Medicaid and Powers of Attorney- Protecting the Elderly

1. Medicaid andPowers of Attorney- Protecting the Elderly Shirley A. Cox MSW, JD Legal Services Developer Oklahoma Department of Human Services, ASD 2401 N.W. 23rd St. Ste. 40 Oklahoma City, OK 73107-2422 (405) 522-3069 (405) 522-6738 (fax)

2. Medicaid andPowers of Attorney Protective Services for Vulnerable Adults Act43A OS Sections 10-101 through 10-110 “Vulnerable adult" incapacitated person substantially impaired in the ability to provide adequately for the care of self unable to manage his or her property and financial affairs, or to protect self from abuse, verbal abuse, neglect, or exploitation without assistance from others

3. Medicaid andPowers of Attorney Protective Services for Vulnerable Adults Act Person having reasonable cause to believe that vulnerable adult is suffering from abuse, neglect, or exploitation shall make report to: • Department of Human Services; or • Municipal police department or sheriff's office Includes - Person entering into transactions with a caretaker or other person who has assumed role of financial management for a vulnerable adult

4. Medicaid andPowers of Attorney Fraud Trends

5. Medicaid andPowers of Attorney Fraud Trends • More than ¼ of consumers - 60 or older – higher in certain fraud categories • More crooks targeting U.S. consumers from Canada or other countries – makes it harder to pursue them • Bank debits now most common method of payment

6. Medicaid andPowers of Attorney Reasons • Older American citizens are most likely • to have a "nest egg," • own their home and/or • have excellent credit all of which the con will try to tap into • segment of the population most likely to be in good financial position

7. Medicaid andPowers of Attorney Reasons • Individuals from 1930s, 1940s, and 1950s - generally raised to be polite and trusting • Important/positive personality traits, except when it comes to dealing with a con • The con- exploits these traits • Knows- difficult or impossible for these individuals to say "no"

8. Medicaid andPowers of Attorney Reasons • Older Americans -less likely to report fraud • don't know who to report to • too ashamed at having been scammed • do not know have been scammed • concerned -relatives will believe no longer has mental capacity

9. Medicaid andPowers of Attorney Reasons • Older Americans -less likely to report a fraud • Elderly victim often make poor witnesses • Con knows the effects of age on memory • Counting on fact -elderly victim will not be able to supply enough detailed information to investigators

10. Capacity Medicaid andPowers of Attorney

11. Capacity Capacity versus Competency Mental capacity -by a health care professional Competency - legal determination by a court Evidence of incapacity -may be used by judge to determine legally incompetence Medicaid andPowers of Attorney

12. Capacity Incapacity versus Poor Judgment Lack of capacity to make decision -not same as making a foolish decision Going against medical advice- does not automatically signal lack of decision-making capacity However- seemingly unreasonable decision/other signs of incapacity - more thorough capacity assessment Medicaid andPowers of Attorney

13. Capacity In general, persons have sufficient capacity to make decisions if Understand conditions/options available Weigh risks/benefits of possible courses of action Appreciate likely consequences of decision Communicate their decisions Medicaid andPowers of Attorney

14. Capacity Assessment factors: Variability –state the same wish consistently? Reasoning –articulate the reasoning behind decision? Medicaid andPowers of Attorney

15. Medicaid andPowers of Attorney Medicaid Planning

16. Medicaid andPowers of Attorney Medicaid Planning Unfortunately, many nursing home residents end up exhausting their assets on long-term care. But it doesn't have to be that way. The best time to plan for the possibility of nursing home care is when you're still healthy. By doing so, you may be able to pay for your long-term care and protect assets for your loved ones. How? Through Medicaid planning.

