the other to decide how to distribute your property. A “general” power of appointment allows the person named to give or “appoint” property to himself, his estate or his creditors or the creditors of his estate. A “limited” or “special” power of appointment places restrictions on who may receive distributions.

Power of Attorney. A written document that allows one person to act on behalf of another.

Probate. A process whereby a court reviews your will to make sure that it is authentic and allows others to make challenges to your will.

State death or inheritance taxes. Taxes that may be imposed by the state where you live or where your property is located after your death. North Carolina does NOT have an estate tax.

Tenancy by the Entireties. A form of property is a form of real property ownership unique to North Carolina and a small number of other states. This form of ownership is similar to Joint Tenancies with Rights of Survivorship property and applies to married couples only. In North Carolina, real property acquired by a married couple is presumed to be entireties property absent clear language in the deed to the contrary.

Tenancy in Common. A form of real property ownership by multiple owners in which each owner owns a certain fraction of the whole but has a full and complete right to the use of the property. Upon sale an owner will receive his pro rata share of the proceeds. An owner can sell, devise by will or gift his share, and can also petition a court to have the property divided among the owners (and perhaps sold).

Trust. A written document providing that your property be held by one (the “trustee”) for the benefit of another (the “beneficiary”). A trust may be created by a grantor as an inter vivos trust during the grantor’s life or after death pursuant to the terms of a will or an older inter vivos trust (after death trusts being referred to as testamentary trusts).

Trustee. A person named in a trust document who will manage the property owned by the trust and distribute the trust income or property according to the terms of the trust document. A trustee may be an individual or a business.

Will. A document that directs how your property shall be distributed upon your death.

Filed Under: Miscellaneous

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Medicare will only pay for up to 100 days of nursing care following a hospital stay, and there are serious limitations on those benefits. Further, Medicare will not pay for long-term care that involves non-medical help with daily tasks, e.g., bathing, dressing. Also, Medigap policies and regular health insurance do not pay for long-term care that involves non-medical help.

Medicaid, the federal-state public assistance program for the poor, does pay for nursing home costs but only after a person essentially gives up many of his or her assets and qualifies for aid. See NC Medicaid Rules Explained on this website.  Although we can assist you with Medicaid Planning, for many individuals and couples the process is either impractical or emotionally trying. The rules are constantly tightening.

According to an article in Kiplinger’s Retirement Guide, nursing home care costs an average of $72,000 per year. In North Carolina the costs can easily climb to $75,000 to $80,000 per year. The American Council of Life Insurance projects that by 2030, nursing home care will average about $190,000 per year.

Most people prefer to receive care in their homes. According to an article in Kiplinger’s Retirement Guide, nation-wide, daily home-care costs average $45,000 per year. If you purchase long-term-care insurance and select the right benefits then you can decide where and what care you will receive. If you purchase long-term-care insurance, you will receive care and at the same time protect your life savings.

As a law firm, we do not sell any insurance; our job is to counsel and advise you. However, we can assist you with the evaluation and selection of an appropriate long-term care insurance policy suitable for your needs.

Filed Under: Insurance, Medicaid, Nursing Homes Tagged With: , ,