“I sure thought I was in the hospital” – Admission v. Observation

A decision has just come down from a Federal Judge that is not good for those on Medicare.  The case is Bagnall v. Sebelius in the US District Court in Connecticut.  What this case specifically addresses is the time when a person who is a Medicare Beneficiary goes into the hospital and stays a few days.

If you have heard me speak or read my writings, you know that in order for Medicare to pay for rehabilitation in a skilled nursing home, you have to have been admitted to the hospital for 3 full days.  This is most easily defined as 3 midnights in the hospital.  What the hospitals are doing is putting a person in the hospital under “observational status” which is NOT an admission to the hospital.  The person is in a hospital room, getting all the care they need including drugs and tests making you think you are “admitted” to the hospital.  However, you are really not admitted there.  They are “observing” you.  What is worse, the physician and the staff can tell you that  you are admitted and you are, however, the hospital has a Utilization Review (UR) Committee that can look at your file and reverse your admission as long as you are still in the hospital.  So, even if you are told you are being admitted, you need to clarify that prior to discharge to make sure you are still admitted.  There are very complicated reason they do this but it doesn’t matter to this discussion.

Why does this matter?  Two reasons primarily: 1) If you are on observational status, your Medicare Part A (Hospital coverage that pays 100% after your deductible) does not apply.  You are under Part B which is paid 80% by Medicare and the other 20% is paid by you individually or by your Medicare Supplement.  2) you do not have the requisite 3 day admission to start your Skilled Nursing Facility 100 days of rehab.  People have gone to the hospital for up to 2 weeks and then gone to rehab and incurred very significant expense thinking Medicare Part A was going to pay when they were never actually admitted to the hospital.  They then owe at least the 20% and if Medicare never really approved any of the care, you could pay the full amount.

What do you need to do?  First, read this article: http://www.medicareadvocacy.org/medicare-info/observation-status Read it all the way to the end.  The last section is probably the most important section giving some very practical advice.  This article mentions some forms that you need to be aware of in order to know what is happening.  Second, share this information with everyone on Medicare that you know so they know to be looking for this.  This is a huge issue.  Since the Federal Judge did not certify the action as a class action case, this means that every Medicare Beneficiary is going to have to go to court by themselves to correct this problem.  Third, if this happens, give us a call.  I am not a litigator but I am associated with some firms that will take this case to court to make sure the Medicare system treats your fairly.

Todd Whatley is the founding partner of the Elder Law Practice of Whatley and Elrod, and the Managing Attorney of the Springdale, Arkansas offices, serving the legal needs of the elderly in Northwest Arkansas, including Springdale and Fayetteville.  Todd Whatley has been working in elder law field since 2000, and became Arkansas’ second certified Elder Law Attorney in 2006.  He is on the Board of Directors of the National Elder Law Foundation.  The Elder Law Practice of Whatley and Elrod is focused on the legal needs of the elderly and their families.  Todd Whatley is a regular speaker for Continuing Legal Education seminars teaching other attorneys about elder law.

About the Elder Law Practice of Whatley and Elrod:

Elder Law Practice of Whatley and Elrod is Arkansas’ largest Elder Law practice, with five locations through the state of Arkansas, in Bryant, Fort Smith, Springdale, and Bentonville and Hot Springs Village.  Todd Whatley and Justin Elrod, the managing partners at the Elder Law Practice, are committed to serving the legal needs of the elderly in Arkansas.  Their services include estate planning, creating wills, trusts, avoiding probate, special needs trusts, Medicare, Medicaid, and more.  The Elder Law Practice of Whatley and Elrod also focuses in VA benefits, assisting Arkansas veterans in getting the benefits and assistance that they have earned during their time spent serving our country.

Caption This! (September 26, 2013)


What in the Bitter Lawyer is going on here?

Put your lawyerly wisdom to the test and post a comment below or on Facebook with a witty, hilarious, or brilliant caption to this comic, courtesy of Shutterstock.com. And keep it clean(ish) and, y’know, respectful.

The editor’s pick will be announced next week, and then we’ll post the comic with the winning caption on Facebook.

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Caption This! Winner (9/26/2013)

New to Bitter Lawyer? Start here, or dig into the archives!

