It took Congress and the President almost a year to agree on the Deficit Reduction Act . The Act made significant changes in Medicaid, many of these changes effecting older adults.
According to the Congressional Budget Office, the action will save about $39 billion. Approximately 65,000 people are expected not to receive care because they will not be able to pay the premiums and co-payments, saving the government $6.1 billion. It is further estimated that $9.9 billion in savings will occur because low income poor people will be dropped from the program by 2015.
Individuals who apply for Medicaid will now be subject to a 60-month "look back" period. This means that individuals will have to show they have not given anything of value away during the previous five years. The prior law was 36 months.
Probably the most significant change is the calculation of the penalty if an individual does transfer assets without fair consideration. Under the new law, for an individual who transferred or gave away money or things of value, the "look back" period for giving assets away starts the day of the Medicaid application, rather than the date of the transfer.
For example if Mrs. Smith gives her son $100,000 on February 9, 2006 and applies for Medicaid four years later on February 9, 2010 because she needs home care, assisted living or nursing home care, the "look back" period begins on February 9, 2010.
The penalty period, which would have expired under the old 36 month provision, now will start on February 9, 2010 and will most likely continue for more than 15 months, depending on the amount of the penalty that the state assesses in 2010.
Another significant change in the law, that started in January, is the disqualification of individuals for Medicaid who own a home with an equity interest of $500,000 or more. If the spouse or a child under age 21 is living in the home, the home shall continue to be an exempt asset. A reverse mortgage can be used to reduce the individual’s total equity interest in the home.
Individuals who purchase annuities, either revocable or irrevocable, for more than $100,000 in the five years previous to the Medicaid application, have to name the state as the remainder beneficiary for the amount of Medicaid that is received, unless the beneficiary is a spouse, minor child, or disabled child.
The state is required to notify the issuer of the annuity about the change in the beneficiary. States may also require the issuer to notify the State if significant withdrawals are made from the annuity.
Individuals who pay an admission or entrance fee to a continuing care retirement community (CCRC), may be required to use these funds prior to application for Medicaid if a) the contract allows the CCRC to use the entrance fee to pay for care when these funds are needed, b) the individual is eligible for a refund on all or any portion of the entrance fee, or c) the entrance fee is not considered part of an ownership interest in the CCRC.
The law allows states to enter into long term care insurance partnerships. Under this provision, if an individual has exhausted the benefits of a long term care insurance policy, and applies for Medicaid, Medicaid will exempt the assets or resources up to the amount of the value of the long term care insurance benefit.
To be eligible for the long term care insurance exemption, the individual must be a resident of the state in which the policy was first issued, the plan is a federally qualified plan under the IRS, and the plan provides for inflation protection. The Colorado legislature did not pass legislation in 2006 to allow citizens to take advantage of this opportunity.
For more information on these and other changes contact your attorney or call (303) 333-3482.