It's Official: Draconian New Medicaid Transfer
Rules Enacted
Last Updated: 2/8/2006
Topic: Medicaid
President Bush today (February 8, 2006) signed into law the Deficit Reduction Act of
2005, which among other provisions places severe new restrictions on the
ability of the elderly to transfer assets before qualifying for Medicaid
coverage of nursing home care.
The law extends Medicaid's "lookback" period for all asset transfers from three to
five years and changes the start of the penalty period for transferred assets
from the date of transfer to the date when the individual transferring the
assets enters a nursing home and would otherwise be eligible for Medicaid
coverage. In other words, the penalty period does not begin until the nursing
home resident is out of funds, meaning she cannot afford to pay the nursing
home.
The law also makes any individual with home
equity above $500,000 ineligible for Medicaid nursing home care, although
states may raise this threshold as high as $750,000.
The new federal law applies to all transfers
made on or after the date of enactment, February 8, 2006. However, the law gives states that must pass
legislation to meet the new requirements more time to come into compliance.
This gives many people in most states a little time to plan. The deadline for
states to enact their own laws varies from state to state, but generally it is
the first day of the first calendar quarter beginning after the end of the next
full legislative session.
Any transfer made before February 8 falls
under the old transfer rules. But what about someone who transfers assets after
that date but before his state comes into compliance with it? In all
probability, this will depend on the date of the application for Medicaid. If
the application is filed before enactment of the state law, it will probably
come under the old transfer rules. If it is filed after the enactment of the
state law, it will come under the new transfer rules.
The bottom line: if you have considered
protecting some assets for your loved ones in case you later require long-term
care, you should contact a qualified elder law attorney now. (To find an ElderLawAnswers member attorney in your area, click here).
The new law also:
- Establishes new rules for the
treatment of annuities, including a requirement that the state be named as
the remainder beneficiary.
- Allows Continuing Care
Retirement Communities (CCRCs) to require
residents to spend down their declared resources before applying for
medical assistance.
- Sets forth rules under which an
individual's CCRC entrance fee is considered an
available resource.
- Requires all states to apply
the so-called “income-first” rule to community spouses who appeal for an
increased resource allowance based on their need for more funds invested
to meet their minimum income requirements.
- Extends long-term care
partnership programs to any state.
- Authorizes states to include
home and community-based services as an optional Medicaid benefit.
(Previously, states had to obtain a waiver to provide such services.)
In addition, the law incorporates provisions in
the original budget bill passed by the Senate closing certain asset transfer
"loopholes," among them:
- The purchase of a life estate
will be included in the definition of "assets" unless the
purchaser resides in the home for at least one year after the date of
purchase.
- Funds to purchase a promissory
note, loan or mortgage will be included among assets unless the repayment
terms are actuarially sound, provide for equal payments and prohibit the
cancellation of the balance upon the death of the lender.
- States will be barred from
"rounding down" fractional periods of ineligibility when
determining ineligibility periods resulting from asset transfers.
- States will be permitted to
treat multiple transfers of assets as a single transfer and begin any
penalty period on the earliest date that would apply to such transfers.
To read President Bush's remarks upon signing
the legislation, click here.
To read the asset transfer provisions in the
Deficit Reduction Act of 2005, click here.
For the full text of the Deficit Reduction
Act of 2005 in PDF format, click on: http://www.rules.house.gov/109/text/s1932cr/109s1932_text.pdf
The section on the transfer provisions begins on page
222.
For the full text in HTML, go to http://thomas.loc.gov/"http://thomas.loc.gov and
type "S 1932" in the Search Bill Text box. Then click on the fourth
version of the bill (S. 1932 EAS).
For an Associated Press article on the vote, click here.