Health Law Blog

The Good News:
Eligibility thresholds are up.  The New York State Department of Health has published increased allowances for 2012 which include the following key provisions.  The new resource allowance that a single person is entitled to keep is $14,250.  The amount of monthly income that a single person is entitled to keep to qualify for home health care is $792.  The amount of resources that the community spouse is permitted keep if the ill spouse is in a nursing home is increased to a maximum amount of $113,640 and the monthly maintenance needs allowance that the community spouse is entitled to keep is increased to $2,841.  In addition, the homestead exemption is increased from $758,000 to $786,000.  Pursuant to this exemption, up to $786,000 in equity value of a Medicaid applicant’s home is not considered an available resource and will not disqualify such applicant from receiving Medicaid.  The equity value is calculated by subtracting legal encumbrances (liens, mortgages, etc.) from the fair market value of the home.

The Bad News:
The Governor’s Budget Bill (i.e., the proposed 2012-2013 New York State Executive Budget Health and Mental Hygiene Article VII Legislation, “Governor’s budget bill”) proposes significant changes to the Medicaid program which may restrict access.  While the proposed changes may not be enacted in current form, they support our belief (as discussed in our December 2011 blog entry) that restrictive changes are afoot, and that putting Medicaid and estate planning in place is prudent.

Spousal refusal.  The Governor’s Budget Bill would severely restrict the “spousal refusal” technique for obtaining Medicaid for an ill spouse.  Spousal refusal is a commonly used Medicaid planning tool when a Medicaid applicant’s spouse signs a written statement refusing to pay for the medical expenses of the applicant.  With a “spousal refusal,” the assets of the spouse may not count as a resource for the Medicaid applicant, thereby allowing the Medicaid applicant to qualify for Medicaid if he or she is otherwise eligible.  While the well spouse may under certain circumstance be held accountable to pay for Medicaid expenditures paid on behalf of the Medicaid recipient, the Medicaid rate for healthcare services is far lower than the private pay rate.

There have been numerous attempts over the years to repeal or eliminate the “spousal refusal” Medicaid planning tool.  The proposed Governor’s budget bill allows for spousal refusal only if the spouse is both absent and refuses to provide support.  The word “absent” is not defined in the budget bill and it is unclear whether the statute will provide a definition.  We also understand that the “spousal refusal” issue is under negotiation and it is unclear at this time whether this provision of the budget bill will remain.

Regulations to be issued. As we discussed in our December 2011 blog entry, there has been an expansion of the definition of assets against which Medicaid can make a claim to recover for healthcare expenditures made on a Medicaid recipient’s behalf.  The regulations for expanded recovery are still under consideration.  There is much speculation that the regulations will consider IRAs and other retirement funds, life estates and Medicaid income only trusts as assets against which Medicaid can make a claim.  However, until the regulations are proposed and finalized, it is anyone’s guess as to what types of assets will be subject to the expanded recovery rules.

Planning Considerations.  While the Medicaid law will continue to change, careful advance planning can assist in many circumstances.

~Submitted by E Koopersmith, D Martin & M Salzman

            New York State has followed the IRS’ lead in granting extensions to charities that electronically file.  Please note that these extensions are available only to organizations that file electronically with the IRS.

             IRS Extension until March 30th for Electronic Filers with Form 990s due in January or February 2012.  The IRS announced that it is granting filing extensions to organizations that file electronically and whose Form 990 is due in January or February 2012. Those organizations have until March 30, 2012 to file their Form 990s.  Information about the extensions is posted at http://www.irs.gov/charities/article/0,,id=251096,00.html.

             New York State Attorney General’s Office grants similar extension.  The Attorney General’s Office will grant the same extension to organizations that file with the Charities Bureau.  An organization that qualifies for the IRS extension will similarly have until March 30, 2012 to file its CHAR500, IRS Form 990 and, if applicable, financial audit or review. To be eligible for the extension, an organization must send an email to the Charities Bureau at charities.extensions@ag.ny.gov stating that (1) it files electronically with the IRS, (2) its annual report is due to be filed in January or February 2012, and (3) it will file the report with the Charities Bureau on or before March 30, 2012.  The organization should put its name and Charities Bureau Registration Number in the subject line of the email.