Think you’re funny? Send us your stuff, and maybe we’ll use it!

Capital Gains Tax Increases and Gifting to Lessen the Bite

In the early fall, taxes are probably the last thing you want to think about. But this is one year in which it may pay for you to get both your income tax planning and estate planning done early.

There are a couple of provisions in the tax code that resulted in higher rates on income and investments for wealthier taxpayers and capital gains tax increases this year. For example:

  • The American Taxpayer Relief Act of 2012 (ATRA) increased the maximum federal capital gain rate beginning in 2013 from 15% to 20% for higher bracket taxpayers (taxable income above $400.000 for single filers and $450.000 for joint filers);
  • The Affordable Care Act (ACA) had previously added a 3.8% surtax beginning in 2013 on net investment income for higher income taxpayers (modified adjusted gross income above $200.000 for single filers and $250.000 for joint filers).
  • Both ATRA and ACA result in a combined federal capital gain rate of 23.8% for higher bracket taxpayers, an increase of 8.8% over the maximum rate that applied prior to 1/1/13.

To avoid a surprise capital gains tax bill when you file your tax return next April, below are some strategies to bypass capital gains or at least lessen the bite. Learn more about charitable giving on “The Perils of Gifting” FAQ and Charitable Planning pages on The Law Firm of Evan H. Farr, P.C. website.  Be sure to make an appointment and consult with a Certified Elder Law Attorney, such as Evan Farr to discuss any issues regarding gifting when it comes to your individual circumstances.

  1. Annual Tax Free Gifts: If you’re in a high bracket but your adult children or parents aren’t, consider giving them appreciated stock. You can make annual exclusion gifts of up to $14,000 a year in cash or property each to as many individuals as you’d like without eating into your lifetime gift/estate tax exemption. If you give highly appreciated stock to your child or parent, he takes your low basis but when he sells it – if he’s in a lower bracket – his capital gains rate is 0%. (Special rules apply to kids under 25.) Keep in mind that if you give more than $14,000 to an individual, you’ll need to fill out Form 709- Informational Gift Tax Return.
  2. Education:  You can give to your children or grandchildren the gift of education in the form of a 529 college savings plan. You can give an unlimited amount for tuition if you make the gifts directly to the college or educational organization. The money you invest in a 529 college savings plan grows tax-free and withdrawals for education expenses are tax-free, incurring no capital gains.
  3. Charity: Instead of selling appreciated stock and giving cash to your favorite charity, give appreciated stock. This way, you get a deduction for the fair market value of the stock (up to 30% of your adjusted gross income), and capital gains taxes do not apply.
  4. Donor-advised funds: By giving to a donor-advised fund, you can give today, take the charitable deduction in this year’s taxes, but decide which charities to benefit next year or beyond.
  5. Charitable gift annuity: If you want to receive a guaranteed lifetime monthly income as an assurance in old age and to benefit a charity in the process, then consider opting for a charitable gift annuity.

With the increases in capital gains taxes and higher tax rates on income and investments, basis has become an even greater consideration in estate planning. Most people have worked their entire life to accumulate their assets.  Everyone needs the peace of mind that comes with making sure their finances are taken care of if they become incapacitated, that decisions about their health care are carried out the way they would like, and that their children and other heirs are taken care of when that time eventually comes (whether or not they have to worry about capital gains taxes). If you haven’t started your estate planning or to update your documents, don’t delay. Please call 703-691-1888 to make an appointment for a no-cost consultation at The Fairfax and Fredericksburg Estate Planning Firm of Evan H. Farr, P.C.

Fredericksburg Elder Law


Fictional Lawyer Face-Off: Breaking Bad’s Saul Goodman vs. The Wire’s Maurice Levy



Saul Goodman, nee McGill
Source: Breaking Bad, AMC TV Series 2008–2013, portrayed by Bob Odenkirk.
Jurisdiction: Albuquerque, New Mexico

Maurice “Maury” Levy
Source: The Wire, HBO TV Series 2002–2008, portrayed by Michael Kostroff
Jurisdiction: Baltimore, Maryland


Two of the most critically-acclaimed television series of this century have focused on the drug trade, and both series have had an unscrupulous lawyer on the side of the dealers. The Wire’s Maury Levy represented various players in the Baltimore drug trade, from the Barksdales in the early seasons to final archvillain Marlo Stansfield.

