VA, Congress crawl toward ending abuse of vet pensioners
In 2012, the Government Accountability Office found more than 200 financial planning firms and estate law offices enticing veterans or their survivors into costly annuities or irrevocable trusts intended to hide or reallocate their assets so they qualify for VA pensions that the claimants wouldn't be eligible for otherwise.
Since then, the Department of Veterans Affairs and the Congress have been crawling toward actions to stop the abusive practices, which twist the intent of the pension benefit in ways to help some veterans, put others in financial binds, and generate fees or profits or streams of residents for the schemers.
The crawl toward reform continues. VA is still working on a draft rule first released for public comment in January 2015. Final publication of the "Net Worth, Asset Transfers and Income Exclusions for Needs-Based Benefits" rule was expected this past summer. However, it remains "in VA's internal concurrence process," a VA spokesman said Wednesday.
Meanwhile, the House veterans' affairs subcommittee on disability assistance and memorial affairs held a first-ever hearing last month on legislation to address financial abuses of the pension program. The Veterans Care Financial Protection Act (now HR 3122) was first introduced in 2014.
The VA pension program exists to help veterans in financial distress if they served at least a day of wartime service, at least 90 consecutive days on active duty and earned an honorable or a general discharge. To be eligible for the basic VA pension, veterans also must have only modest annual incomes or none at all.
They can qualify for more VA financial help, however, if they are disabled and unable to leave their homes unassisted, or they have unmet daily living needs or they face exorbitant medical, assisted care or nursing home costs. The additional financial help is called the VA Aid and Attendance benefit.
"It's an absolute lifeline for veterans who have significant health problems," John Katz, the American Legion's assistant director for pensions at the VA regional office in Philadelphia, told me late last year. "Many people who laid their lives on the line for their country are incapable today of taking care of themselves without housebound benefits or aid and attendance, in addition to the non-service connected (VA) pension. For them there's no other way they'd survive."
About 303,000 wartime veterans and 220,000 survivors draw VA pension benefits. Veteran advocates believe thousands more would qualify if they knew the program existed and applied. What has raised the profile of pensions recently, however, have been the reports of abuse and target marketing by unscrupulous financial planners, lawyers or even care facilities seeking vets who are ill or elderly.
The pension is a needs-based benefit with need determined using thresholds on annual incomes and on assets or net worth. For example, a wartime vet with no dependents can qualify for all or a portion of the basic pension benefit if he or she has income, including Social Security, less than $12,907 annually. If income is $10,000, for example, the benefit would be calculated by the maximum annual pension rate of $12,907 minus $10,000, for a total of $2,907 annually
However, the pension benefit is unique in that it allows veterans to apply medical expenses to offset income calculations and raise the benefit. Even higher amounts are payable if the veteran or surviving spouse is housebound, and more aid and attendance dollars are available if claimants need help with daily activities.
A married veteran needing aid and attendance can qualify for at least some pension monthly if his or her income doesn't exceed $25,525. A survivor's pension is smaller but also based on need with consideration of medical expenses.
The other threshold to determine eligibility is net worth. If assets other than primary residence and vehicle exceed $80,000, then VA can't assume eligibility without a closer determination. Again, medical-related expenses can be critical. For example, if a veteran with assets totaling $100,000 moves into an assisted living facility that costs $5,000 a month, a VA service officer could determine the asset threshold quickly will be reached and can find the veteran eligible for pension.
Veterans and survivors who believe they might qualify should contact the veterans' service office for their county to fill out required forms. More program information can be found online at: http://benefits.va.gov/PENSION/index.asp
A key purpose of regulatory reforms aimed at VA pension benefits is to ensure they are used by low-income veterans or those facing exorbitant medical expenses they can't pay, rather than be used as a tool to preserve family wealth.
One provision in VA's draft rule would impose a three-year look-back provision on assets to discourage new claimants from hiding assets. Other changes would reset the asset ceiling to the higher and "brighter line" used by Medicaid, and more clearly define medical expenses that can reduce income calculations. The new rule would not leave the threshold on assets open to interpretation as it is now.
Legislative reforms, which show signs of life, take a different approach. As Rep. Matthew Cartwright, D-Pa., testified last month on behalf of his bill, HR 3122, it would direct VA and other federal agencies to work with state officials and outside experts to establish state and federal standards to end "dishonest, predatory or otherwise unlawful practices" that target VA aid and attendance dollars.
"Unscrupulous actors are increasingly exploiting this assistance program by preying on our older veterans' vulnerability" to waste federal dollars and turn "this well-deserved benefit into a financial nightmare for those who can least afford it," Cartwright said.
Some charge veterans "a non-existent application fee to obtain the benefit," he added. Others collect "consultation fees" with "promises to expedite the application process. Yet another scam is an offer to help veterans qualify for the benefit even when their net worth is too high to qualify."
In that way, Cartwright explained, financial planners gain control of the veteran's assets and "move them into an irrevocable trust or annuity, which the elderly veterans often cannot access for many years."
Increasingly, he said, retirement homes are recruiting veteran residents with promises that they will qualify for VA Aid and Attendance to cover cost of the home.
"If the A&A claim is later denied, however, the nursing home then demands back payment from the veteran. This is a practice that leaves vulnerable elderly veterans with the undesirable choice of draining their own remaining assets or giving up their new home," Cartwright said.
He first introduced his bill on learning of companion legislation in the Senate (now S. 1198) from Sen. Elizabeth Warren, D-Mass. The bill now has bipartisan support in the subcommittee. Witnesses for VA and veteran service organizations expressed support. Cartwright promised some changes to reflect concerns from the GAO that it shouldn't be given a role in establishing the new protection standards given its existing responsibilities for reviewing how the standards are implemented.
With no costs attached, the bill is expected to clear the subcommittee this fall. Full committee action and passage by the House isn't expected this year.