2006 Medicaid Changes
The Deficit Reduction Act has changed the federal Medicaid laws effective February 8, 2006. The three most important changes concern: 1) the transfer of assets to qualify for Medicaid; 2) Medicaid annuities; and 3) Medicaid’s treatment of the primary residence.
Transfer of Assets
Medicaid penalizes applicants who transfer assets by imposing one of month of ineligibility for nursing-home benefits for every $7,380 (as of 2006) given away. But by changing two important aspects of the Medicaid rules, Congress has imposed much stricter penalties than ever before.
Under the old rules, Medicaid would review three years (or in the case of trusts five years) of financial statements in order to identify any disqualifying transfers. This is known as the “look-back period.” The new law extends the look-back period to five year for all transfers.
More significantly, however, the new law also changes the date on which the penalty period begins. Under the old rules, the penalty period started when the transfer was made. The new law shifts the start-date of the penalty period to the date when the person requires a nursing home level of care and his or her funds have run out. The new law applies only to transfers made after February 8, 2006.
Annuities
Congress has also changed the annuity regulations. Medicaid allows a spouse whose assets exceed the Medicaid limit to protect those “excess assets” by purchasing an irrevocable, immediate annuity. The old Medicaid rules allowed the spouse to name anyone he or she wanted to receive the remaining annuity payments if the spouse died during the annuity term. Under the new rules, Medicaid requires that annuities name the Commonwealth of Massachusetts as the beneficiary. Although the revised statute is somewhat ambiguous, it appears that the Commonwealth can only seek reimbursement from the annuity for benefits provided to the community spouse. The new rule does not apply to annuities purchased prior to February 8, 2006. Buying annuities remains an effective strategy to protect assets for the spouse of a nursing home resident; however, the new rules have added a risk to this strategy.
The Primary Residence
In the past, Medicaid did not count the equity of an applicant’s home in determining eligibility. This meant that an individual did not need to sell his or her home, regardless of value, in order to qualify for Medicaid. Under the new rules, however, a house with equity over $750,000 is now counted in determining Medicaid eligibility. Under the new rules, a single person whose equity exceeds $750,000 cannot qualify for Medicaid unless he or she either reduces the equity below $750,000 or agrees to sell the house. However, even under the new rules, a house continues to be noncountable if a spouse, disabled or blind child, or child under the age of 21 lives there.
The Medicaid rules are presently in a state of flux. It is more important than ever for you to keep in regular contact with our office so we can advise you as the rules change.
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