Breaking Bad‘s Saul Goodman is a catchphrase-wielding, local-tv-ad-buying, ambulance chasing attorney-of-all-trades who routinely saves the bacon of Walter White, Jesse Pinkman, and their meth-cooking cronies. But he’ll also take your common DUI case or pain and suffering complaints from the “victims” of an airline crash.


[Before getting into this section, I feel I should issue a blanket (see ethical issues)]

Levy’s job is more about damage control than it is about winning cases, but he is extremely skilled in that area. His specialty may be witness suppression, pulling strings to properly intimidate nicked members of the Barksdale organization into silence. Levy does have one notable failure in the courtroom when his client Bird Hilton is sentenced to life in prison for murder, after Omar Little humiliates Levy from the witness stand with a moral condemnation for his role in “The Game.”

Similarly, Saul Goodman’s success rate is not necessarily a fair representation of his effectiveness as counsel, because his greatest skills lie outside the courtroom. He seems to be the most connected man in Albuquerque, initiates the successful laundering of White’s drug money, and finds a replacement crew when he restarts his operation in Season 5.


In this face-off, it;s unclear if the contender with the GREATER sin should be crowned the victor in this category, because choosing the lesser of two ethics-violators in this case is an exercise in futility. They’re both well past the point of no return. Obviously facilitating criminal activity is unethical for lawyers. And let’s be real here: these guys are both criminals in their own right.

Either way, it’s too close to call.


Levy, despicably, puts on airs of being a respectable servant of the justice system above reproach despite his countless misdeeds. He’s one of the least sympathetic characters in The Wire, a series which has no shortage of villains.

Goodman, for the most part, owns that he is a scoundrel, as well as a low-rent strip-mall lawyer. His charisma generally outpaces his obnoxiousness. It really helps that he’s one of the greatest (only?) sources of comic relief in the extremely bleak series.


Obviously. It helps when only one of the two lawyers is even remotely likable. While anything could change in the final episodes of Breaking Bad [Note: this piece was written before the penultimate episode aired], the fact remains that only one of these guys is getting his own spinoff series. I’m calling it for Saul.


[Image via Shutterstock]

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Why Corporate Law is a Total Scam


Corporate law is the Mecca of the law field. Frankly, if you aren’t a corporate attorney, you probably are going to have a hell of a time paying off your student loans. It only makes financial sense to go to to law school if you are going to work in a giant law firm and rake in tons of cash.Yeah, you are going to have to work 90 hours a week, but on the bright side, you’ll have financial freedom. That’s the choice law students have to make — gripping life long debt or soul sucking life long servitude to a firm that will work you 90 hours a week.

But it’s all a total scam. Supposedly rational businesses are lining up to give all of their hard earned cash to bloated corporate law firms. I always scoff a little bit when economists assume people act in rational ways solely related to profit. The statistically insignificant sample size that is my experience says this almost certainly false. And the way businesses pay for their legal representation seems to solidify my theory that human behavior is far more complex than the bottom line.

Corporate law firms are set up as follows: they hire a bunch of extremely desperate and highly indebted students from the top universities in the county. People who had high expectations for their life, but were either tricked or threatened into going into law school. Now, they are too educated to get another job, but too in-debt not to make good money. So, they work for these firms and get lofty six figures jobs but, since they have no other option, they willing work 90 hour weeks in order to keep their jobs. If they don’t spend enough time in the office, they are out into the depressing world of never paying off your student loans and financial ruin.

What’s wrong with this situation should become immediately clear. The people doing the legal work for any given company are not motivated to do a quick, amazing, and efficient job. You know what happens to attorneys who are extremely efficient? They don’t make billable hours. You don’t make billable hours, it’s public interest work for you. And so, the whole system is set up to make legal work as inefficient as possible.

When a young associate has a motion to write, they make it 100 pages with random references to various  cases that may or may not apply. Chances are the judge doesn’t have time to read  the whole motion and make sure it is all relevant. Besides, he or she might be impressed by the sheer volume of work. The client sees volumes of work and is extremely impressed with the time the associate spent on their case (or if not impressed, at the very least, hard pressed to say the 900 hours invoice they receive for such motion is not legitimate). The firm bills them for 900 hours, pays the associate a small percentage via that six figure salary (which is not looking so large when you’re billing hour number 900 one month into the billing year), takes the rest as profit and everyone is happy.

