In a significant and constructive development, the New York State Department of Health (DOH) has confirmed that it will advise local Medicaid districts to no longer impose a restrictive Medicaid position that unnecessarily forced seniors into nursing homes. The New York State Bar Association Elder Law and Special Needs Section reported the change and was instrumental in the negotiations to bring it about.

The prior policy adversely affected Medicaid recipients who needed to sign documents to enroll in a pooled income trust. Some of them lacked the current mental capacity to sign the forms but had signed powers of attorney when they had capacity. Many of those powers of attorney did not include a statutory gifts rider. The prior DOH policy required local Medicaid districts to reject pooled income trusts that were signed by an agent under a power of attorney without a statutory gifts rider. The new policy states that Medicaid cannot reject a pooled income trust enrollment by an agent under a power of attorney without a statutory gifts rider. By eliminating the onerous requirement, enrollment in the pooled income trust will now be more equitable and consistent with General Obligations Law and the Social Services Law. This article is an update to "New Restrictive Rule Regarding Medicaid and Power of Attorney" (Fish, Daniel G., NYLJ, Aug. 15, 2019).

Background

Medicaid Pooled Income Trust: Eligibility for Medicaid benefits is needs based and requires that the applicant have monthly income of no more than $895 (in 2020). An applicant with monthly income above that amount can still qualify if the surplus income is given to Medicaid. Left with monthly income of $895, many Medicaid applicants cannot pay for their basic needs. As a result, they are unable to remain at home and are forced into nursing homes.

The pooled income trust can be a solution to this conundrum. It allows the Medicaid recipient to send the surplus monthly income to a pooled income trust instead of giving it to Medicaid. The pooled income trust then uses the surplus income to pay the living expenses of the Medicaid recipient, such as rent, coop maintenance, mortgage, food or clothing.

To enroll in a pooled income trust, the Medicaid recipient must sign a joinder agreement. For seniors who were capable of signing themselves this was not a barrier. For seniors who had already signed a power of attorney with a statutory gifts rider, this requirement was not a barrier. For those seniors who signed a power of attorney that did not include a statutory gifts rider and lacked the current capacity to sign a new power of attorney with a statutory gifts rider, this requirement was an almost insurmountable barrier. The legal counsel to one of the largest pooled income trusts in New York state suggested that the only alternative might be a limited guardianship proceeding. The cost and time required to initiate a guardianship proceeding made this option illusory.

The New York State Department of Health, which administers the Medicaid program, communicates its instructions to the local Medicaid offices by means of General Information System (GIS) messages. GIS 19 MA/04, entitled "Clarification of Policy for Treatment of Income Placed in Medicaid Exception Trusts" was issued on February 4, 2019. It instructed local Medicaid offices to reject pooled income trust enrollments that were made under power of attorney without a statutory gifts rider. It is this policy that will be clarified by the issuance of a new GIS.

Power of Attorney: The law regarding powers of attorney is found in General Obligations Law, beginning at §5-1501 and was dramatically overhauled in 2009. The impetus for the massive change was a concern that the power of attorney form was so simplified (it had been only two pages in length) that it was being used by unscrupulous agents to engage in elder financial abuse. The abuse was frequently accomplished by the agent making gift to himself or herself. To address this issue, the statutory change limited gift giving under the general power of attorney to $500 per year:

If you grant your agent this authority, it will allow the agent to make gifts that you customarily have made to individuals, including the agent, and charitable organizations. The total amount of all such gifts in any one calendar year cannot exceed $500.00;

In an attempt to thwart abuse, gift giving above $500 per year now can only be authorized if the principal executes a separate document called the statutory gifts rider. The separate statutory gifts rider must be signed on the same day as the general power of attorney, the principal's signature must be notarized and there must be two disinterested witnesses. In addition, in the general power of attorney, the agent must affirm an understanding of the responsibility to act in the best interest of the principal. Given the grave concerns about abuse under the power of attorney, it is not surprising that many seniors would sign a general power of attorney (limiting gifting by the agent to $500 per year) but would not sign the statutory gifts rider. These cautious seniors were then barred from participating in the pooled income trust under the prior rule.

Arguments

Advocates for the elderly made two arguments to the Department of Health. First, they argued that the transfer of funds to the pooled income trust was not a gift and therefore the agent did not require a statutory gifts rider. This argument is very persuasive as the surplus income transferred to the pooled income trust can only be spent on behalf of the Medicaid recipient. Second, they argued that there was strong legislative evidence of a policy favoring the use of the pooled income trust. The advocates pointed to Social Services Law §366 (5)(f). That statute requires that Medicaid applicants be given written notice of the availability of the pooled income trust. The advocates argued that Medicaid should be encouraging, and not discouraging, the use of the pooled income trust.

Rescission

The Department of Health will soon be issuing a new GIS, clarifying GIS 19 MA/04 and advising local Medicaid districts that they may not require the statutory gifts rider to the power of attorney to enroll in a pooled income trust. That action would be a very salutary development that would assist disabled seniors to remaining in the community and avoiding institutionalization.

Daniel G. Fish is a partner at McLaughlin & Stern.