Posts Tagged ‘Utah gap’

Independent Social

MAY 16, 1994 VOLUME 1, NUMBER 25

Security Agency

Senate Finance Committee Chairman Daniel Patrick Moynihan is urging Congress to establish Social Security as an independent agency. The New York Democrat argues that such a move would help insulate the program from political attacks and manipulations.

Social Security frequently comes under attack for its perceived contribution to the federal deficit. Moynihan points out that the program actually is “off budget,” meaning that revenues received and benefits paid are separate from federal budget calculations and do not affect the deficit.

Moynihan argues that Social Security would also have a higher public profile than it enjoys as a division of the Department of Health and Human Services. The Social Security Administration employs 63,000 people and pays out more than $350 billion in benefits to 42 million beneficiaries.

Aids and the Elderly

The April, 1994, issue of The Harvard Health Letter points out that even the elderly should be worried about AIDS. Men and women over age 50 account for 10% of all AIDS cases diagnosed each year. While AIDS cases diagnosed among the elderly a decade ago were almost all attributed to transfusions of contaminated blood or homosexual contact, HIV infection through heterosexual contact has been rising since 1986. Today, heterosexual transmission accounts for about 10% of new cases in the over-50 age group.

A recent survey published in The Archives of Internal Medicine reported that older citizens at risk of contracting AIDS were only one-sixth as likely to use condoms as the 20-year-old comparison group. They were only one-fifth as likely to be tested for HIV. The conclusion is obvious–older patients tend to ignore (or do not understand) the risk of AIDS.

The study’s principals, Ron Stall and Joe Catania, are behavioral epidemiologists at the University of California in San Francisco. For purposes of the study, they defined “at risk” older participants to include all those having multiple sex partners, sex partners with known HIV risk, or having received a blood transfusion between 1978 and 1984. Stall and Catania indicate that the results do not surprise them, especially since AIDS prevention messages are aimed almost exclusively at younger people.

Income Cap Trusts


Regular Elder Law Issues readers will recall that the federal government has finally provided some relief for nursing home patients who fail to qualify for ALTCS because they receive “too much” income. Under current eligibility rules, a patient with over $1338 in monthly income will not qualify for ALTCS assistance, even though the cost of care may exceed $2500 or even $3000 per month.

Last August Congress gave patients in the so-called “Utah Gap” the opportunity to assign their income to special trusts. These trusts (variously known as Income Cap Trusts, MillerTrusts or Qualified Income Trusts) had not previously been recognized in Arizona. Since the new legislation was adopted, Arizona officials had been unusually quiet about what specific terms might be deemed acceptable, leading critics to speculate that each trust would face legal challenges.

Now comes word from Phoenix that at least two Income Cap Trusts have been approved by ALTCS. Two more such trusts have been filed in Tucson, and the results are expected within the next few weeks. It may finally be possible to secure nursing home care for the “Utah Gap” patient.

The “Vanishing” Income Cap


Nursing home patients with more than $1302 in monthly income ($1338 in 1994) are simply ineligible for ALTCS, Arizona’s version of Medicaid for long-term care. Or are they?

The “Utah gap” patient–one who has income in excess of the $1338 cap but less than the $2500-3000 cost of nursing home care–has become a notorious problem in financing the long-term care system. With the adoption of the federal budget in August of this year, Congress and the Clinton Administration provided some relief for “Utah gap” patients and the institutions that care for them.

Income Trusts

The concept of income trusts is straightforward enough. The income of the patient is assigned to a Trustee of a special type of Trust. By federal law, the income is deemed not available to the patient and, if other eligibility criteria are met, the patient becomes eligible for ALTCS.

There are several explicit requirements in the new federal law for execution of Income Trusts. Those requirements include:

The Trust must be “established for the benefit of” the applicant. It is not necessary to have the Court establish the Trust, though it may be advisable. It may be necessary to secure Court approval of the transfer of income.

Amounts remaining at the time of the patient’s death must be paid to the State (to the extent of the ALTCS subsidy received). If additional amounts remain, they may be distributed to family or other heirs.

Only income can be assigned to the Trust. It may not contain any other assets of the applicant, though unspent income may be accumulated.

Federal law is silent about a number of issues, including payment of administrative expenses from the Trust, whether any or all of the income received by the Trust must be used to pay the applicant’s “share of cost,” and whether excess income can be utilized for supplemental therapy and other needs. Based on early readings from ALTCS’ legal counsel, these issues may require litigation.

What Does it Cost?

Establishment of an Income Trust is not an inexpensive proposition. In most cases, Court proceedings are required to secure authority to establish the Trust, and the costs of drafting must be added to those Court costs. Transfer of different types of pension income may involve multiple applications, each with different rules and expectations. Finally, it is reasonable to anticipate that ALTCS will deny eligibility to initial applicants under the new rules, and the cost of an administrative appeal (with ultimate recourse to the Courts) must be considered.

After all costs and fees are added, the total price for establishment and funding of an Income Trust, plus representation during an ALTCS application and appeal process, should be in the range of $2,000 to $4,000. While this is a significant amount of money, two things should be kept in mind:

1. The cost of establishment of an Income Trust can be paid from the patient’s available resources, and

2. Making the patient eligible for ALTCS will repay the cost of establishing the Trust, in most cases, within a few months.

New Medicaid Rules


With the adoption of the federal budget on August 11, 1993, Congress and the Clinton administration have substantially rewritten the rules for long term care subsidies through the Medicaid program. The Arizona Long Term Care System (ALTCS) will be required to comply with the new federal rules, though regulations to implement most of the rules have not yet been adopted.

The changes to Medicaid/ALTCS rules include:

  • Increased penalty periods for gifts and other transfers
  • Disallowance of most trusts
  • Creation of several new types of trusts for specific circumstances
  • Aggressive estate recovery program

Penalty periods for gifts
Previous law disqualified an applicant from ALTCS eligibility if substantial transfers had been made during the thirty-month period before application. The new rules extend that period to thirty-six months, and may also remove the limit on the period of ineligibility.

New Treatment of Trusts

Under the new rules, most trusts established by an applicant (or anyone else on his or her behalf) will be treated as available to the ALTCS applicant. For most purposes, the use of trusts to qualify for ALTCS will no longer be an option.

Special Types of Trusts

Even while disallowing most trusts for ALTCS eligibility, the new law creates three special new categories of trust. Patients in any of the following circumstances might be able to shelter income and/or assets using the new opportunities:

Young (under age 55) recipients of personal injury settlements or inheritances

“Utah Gap” patients–those with income over $1302 ($1338 in 1994)

Participants in a pooled trust arrangement

Did You Know?

The number of nursing home residents in the U.S. increased by 24% (to 1.8 million) during the 1980s, according to the Census Bureau. The largest increases were in the District of Columbia (144%), New Mexico (142%) and Florida (121%).

According to the same Census Bureau figures, women make up almost 60% of nursing home residents, and nearly 90% were age 65 or older.

©2021 Fleming & Curti, PLC