Except that any competent attorney could have written that well drafted and complete motion in 4 hours. Sure, it wouldn’t cite every case known to human history, but let’s be honest, big firms are hoping the judge wouldn’t actually read them anyway. The length of the motion is not meant to be substantive, it’s meant to be impressive to look at.  And, supposedly rational companies justify this sort of waste. Why not? Associates pick up their phones at 3 am on Saturday nights because, well, they have no choice, remember? They are completely unemployable outside the legal world and 90 hour weeks are expected at all big corporate jobs. So, the companies get as close to having an indentured servant as they are ever going to get and, as an added bonus, partners take them out to lavish and expensive dinners randomly throughout the year.

Of course this would never ever work in any other sort of service industry. People don’t pay their accountants extra for taking an extra long time to do their taxes and filing extra needless paperwork with the IRS. And they sure as hell aren’t impressed with dinners that cost about .001% of their accountant’s total fees. No one brags about how awesome a restaurant is because it bills the customers for every hour they spend pointlessly arranging rosemary on the plate. That’s what a lot of corporate law work amounts to — arranging rosemary on the plate.

Sure, companies complain that they can’t ever budget since they never know how long it’s going to take a first year associate to write a motion responding to the inadequate answers to interrogatory questions number 4, 8, 30, 38, and 40. But, they don’t say “This is completely ridiculous, I’m not paying you for manufactured work!.” Instead, they go out to dinner with extremely likable partners and down a bottle of wine and all the while become convinced that legal work really is just that hard and impressive and impossible to estimate ahead of time. How could firm that’s done 3,902,483 foreclosures know how much it would cost them to do another one for you? Obviously, it’s impossible! But those partners sure are friendly (or if not friendly, at least equipped with a limitless firm corporate card that will cover enough bottles of $200 wine to disguise any shortcomings in their personality)!

The entire business of justifying the pay scheme for corporate law ends up looking a lot more like care sales then it does any other service industry. Getting an attorney is a lot more like going to the hospital to have a surgery.  You have no idea how much it’s going to cost in the end and no one is at all concerned about telling you. Except that, with attorneys, you don’t have insurance and you are on the hook for the whole thing.

I can’t really blame the corporate attorneys for what they are doing. It’s not like the billing structure is a secret. Businesses are supposed to be highly intellectual consumers. If they want to pay for lavish dinners and needlessly time consuming legal work, why not? But, I do wonder, if General Counsels really are all that intelligent. Anyone could tell you that that bloated salaries contingent on logging as many hours as possible isn’t going to yield efficiency. Why don’t the shareholders question how much of the companies profits are dropped into legal fees? I suppose most of the shareholders are attorneys themselves. So, they aren’t going to suggest that an attorney’s time is worth anything less than $5,000 an hour.

(image: Business people shaking hands finishing up a meeting via Shutterstock)

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Ask the Expert: Do You Lose Medicare or Medicaid Coverage if you Leave a Nursing Home for a Family Event?

Q. At the age of 60, my younger sister Anna is getting remarried. She is hoping that our 82-year old mother, Shannon, can attend and even sent her a plane ticket to Texas for the wedding. Our mother is on Medicaid, and is in a nursing home in Virginia. Mom is in the early stages of dementia and needs a lot of help with day-to-day tasks, but is able to travel if I go with her (I am a nurse). I also think it would be good for mom to stay for a few days to visit with friends and family.

My older sister, Maeve, also wants to travel with us to be at Anna’s wedding, but she is on Medicare and has been in short-term nursing home care to recover from her recent surgery. She will probably need full-time nursing home care in the near future, like our mother, because she is beginning to need help with day-to-day activities like bathing, toileting, and getting around the house.  

In both cases, the facilities have given my mom and my sister a hard time about leaving, saying that they could lose their beds and if not, that they will have to pay out of pocket for the days they are gone. Is what they are saying true? If mom and Maeve were to leave their respective facilities and go with me to the wedding, would they lose their Medicaid or Medicare coverage for their rooms? Worse off, could they lose their beds to someone else? Thanks for your help!

