New Medicaid Transfer Rules
Elder Law News
On February 8, 2006, the federal government passed a budget bill (the Deficit Reduction Act of 2005), which changes Medicaid rules. This newsletter is a summary of the changes that affect Medicaid.
Increases the Lookback Period to Five Years. All transfers will be subject to a five-year lookback period rather than the prior three-year lookback period for individuals, and five years for transfers to trusts.
Postpones the Penalty Period Start Date. The new law shifts the start of the penalty period for a transfer of assets from the first day of the month of the transfer to the date one would otherwise be eligible for Medicaid, but for the transfer. The penalty period does not begin until the individual moves to the nursing home and the person would be eligible for Medicaid; meaning, until they have spent down to $2,000.
In other words, the penalty period does not begin until the nursing home resident is out of funds, and she cannot afford to pay the nursing home.
An example should help explain how this works. Let's assume that Ms. Brown transfers $45,830 to her children on February 1, 2006. Ms. Brown enters a nursing home December 1, 2006, and has less than $2,000 in her name. The penalty period is 10 months. The difference in the current law and the proposed law is when the 10-month penalty period begins to run.
Under old law, the penalty period begins to run on February 1, 2006, which is the date of transfer. Ms. Brown would be eligible for Medicaid 10 months later, on December 1, 2006.
Under the new law, the penalty period begins to run on December 1, 2006, the date she enters the nursing home and has less than $2,000 in her name. Ms. Brown would not be not eligible for Medicaid for 10 months from December 1, 2006. This, of course, raises the question of how her care will be paid during the10-month penalty period.
The Effective Date. The new transfer rules apply to all transfers occurring on or after the date of enactment of the budget bill, February 8, 2006. Transfers made before February 8, 2006 are "grandfathered" in under the old transfer rules.
Annuity Changes. The purchase of annuity shall be considered a disposal of assets for less than fair market value unless the state is named the remainder beneficiary for at least the total amount of medical assistance paid on behalf of the annuitant. A spouse, minor, or disabled child can be named as the primary beneficiary, but the state must be named as the secondary beneficiary.
Equity in Homes. The equity in homes of nursing home residents exceeding $500,000 shall be countable, unless the nursing home resident's spouse, child under age 21, or blind or disabled child is living in the house.
Disclaimer: This information is for general informational purposes only and does not constitute legal advice. For specific questions, you should consult a qualified attorney.