MAJOR CHANGES TO MEDICAID LAW LOOM: Don't Delay Planning
As we go to press for this newsletter, the U. S. Congress
is on the verge of passing major legislation that will
profoundly change the Medicaid system. This legislation,
if passed, will make it much harder for individuals
in need of long term care to get help from Medicaid
to pay for it.
This law was likely to be passed the end of January
or in early February when the House of Representatives
resumes its regular session, so it may already be law
by the time you read this. The way the legislation is
written, the changes become law on the date that the
bill is enacted into law. That date would be the date
on which President Bush signs the legislation, after
the House of Representatives has passed it. The legislation
passed on December 23, 2005 in the U. S. Senate on a
vote of 50 to 50 with the tie broken by Vice President
Dick Cheney. The House had passed the legislation a
few days prior by a vote of 212 to 206. However, the
legislation went back to the House for some technical
corrections.
The new law will make access to Medicaid coverage
for nursing home care much more difficult. Among other
provisions, the new law would do the following:
1) Increase the look back period for all asset transfers
from three to five years. Any transfers of assets to
either individuals or trusts made within 5 years of
a nursing home Medicaid application would prevent a
person from qualifying for nursing home Medicaid for
some period of time;
2) Render ineligible for nursing home Medicaid any
person with equity in a residence of over $500,000,
possibly $750,000, if Hawaii adopts an alternative higher
limit of $750,000 permitted in the bill;
3) Require a Medicaid qualifying annuity to have named
the state as beneficiary after the death of the owner
as to the amount of Medicaid paid by the state on the
owners behalf;
4) Start the penalty period for asset transfers at
the date when the individual would qualify for Medicaid
coverage but for the transfers. Currently, the penalty
period for an asset transfer starts at the date of the
particular transfer.
The last item is very troubling, and can be hard to
understand if you are not familiar with the way penalty
periods are calculated for nursing home Medicaid. Under
current law, if relatively small gifts were made a couple
of years before a person entered a nursing home, they
would not cause a disqualification period. Under the
new law, the penalty period would begin on the date
that the person would otherwise qualify for nursing
home Medicaid.
For example, grandmother is healthy and gives her two
grandchildren a total of $30,000 in 2006, and again
in 2007, to cover college tuition and costs. Grandmother
gets very ill unexpectedly in 2008 and needs nursing
home care. She runs out of money in 2010 after paying
$9000 a month for a total of over $250,000 for her care.
Under the old law, she could apply for Medicaid when
she ran out of money, and she would not be not penalized
because of the gifts. First, the gifts were outside
of the look back period of three years. Second, if they
were in the three year period prior to the application,
the penalty period would have started in 2006 in the
month the first gift of $30,000 was made and would have
expired 4 months after the date of the gift. The penalty
period on the second gift would have started in 2007
in the month the second gift of $30,000 was made and
would have expired 4 months after the date of that gift.
Under the new law, Grandmother can apply for Medicaid
when she runs out of money. The gifts are combined and
the penalty period started when she applies for Medicaid.
Her application, though, will be denied, and she will
be told that she must pay for her own care for another
7 to 8 months. The problem is she has no money left
and the tuition funds have already been spent.
There are many more changes to the Medicaid rules that
will seriously impact the ability of a person requiring
serious long-term custodial care to get help to pay
for it through the Medicaid system.
For individuals in the middle class, who hope to provide
for a spouse, or protect some assets for their loved
ones, Medicaid planning will still be possible, although
it will be tougher. Since in most situations, more advanced
planning will be necessary, the Elder Law Attorneys
at Sterling and Tucker can help. If you have any questions
about how the new Medicaid law may affect your future,
call our office and schedule an appointment.
by Judith Lee Sterling
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