17. Medicaid andPowers of Attorney Medicaid Planning • Medicaid planning by family members • often the root of financial abuse • Common knowledge- Medicaid program provides funds • Media encourages "self-help plan“ • how-to's of qualifying elderly into being poor enough to become entitled to Medicaid benefits • Mistaken notion -"government will take" assets and income

18. Medicaid andPowers of Attorney Medicaid Joint federal-state program • Provides health insurance coverage • Covers care in a nursing home for those who qualify • Medicaid- default nursing home insurance of middle class

19. Medicaid andPowers of Attorney Medicaid Countable assets • < $2,000 in "countable" assets • "community spouse" -- limited to ½ of the couple's assets up to $109,560 (in 2011) in "countable" assets • If > $109,560, community spouse’s half of resource in excess of $109,560, reallocated to institutionalized spouse • $25,000 floor for community spouse • Certain trusts w/exceptions

20. Medicaid andPowers of Attorney Medicaid Non-countable assets – • Personal possessions • One motor vehicle- for medical reasons 4/year • principal residence -if equity < $500,000 • house -no equity limit if applicant's spouse or dependent lives there/or if does not live there, still exempt for 12 months if person plans to return • Resource spenddown- countable resources minus community spouse resources must be < $2,000

21. Medicaid andPowers of Attorney Medicaid Non-countable assets • Irrevocable burial plans/life insurance (funeral expenses) < $10,000 • Face value of life insurance ($1500) • Designated accounts for burial ($1500) • Property used in trade of or business • Income producing property < $6000 and produces income < 6% • Annuities – depends on annuity –presumptions marketability (can be sold) has value (discounted by IRS rules)

22. Medicaid andPowers of Attorney Medicaid Transfer Penalty • Penalty for transferring assets < FMV • Look back period after 2/06 =60 months • Penalty- time ineligible for Medicaid • Penalty period -determined by dividing amount transferred by average private pay cost of a nursing home in OK • e.g. -average monthly cost of care = $5,000, give away property worth $100,000, ineligible for benefits for 20 months

23. Medicaid andPowers of Attorney Medicaid Exceptions to the Transfer Penalty- To spouse, blind or disabled child, certain trusts for the benefit of a blind or disabled, sibling, caretaker child Two major issues Amount of resources Timing of transfer

24. Medicaid andPowers of Attorney Medicaid Income – • 300% of maximum SSI ($2022/month in 2011) • If > $2022 but < $3,000 -Medicaid Income Pension Trust • All income goes into trust • $50/personal use • Pays medical insurance premium • Pays rest to nursing home • Trust accumulates rest of income to be used for other approved costs • When person dies, money left used to pay back Medicaid

25. Medicaid andPowers of Attorney Medicaid Income – • For married Medicaid applicants • income of the community spouse not counted • only income in applicant's name counted • even if community spouse still working, will not have to contribute to the cost of care • Medicaid Income Pension Trust- available

26. Medicaid andPowers of Attorney Medicaid Planning • Objective-to preserve assets within family • Have government programs pay LTC costs • Ensure children/grandchildren inheritance • But, usually assets will not be expended on the elderly person's care

27. Medicaid andPowers of Attorney Medicaid Planning • Exploitation -generally, adult child precipitates “self–help” scenario • power of attorney -naming that child as the attorney-in-fact • transfers elderly parent's bank account, securities, and real property into his/her own name • Siblings then discover the transfer

28. Medicaid andPowers of Attorney Medicaid Planning • DPOA often digs his/her heels • refuses to account • refuse to acknowledge siblings interest • Defeats inheritance rights • elderly parent tries to apply for Medicaid < the five-year transfer period has elapsed • DHS denies eligibility

29. Medicaid andPowers of Attorney Medicaid Planning • Exploiter –may consult with attorneys/other professionals for Medicaid planning • Fact that elderly not present ripe for abuse • When competent elderly person seeks counsel, to accomplish Medicaid planning, attorney is duty-bound • provide client with information • assist to the extent requested

30. Medicaid andPowers of Attorney Medicaid Planning If person never speaks/ meets with the attorney • no first-hand, direct knowledge of mental capacity • conflict of interest • attorney is counseling third party • Under Protective Services for Vulnerable Adults Act, required to report

31. Medicaid andPowers of Attorney Medicaid Planning Not all Medicaid planning suspect Medicaid planning -can rearrange finances-countable assets exchanged for exempt assets/otherwise inaccessible • e.g. pay off the mortgage on family home, make necessary home improvements and repairs, pay off debts, purchase car for healthy spouse, prepay burial expenses

32. Medicaid andPowers of Attorney Medicaid Planning Policy questions • ultimate goal of society -government pays? • artificially planned indigence inappropriate, ever? • how much does Medicaid planning contribute to exploitation of elderly?

