The New Medicaid Rules: How Do They Affect You?
The Deficit Reduction Act of 2005 was enacted on February 8, 2006. This new law made drastic changes to the Medicaid eligibility rules for coverage for long-term nursing home care and community-based care (Passport). This article provides an overview of the most significant changes. The new law applies to all transfers made on or after February 8, 2006. Planning for Medicaid eligibility can still be done, but the planning has changed, and it is advisable to do planning earlier than was needed previously. Since planning has become so complicated, only an attorney specializing in Elder Law should be retained.
The basic rules for Medicaid eligibility for long-term nursing home care and community-based care have not changed and are as follows:
1. The applicant must not have more than $1500 in "countable" assets. "Non-countable" assets include household goods and personal possessions, one motor vehicle, a prepaid irrevocable funeral plan, life insurance with a face value of $1500 or less, "inaccessible" assets, and the principle residence. "Countable" assets include all other assets. Income is not considered an asset for Medicaid purposes and is treated differently.
2. The applicant must not make any improper transfers during the "look back" period. However, if the applicant has made improper transfers, the applicant is eligible after the "penalty period" has passed. The penalty period is determined by taking the value of the transferred money and/or asset and dividing it by $4806. The result is the number of months of the penalty period. At the end of the penalty period, the applicant is eligible. For example, if Mary Smith contributes $10,000 to her church, Medicaid considers this to be an improper transfer. Mary would not be eligible for Medicaid for 3 months. ($10,000 divided by $4806 = 2.1 months. Ineligibility periods are rounded up to the next whole number.)
Medicaid considers an improper transfer to be any transfer or gift made to anyone other than one's spouse. Examples of an improper transfer include paying for a grandchild's college or wedding, giving money to a family member which he uses as a down payment on his home, a loan to a family member or friend which is not in writing and you really don't expect to be re-paid, and selling your car to your son for $5000 when the car is worth $7000.
Under the old law when an applicant filed an application for Medicaid coverage for long- term care or community-based services, Medicaid looked back thirty-six months from the date of the application for any transfers made for less than fair market value. Under the new law, the "look back" is now sixty months.
Under the old law, the penalty period for an improper transfer began on the first day of the month in which the improper transfer was made. Under the new law, the penalty period for an improper transfer begins on the date the applicant is eligible except for the improper transfer. This means that when the person would otherwise be eligible for Medicaid coverage, the penalty period will start. This is when the applicant has no funds to pay for his care.
An applicant may not have more than $500,000 equity in his home. However, this does not apply if (1) his spouse is living in the home and/or (2) a permanently and totally disabled or blind child or a child under the age of 21 resides in the home. The old law did not limit the amount of equity an applicant was permitted to have in his home.
An applicant who purchases an annuity or similar financial instrument must make the state of Ohio the beneficiary. The state must be the second beneficiary if the applicant has a spouse and/or a disabled, blind, or minor child.
These rules may cause harsh results to persons who apply for Medicaid coverage for long-term nursing home care and/or community-based services. Medicaid planning can still be done. It is more important than ever to begin Medicaid planning earlier before the applicant needs Medicaid coverage.
Please contact us if you would like more information about this topic. Attorney Kreiner is available to do group presentations on this topic.