A. Congratulations to your sister on her upcoming nuptials! Nursing home residents, such as your mom and your sister, Maeve, do not want to miss out on important family events, but there is always the concern that they will lose coverage or their bed if they leave the nursing home.

For your sister, as you may know already, Medicare’s coverage of nursing home care is quite limited and it only covers skilled care (treatment provided by a doctor or nurse). The Medicare Benefit Policy Manual states that “a short leave of absence to attend a family occasion is not, by itself, evidence that the resident no longer needs to be in the nursing home.” The manual also states that “staff should not tell a resident that leaving the facility will cause coverage to lapse.”

According to the Medicare Benefit Policy Manual, if your sister, Maeve, leaves and returns by midnight the same day, the nursing home can bill Medicare for the day. However, if Maeve is gone overnight, Medicare will not compensate the nursing home for the time missed. If your aunt wants to leave for a few days, she should check with the nursing home to make sure the bed can be held. The nursing home may charge her a bed-hold fee in order to keep the space available.

If your mother, who is on Medicaid, leaves the nursing home to visit family, it is typically referred to as “therapeutic leave.” State laws regarding therapeutic leave vary widely. Some states will pay to hold a bed for as long as 30 days a year, while others pay nothing at all for such leave. Each nursing home is required to provide residents with information about their bed-hold policy before the resident leaves the facility. In addition, if a Medicaid recipient is absent longer than the nursing home’s policy allows, federal law requires the nursing home to readmit the recipient to the first available room.

In Virginia, Medicaid does not pay for any bed hold days when a nursing home resident is admitted to the hospital unless the leave is within her plan of care and it is noted in her chart. If noted, therapeutic leave includes visits to relatives or friends or admission to a rehabilitation center for up to 7 days for evaluation, but it does not include admission to an inpatient hospital. If it is not part of her plan of care, unless the resident or family chooses to pay to hold the specific bed, the facility has the right to offer the bed to another person. However, in accordance with federal laws, while the hospitalized resident may not be able to return to the same bed if it has already been filled, he or she still has the right to be readmitted to the same facility to the next available bed in a semi-private room, as long as the resident still requires nursing home care and is eligible for Medicaid nursing facility services.

In the state of Virginia, two written notices about readmission rights are required. The first notice must be given to the resident and a family member or legal representative before a resident is allowed to go on therapeutic leave (probably given at time of admission as part of the admissions package). This notice must state the duration of the bed hold policy under Medicaid and the facility’s policy regarding the bed hold period, including the facility’s readmission policy. A second notice about the bed hold policy must be given at the time the resident is transferred to the hospital or for therapeutic leave.

In addition, the Virginia Medicaid rules states that the facility must post a notice regarding readmission rights in a conspicuous place accessible to residents and their families, and that the resident’s record must include a statement signed by the resident or her representative that she has been fully informed about her rights to readmission.

You mentioned that Maeve is nearing the need for long-term nursing home care. As you are probably well aware because of your mother, nursing homes in Northern Virginia cost $10,000- $12,000 a month. Life Care Planning and Medicaid Asset Protection is the process of protecting your assets from having to be spent down in connection with entry into a nursing home, while also helping ensure that you or your loved one get the best possible care and maintain the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home. Learn more at The Fairfax Elder Law Firm of Evan H. Farr, P.C. website. Call 703-691-1888 to make an appointment for a no-cost consultation.

Nursing Home

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Dear Liza, I would like to give my son $200k to upgrade homes. Can me and my wife each give $13,000 to my son, daughter in law, and two grand children? That would be $102,000, and then apply the remaining $98,000 to the unified tax credit. Can I write…

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Dear Liza, I would like to give my son $200k to upgrade homes. Can me and my wife each give $13,000 to my son, daughter in law, and two grand children? That would be $102,000, and then apply the remaining $98,000 to the unified tax credit. Can I write…

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Dear Liza, I would like to give my son $200k to upgrade homes. Can me and my wife each give $13,000 to my son, daughter in law, and two grand children? That would be $102,000, and then apply the remaining $98,000 to the unified tax credit. Can I write…

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