Solomon tells us that "Plans fail for lack of counsel, but with many advisers they succeed."  Proverbs 15:22.  To this, the Mississippi Division of Medicaid would add, "…until Medicaid taketh away."  The Mississippi Division of Medicaid has circulated a directive to all of its regional offices instructing case workers to only allow up to $2,000 in legal fees in a Medicaid case.  Any fee over this amount is to be treated as an uncompensated transfer, or in other words a gift, resulting in a penalty or delay in Medicaid benefits. What this means to our elderly and disabled clients is that if they do any estate planning through lawyers to get their affairs in order within 5 years of applying for Medicaid, they may well be penalized by Medicaid in the form of non-payment of benefits for 1 month for every $4,600 they spend above the arbitrary $2,000 fee cap that Medicaid has declared to be "reasonable." 

Yet again, Medicaid has embarked on a system designed to encourage and reward people for being irresponsible.  As the system has always operated, responsible people who work hard and save their money for their retirement are denied benefits because they have too much money (anything over $4,000 is too much), while an irresponsible person who spends everything and saves nothing is covered by Medicaid from the first day of their institutionalization. 

Now Medicaid has added to this penalty by further penalizing responsible people who also choose to get their affairs in order before they die or become disabled.  An individual who's estate planning legal fees exceed $2,000 within 5 years of a medicaid application will be denied benefits for an additional period of time, while the irresponsible person who does nothing to plan for the well-being of their surviving spouse, or special needs children, will not suffer such a penalty.  The arbitrary policy further encourages the bizarre consequence of actually encouraging some lawyers to charge unreasonably high fees in certain circumstances.  For example, a responsible client who's planning requires only a simple will, powers of attorney, and/or healthcare directives will generally spend in the neighborhood of $500 to $1,000 for those documents in the local Mississippi market.  Yet, since Medicaid will allow up to $2,000 for such planning, it's policy encourages lawyers to overcharge for these basic planning services, and no doubt many will.  Conversely, a client with a complicated estate, such as potential estate taxes, or special needs beneficiaries, can reasonably be expected to pay significantly more than $2,000 for the customized documents and highly specialized knowledge required for such complex planning. To those responsible individuals who want to take care of their families and loved ones, Medicaid has declared that no good deed should go unpunished, and will assert a penalty for spending those reasonable fees.