CHANGES IN
MEDICAID LAW
ANNE R.
MOSES
The Deficit Reduction Act of 2005 (DRA) made significant
changes to the Medicaid
laws. Alabama recently introduced revised provisions in
response to that law, which
almost create more questions than they answer. The purpose
of this article is to give you
a brief overview of the major changes in the application of
the law.
You should know that the DRA has been challenged in court as
unconstitutional, but is
effective law until a final ruling is made which will be
years away.
Medicaid is for those with insufficient resources and income
to pay for their medical
costs. Medicaid is financed by the State of Alabama, which
pays approximately 30% of
the costs, and the Federal government which pays the
balance. Upon qualification for
Medicaid, a patient is eligible for skilled nursing care.
Changes
in Resource Requirements. DRA has made some changes to the
resource test
which restricts the kind and amount of assets you can own:
1. Personal Effects and Household Goods are no longer
considered assets;
2. Only the first $500,000 in equity of your real estate is
excluded.
Changes in Look-Back Period. The look-back period for
reviewing transfers has been
expanded from 36 to 60 months for all transfers prior to the
date of application. Alabama
has interpreted this by introducing a phase-in period so
that the 60-month period does not
begin to be effective until 2009 for transfers prior to
February 2006.
When the Penalty Period Begins. The commencement of the
penalty period used to
calculate whether a person is eligible for Medicaid Benefits
previously began on the date
the transfer of an asset began. Now, it begins on the date
you apply for Medicaid
Benefits. The impact of this could be devastating for many
families for whom nursing
home care comes as a surprise. For instance, Mom and Dad
give Granddaughter $15,000
for college. Dad has a stroke a year later. It used to be
that the penalty ran from the date
of the gift. Now it runs from the date the Medicaid
Application is made. So Dad will have
to pay for his own nursing home benefits for about four
months.
Annuities. An annuity acquired prior to the 60-month look
back period will not be
considered a transfer for Medicaid purposes. The DRA has
expanded the use of annuities,
2 but Alabama law currently does not exempt annuities unless
they are actuarially sound. If
Alabama revises its position on this, it could have a
significant impact on the use of
annuities here. Currently, where one spouse is in a nursing
home and the other is in the
community, they may try to get more income to the community
spouse by taking assets in
excess of the community spouse’s resource allowance (between
$25,000 and $99,540
depending on total assets) to purchase an annuity for the
community spouse. Such an
annuity cannot exceed the life expectancy of the individual;
you cannot use deferred
annuities; and the annuity terms cannot provide that it can
be surrendered for its cash
surrender value. |
