New Legislation that Impacts Medicaid Coverage
The United States Congress dramatically changed the transfer of assets rules as applied to applications for Medicaid (Title 19 in Connecticut) when it passed the Deficit Reduction Act of 2005 ("The Act") on February 1, 2006. The Act will impose new restrictions on the ability of clients to transfer assets before qualifying for Medicaid coverage. President Bush signed this legislation on February 8, 2006.
The legislation makes the following changes:
Lookback Period - now 5 years.
Before these changes, there was a 36-month (3-year) lookback period when someone applies for Medicaid (Title 19). The state looks at 3 years of financial records to determine if any gifts have been made. The new legislation changes the lookback period to 60 months (5 years).
Despite the lookback period, a penalty period (when someone is not eligible to receive any Medicaid benefits) could be shorter, even if gifts were made during the lookback period. The penalty period was measured by how much was given away to persons other than the spouse. The penalty period began with the date of the gift - when it ended, the donor could receive Medicaid benefits, even if shorter than 3 years. There was no requirement that the donor had to be without funds to start the penalty period from beginning.
Now all this has changed. The penalty period WILL NOT BEGIN when the first gift is made but when the donor is otherwise eligible for benefits (when all the money retained has run out). Effectively this means that there may not be a penalty period shorter than 5 years.
Exemption of Real Estate
Prior to this legislation, all the equity in one's residence was protected if you were married and if your spouse needed care. However, now the exemption is limited to $500,000 of equity (the State of Connecticut can raise that amount to $750,000, if it so wishes). This may force homeowners to obtain traditional or reverse mortgages to protect their homes.
The legislation also changes the treatment of annuities, including a requirement that the state which is paying the benefits be named the remainder beneficiary of the annuity, if any.
Continuing Care Communities (Assisted Living) Payments
Previously, it was believed that buy-in payments to assisted living or independent living facilities would be treated as exempt (as if one owned a home). This new legislation requires that such payments be part of the spenddown before applying for Medicaid.
What if gifts were made and the donor needs care but has no funds?
The real tragedy in this legislation is that it can be financially disastrous for nursing homes and the families of sick elderly persons. Under the new legislation, all gifts within 5 years of application could create problems, not just those made to enable persons to qualify for assistance. Gifts to help grandchildren pay for college, birthday and Christmas gifts and the like will be scrutinized. Persons in nursing homes who run out of money may not immediately qualify for assistance. Nursing homes are not able to discharge elderly persons who cannot pay. To protect themselves financially, these institutions may be more selective as to whom they admit.
What is the effective date of the legislation?
The new law applies to transfers made on or after February 8, 2006. However, many states such as Connecticut have to change their rules. Congress has given these states more time to come into compliance with the new federal law. Therefore, there may still be time for Connecticut residents to transfer assets under the old law (the 3-year rule).
If you are concerned with these issues, please call Atty. Greta E. Solomon and make an appointment to see how these new rules may affect you and your family.