Click Here for more information

~Submitted by M Salzman

The Federal estate and gift tax exemption for 2012 rose to $5,120,000 after an inflation adjustment. The Federal estate and gift tax rate remains at 35% for 2012.  In 2013, the exemption is scheduled to revert to $1,000,000 and the rate to 55% so consider making substantial gifts in 2012 before this opportunity could be gone.  The annual gift tax exclusion remains at $13,000 per person ($26,000 per couple) for 2012 (make your 2012 gifts now to ensure you don’t miss this opportunity in the year end holiday crush and get the growth on the gifted assets out of your hands).  The amount of business real estate eligible for special estate tax valuation discount also rose to $1,040,000.  If more than 35% of an estate consists of a closely-held business, more estate tax (up to $486,500) now qualifies for installment payment and the IRS charges only 2% interest. 

~Submitted by D Martin

Recently, New Jersey passed a law that allows for, and encourages, the use of a Physician Orders for Life-Sustaining Treatment (“POLST”) form.  The standardized POLST form contains signed, immediately actionable medical orders that address a patient’s wishes regarding life-sustaining care.  The form clearly expresses a patient’s decisions on a range of life-sustaining interventions and the patient’s preferred intensity of treatment for each intervention.  The function of the POLST form, complementing an advance directive, is to convert a patient’s wishes about end-of-life care into direct medical orders and to provide detailed direction to health care professionals. Health care professionals are recommended to introduce the POLST form on a voluntary basis to patients who have advanced chronic progressive illness or a life expectancy of less than five years.

Click Here for the NJ Senate bill (S-2197) and Click Here for a sample NJ POLST form.  A standardized form for NJ is not yet available.

~Submitted by E Sibley

Here are our year end recommendations concerning estate planning.  There are important things to consider and ways you can take advantage of tax saving opportunities before they expire.

Annual Gifts

• Let’s start with the basics.  Annual gifts of $13,000 per person ($26,000 if you are married) are an easy way to save estate taxes by depleting your assets and are also a way to help family members.  Do a holiday gift for 2011, and then make a New Year’s gift in 2012.  Remember though that time is of the essence:  cash gifts can be given through December 31st, but gift checks or wires must clear your account before January 1st to count for 2011.
• Gifts to “529” college savings accounts (which count towards the $13,000/$26,000 limit) can also get you a state income tax deduction, the funds grow income tax-free, and account distributions for education are free of income taxes.
• Any amount paid for tuition and medical expenses (including health insurance premiums) are tax-free gifts as long as you pay the school or medical provider directly.  These gifts do not count toward the annual or lifetime gift limits.
• If outright gifts concern you, gifts can be made to trusts for your beneficiary instead of outright and your payment of the annual income tax bill on the trust is an additional tax-free gift.

Major Gift Planning

• Larger gifts can save even more taxes.  New York has no gift tax.  No Federal gift tax is due until you use up your lifetime exemption (which will rise to $5,120,000, or $10,240,000 per couple, in 2012).  However, 2012 will be the last year this larger exemption is available.  In 2013 the gift and estate exemption reverts to $1,000,000 and the top rate goes back to 55% (plus a 5% surcharge for certain large estates).  There was a rumor that the deficit “Super Committee” in Washington was going to cut back the lifetime exemption to $1,000,000 before 2013, but that did not come to pass.  Legislators have introduced bills on the exemption.
• Even if you were fortunate enough to have had the means to exhaust your lifetime exemption, the rate for taxable gifts is now lower than ever (35%) and is scheduled to return to 55% in 2013.  Further, the amount used to pay a gift tax is out of your estate, when that tax amount itself would be taxed at your death.
• Gifting techniques that take advantage of historically low interest rates and low asset values are very attractive now and should be considered.  We understand that the economic downturn has challenged everyone, but please consider that it also presents an opportunity you may find attractive for shifting wealth to the next generation.  The combination of these factors can produce highly advantageous results for your family.  Techniques such as Grantor Retained Annuity Trusts (“GRATs”), Charitable Lead Trusts (“CLTs”), sales to Intentionally Defective Grantor Trusts (“IDGTs”), and loans to your children are particularly advantages now.  Moreover, future appreciation on gifted assets in an eventual economic recovery will benefit the gift recipient and escape estate taxes.  Bills have been introduced in Congress repeatedly to restrict or eliminate these techniques.
• No one can predict what will happen in the future at this point.  For that reason, consider gifting options before they are gone or severely limited.  As the gift tax exclusion was $1,000,000 for many years, this increase for a limited time is a unique and valuable opportunity that should not be passed up.  If you are interested in saving estate taxes, you should act as soon as possible to ensure your plan is not affected by future changes in the law.

