Chapter 2 Review Questions

NOTE to Department of Financial Services.  The following questions represent a bank of questions that we will use to compile this chapter's review questions.  We use a software package that creates a unique review for each student, scrambles choices and question order.  This bank is presented in its current format to allow the Department to see the text references for these questions.  Simply click on the question link to see the text reference. The software package provides feedback to the student -- the correct answer and the rationale.

 A widower, age 69 owns a home valued at $800,000 with no liens or mortgage.  He receives Social Security and a small pension from the Veteran's Administation.  If he were to apply to Medicaid for LTC, he would be:
a. ineligible, he has too much equity in his home   
b. immediately eligible, his home is exempt and his income is low   
c. might be ineligible, his income is too high   
d. must obtain a reverse mortgage on his home and make up the difference in cost of care before Medicaid will pay

ANS:     A
Medicaid imposes a limit on hme equity ($500,000 or $750,000 depending on the state) unless a spouse or other family member lives in it.  In the case of this widower, his equity exceeds the threshold.


 John is contemplating entering a nursing home.  John contacts his insurance agent and purchases an immediate fixed annuity.  Under which circumstances would this purchase of an annuity NOT be considered an asset transfer under Medicaid's look-back rules?
a. John names his wife as beneficiary of the annuity   
b. The annuity payments are based on John's life expectancy   
c. John names the state as a contingent beneficiary   
d. all of the above would exempt the annuity from the asset transfer rules

ANS:     D
Annuities are not considered an asset transfer if the annuity payments are actuarily sound (based on the transferor's life expectancy), and if the state is named as a contingent beneficiary in case the transferor dies and leaves value in the annuity.  The state must be primary beneficiary, or in the case of a married transferor, a secondary beneficiary if the spouse is the primary beneficiary.

 Under the DRA, Medicaid imposes a look back period on asset transfers of
a. 24 months   
b. 36 months   
c. 48 months   
d. 60 months

ANS:     D
With transfers taking place since February 8, 2006, the look back period is 60 months.  The old rule (pre-2006) was 36 months for non-trust transfers, 60 months for transfers to a trust.


Asset transfers for less than fair market value (gifts, bargain sales, etc.) will be subject to which of the following under Medicaid's look back rules?
a. penalty period   
b. disallowance of the transfer   
c. 10% penalty on the difference between fair market value and transfer value   
d. all of the above

ANS:     A
Transfers for less than fair market value will be suject to a penalty period, based on the average monthly private pay rate for nursing facility care.


   All of the following are ways to obtain cash from the insurer of a life insurance policy EXCEPT:
a. viatical settlements   
b. accelerated benefits provisions   
c. cash surrender   
d. policy loans

ANS:     A
Insurers can provide a life insurance policyholder through surrender of the policy, policy loans, and accelerated benefits provisions.  A viatical settlement is the sale of a life insurance policy to a third party.

  Which of the following sources of cash requires repayment:
a. reverse mortgage   
b. home equity loan   
c. life insurance policy loan   
d. all of the above

ANS:     B
Reverse mortgages need not be repaid unless the homeowner moves or sells the home.  Life insurance policy loans do not need to be repaid -- although interest accrues on the loan and will be deducted from eventual death proceeds.  Home equity lines of credit, like regular mortgage, must be repaid.


 A high deductible health plan is central feature of which of the following?
a. Medical Saving Account   
b. tax-qualified LTC policies   
c. HIPAA eligible LTC policy   
d. PQ LTCI

ANS:     A
Medical Savings Accounts are tax-advantaged methods to save for medical expenses.  They require accountholders to have a high deductible medial plan to defray serious medical expenses.


 A life settlement is closely related to:
a. policy surrender   
b. policy loans   
c. accelerated benefits   
d. viatical settlements

ANS:     D
Viatical settlements are the sale of life insurance policy by a terminally ill insured.  Life settlements are also sales of a life policy, but there is no requirement that the insured by terminally ill.



 Which of the following is a non-countable asset in Medicaid's eligibility requirements?
a. qualified retirement plans    
b. life insurance    
c. family burial plot   
d. collectibles

ANS:     C
Non-countable (or exempt) assets include household goods, one automobile, very small amounts of life insurance, wedding and engagement rings, and burial plots.  Most everything else will be "countable".

All of the following are true regarding a personal residence in Medicaid eligibility rules EXCEPT:
a. if the Medicaid applicant is not applying for LTC benefits, the value of the home does not count as an asset   
b. if the applicant moves out of the home into LTC facilities the value of the home is counted regardless of value   c. if the Medicaid applicant is applying for LTC benefits, any home equity in excess of $100,000 counts as an asset   
d. Medicaid can place a lien against the home, even if the home is not deemed "countable"

ANS:     C
Equity in excess of $500,000 (not $100,000) is countable if the applicant is seeking LTC benefits.  The other statements are true.

 In most states, Medicaid allows a long-term benefit applicant who is unmarried to retain countable assets totalling:
a. $1,500   
b. $2,000   
c. $3,000   
d. $5,000

ANS:     B
Medicaid generally requires a single applicant to have assets totally less than $2,000 ($3,000 for married applicants).

  Medicaid's estate recovery system applies to assets of all deceased Medicaid beneficiaries who received
a. nursing home services   
b. home health care services   
c. community based care   
d. all of the above

ANS:     A
Estate recovery is the process of reclaiming assets of Medicaid beneficiaries who have died. If applies to all nursing home beneficiaries -- and beneficiaries of home health care and community care services if they were age 55 or older when then began receiving Medicaid benefits.

  Federal guidelines require state Medicaid programs to provide which of the following to eligible applicants?
a. home health care services   
b. community based care services   
c. nursing home care service   
d. all of the above

ANS:     C
The minimum federal requirement is for nursing home care, although many states provide a wider range of LTC services under Medicaid.


Medicare Part A covers nursing home care only if
a. the care is certified as  medically necessary by a physician   
b. the patient has been hospitalized for at least 3 days in the previous month   
c. skilled care is provided   
d. all of the above are required for Medicare to cover nursing home care

ANS:     D
All of these conditions must be met to qualify for Medicare coverage of nursing home care.