Dramatic Medicaid Law Changes Enacted
On February 8,
2006, President Bush signed the Deficit Reduction Act of 2005 (DRA).
Included in this legislation were sweeping changes to the Medicaid
eligibility laws. The full ramifications of these changes are yet to be
seen. However, there are a couple of primary aspects of the new law of which
you should be aware.
First, the DRA increases the lookback period. Now, all
transfers, whether to individuals or to trusts will be subject to a minimum
of a five-year lookback period. Prior to the DRA, there was a three-year
lookback period for individuals, a five-year lookback period for transfers
to trusts and an unlimited lookback period for those who made applications
during a lengthy penalty period. This new rule also eliminates the ability
of an individual to make small gifts to his or her family or church without
imposing a Medicaid penalty. This new rule is anticipated to cause
nightmares for unsuspecting nursing home residents, their families and the
nursing homes themselves. Some have dubbed this new law the “Nursing Home
Bankruptcy Law of 2005.”
Second, the DRA shifts the start of the period of
ineligibility for a transfer of assets. Under prior law, a period of
ineligibility for a transfer began on the first day of the month of the
transfer. Under the DRA, the penalty period will begin on “the later of” the
date under the old law or: “the date on which the individual is eligible for
medical assistance under the State plan and would otherwise be receiving
institutional level care...based on an approved application...but for the
application of the penalty period.” In other words, prior gifts will create
a penalty period that will not start to run against the Medicaid applicant
until they are already in a nursing home, are already spent-down to less
than $2,000, and make a Medicaid application.
Although the new transfer rules apply to all transfers
occurring on or after February 8, 2006, the date of enactment of the DRA,
Oklahoma may have a grace period in order to establish laws to effectuate
the DRA rules and to change the Oklahoma Medicaid administrative policy
manual.
Other changes enacted by the DRA to close various
“loopholes” include requiring the states to apply the “income-first rule” to
community spouses who appeal for an increased resource allowance, requiring
the states to be the named remainder beneficiary on annuities to the extent
of medical assistance paid, and limiting the exempt equity in homes of
nursing home residents to $500,000 (or $750,000 if the State so elects).
The new law has greatly complicated Medicaid planning
and the Medicaid application process. The advice of an experienced elder law
attorney will now become more important than ever before in light of these
new laws.
Lee M. Holmes is available to speak to your group or organization regarding
Medicaid planning and the changes enacted under the DRA.
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info@medicaidoklahoma.com
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