Charitable Giving

• For last-minute gifts to charities to qualify as a 2011 deduction, the check or wire must be sent by January 1, 2012 (but need not clear your account).
• Consider gifts of appreciated stock to satisfy your charitable giving.  The charity pays no capital gains tax on the sale of the stock as you would, essentially allowing you to make charitable gifts at a reduced cost to you.
• Consider creating a “donor advised fund” administered by a local community trust.  You can make a gift in 2011 to your donor advised fund, and take a charitable deduction for 2011, but defer distributions to charities of your choice until the need for a contribution arises.  The funds are invested until distribution and community trusts offer planned giving advice to help you choose reputable and effective charitable recipients.
• Use your “required minimum distribution” (“RMD”) to make gifts to a charity directly from your IRA and pay no Federal income tax on your required minimum distribution.  The distribution counts towards your RMD, but you will not receive a charitable income tax deduction.

IRAs

• There is no longer an income tax ceiling for a Roth conversion.  Consider converting an IRA to a Roth IRA, paying the income taxes, and having the funds continue to grow income tax free without required minimum distributions or income taxes on future distributions.

For more information on this subject Click Here

~Submitted by D Martin

The deadline for eligible hospitals to register and attest to receive payments for Federal fiscal year 2011 under the NJ Medicaid Incentive Program is December 27, 2011.  After registering with CMS through the National Level Repository (NLR), hospitals will be directed to the New Jersey Medicaid provider portal to submit their New Jersey Medicaid EHR Incentive Program request form and applicable supporting documentation.  The New Jersey-specific attestation application is not yet available, but, according to the State’s website, is supposed to become available in mid-December.  Eligible hospitals are encouraged to register now in anticipation of the deadline so as to avoid losing the ability to apply for and receive these incentive payments, which could be significant.

~Submitted by Stephanie Matos

On November 10, 2011, in Joint Commission Standards Frequently Asked Questions, the Joint Commission clarified that “text orders” are impermissible in a Joint Commission-accredited hospital or health care setting.  The Joint Commission’s rationale for this position  is texting orders “provides no ability to verify the identity of the person sending the text and there is no way to keep the original message as validation of what is entered into the medical record.”  The following link will take you to the new FAQ:  Click Here

~Submitted by S Gulick

The generous $5 million per person estate, gift, and generation-skipping transfer tax exemption and maximum 35% rate for such taxes is in danger.  The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) increased the tax exemptions and decreased the maximum rates for 2011 and 2012 only.  It is now rumored that the Joint Select Committee on Deficit Reduction, commonly known as the “Super Committee”, will propose legislation that will return the exemption to $1 million per person before 2013, even possibly on November 23, 2011 when the Super Committee vote takes place. 
 
It is impossible to predict what the outcome will be, particularly given the past history of the twists and turns of the exemption.  This leads us to caution our clients that if they wish to take advantage of the larger exemption by making gifts they should do so as soon as possible.

Previously, the gift tax exemption was $1 million per person and the estate and generation-skipping tax exemptions were each $3.5 million per person.

~Submitted by D Martin

CMS is requiring suppliers (e.g., physician practices, independent diagnostic treatment facilities ) that provide the technical component of certain advanced diagnostic imaging, such as MRIs, CT scans, and nuclear medicine imaging (e.g., PET scans) , and receive payment under the Medicare Physician Fee Schedule, be accredited by either the Joint Commission, the American College of Radiology, or the Intersocietal Accreditation Commission (the “CMS Accrediting Organizations”) by January 1, 2012.    According to CMS, claims submitted after January 1, 2012 by unaccredited entities will be denied as insufficient.  The accreditation process may take up to five (5) months and may involve unannounced site visits by representatives from the CMS Accrediting Organization; and therefore, applicable entities must initiate the accreditation process immediately if they have not already done so.

~Submitted by M Colford