San Antonio Express-News
February 17, 2004

Medicaid Planning Scams

copyright 2004, Paul Premack

Several non-attorney businesses have popped up around the state, offering to do Medicaid planning for you. Avoid using these planners! Since they are not licensed attorneys, there are several negative implications:

First, the information you provide to them is not confidential and not privileged as it would be with an attorney. They do not owe you an obligation to protect the financial data you provide. For instance, if you are sued, they can be subpoenaed into court to expose your personal data.

They may share your financial data with insurance brokers, or may try to sell you an annuity directly, claiming the annuity will allow you to qualify for Medicaid. However, Medicaid has eliminated much of the annuity’s attractiveness by requiring that any death benefit be payable to Texas Medicaid. Further, payments under an annuity must be made in equal amounts each month over the projected lifetime of the patient.

The annuity strategy may still be viable under a set of limited circumstances: if 1) the nursing home patient has too much cash, 2) the community spouse has very little income, and 3) the community spouse is named as owner of the annuity. Under those circumstances, the annuity’s monthly check can be used to increase the community spouse’s income until it reaches $2,319. Since the community spouse owns the annuity, Medicaid may not make a claim against it when the patient dies.

While that strategy sounds useful, it pales compared to the Expanded Protected Resource Allowance. The Expanded PRA allows a great deal of money to be sheltered as part of the spousal allowance and the funds can be invested in any fashion. This avoids the negatives often associated with annuities: a commission, penalty for early withdrawal, and inflexible rates of return.

Second, Texas law says that a person not licensed to practice law cannot charge you a fee for representing you at a Medicaid hearing or for aiding you in applying for Medicaid benefits. The offense is a Class A misdemeanor. Thus, anyone who charges a fee for these services must have a law license and anyone without a law license cannot charge you a fee. Of course, if the only service is selling you an insurance product, an insurance license is adequate; but there is much more to Medicaid planning than selling an insurance product.

Finally, as you noted in your Email, they sure do charge a lot. The bids you got were actually low compared to other reports I’ve received: sometimes they try to charge $5,000 to $10,000 for Medicaid planning services. If you go to a licensed attorney experienced in Medicaid issues, the charges will likely be a fraction of that cost.