33. Medicaid andPowers of Attorney Powers of Attorney

34. Medicaid andPowers of Attorney Powers of Attorney • Powers of attorney- popular after World War II -create simple device • Fiduciary abuse- one of most egregious methods of exploitation • Fiduciary agent has legal responsibility -by necessity exercises considerable control over person and/or finances • Durable powers of attorney - interpreted narrowly/must be explicit • Certain powers cannot be granted

35. Medicaid andPowers of Attorney Powers of Attorney Two statutes in OK • 58 OS Section 1071 et. seq. Uniform Durable Power of Attorney Act (Probate) • Grant powers over health and medical decisions as well as property and finances • signed by the principal, witnessed by two people who are at least 18 years old and not related to the principal or to the attorney-in-fact by blood or marriage, and notarized

36. Medicaid andPowers of Attorney Powers of Attorney Effectiveness Effective - upon signing Springing- certification- person no longer capable of making decisions

37. Medicaid andPowers of Attorney Powers of Attorney 15 OS Section 1001 et. seq. Uniform Statutory Form Power of Attorney Act (Contracts) • Provides standardized form-grant powers over property only (13 powers) • Principal can initial each power or may initial one line- all powers • Each power -defined in more detail • Does not need to be witnessed, but it does need to be signed by the principal and notarized

38. Medicaid andPowers of Attorney Powers of Attorney 2003 national survey (among elder lawprofessionals) - >70% consensus -power of attorney statute should include • attorney-in-fact's fiduciary obligations • whether attorney-in-fact can refuse to act on a principal's behalf • how principal can revoke authority • when third party can properly refuse to accept a power of attorney

39. Medicaid andPowers of Attorney Powers of Attorney • But- delegation of authority takes place in private • Reliance on child/friend • Approaches to induce the trust of older adults • offer to provide advice about investments, "let me handle everything” • marriage • coercion

40. Medicaid andPowers of Attorney Powers of Attorney • fiduciary owes special duty to principal • act in his/her best interest • most unaware of the level of conduct required • Oklahoma - requires power of attorney to state that attorney-in-fact owes fiduciary duty

41. Medicaid andPowers of Attorney Powers of Attorney • Fiduciary duty • Agent- must keep the elder informed • Agent may gain profit only if informs and gets consent • Agent may not acquire interest adverse to the elder or reap a secret profit • Agent may not transfer the elder's property self (or to others) unless power specifically conferred

42. Medicaid andPowers of Attorney Powers of Attorney • DPOA can be a useful planning tool, but virtually unregulated within legal system • No termination-can last a long time • No requirement of attorney • No filing with local court requirement • No prerequisite -agent notify the principal when authority exercised • No periodic accountings by the agent required • Effect of conveyance of assets under DPOA as exploitation and denial of Medicaid eligibility -enforceable right

43. Medicaid andPowers of Attorney Powers of Attorney • Prior to execution – Coercion/trickery in signing document • Subsequent to execution - Three categories of abuse • Transactions exceed intended scope of authority e.g gift giving, sale • Transactions involving self-dealing • Transactions in contraventions of expectations e.g. gift giving that defeats estate planning

44. Medicaid andPowers of Attorney Signs of Financial Exploitation

45. Medicaid andPowers of Attorney The Signs of Financial Exploitation • Numerous cash withdrawals from older adult’s checking account in short period of time, especially if inconsistent with previous spending habits • Signatures on checks, wills, powers of attorney or other documents that look forged, unusual or suspicious • Checks used out of numerical order • Reports by older adult that funds are missing from account

46. Medicaid andPowers of Attorney Signs of Financial Exploitation • Someone encouraging, pressuring, or coercing older adult into withdrawing large sums of cash • An older adult applying for several new credit cards • An unexpected increase in ATM or credit card usage by older adult • An older adult failing to understand recently completed financial transactions

47. Medicaid andPowers of Attorney Signs of Financial Exploitation • Having credit card statement sent to someone other than older adult named on account • Unexpected or unexplained changes by older adult in account beneficiaries, property titles, deeds or other ownership documents • An older adult refinancing mortgage

48. Medicaid andPowers of Attorney Signs of Financial Exploitation • Abrupt and unexpected changes in will, trust, power of attorney, or other legal document • An older adult unexpectedly and uncharacteristically unkempt, forgetful, disoriented • Older adult unexpectedly not meeting financial obligations: food, utilities, rent, or mortgage payments The End