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CHANGES IN STORE FOR MEDICARE AND
MEDICAID
President Bush
signed into law in February the Deficit Reduction Act, otherwise known as
the fiscal year 2006 budget reconciliation bill. That law, which contained
more than $39 billion in cuts, including $6.4 billion from Medicare and
$4.8 billion from Medicaid, has plenty of changes in store for seniors.
Under the new law,
for instance, most Medicaid beneficiaries would be required to pay higher
co-payments for health care services and could be denied service for lack
of payment. Provisions affecting Medicare include higher premiums for
beneficiaries, with greater increases for higher-income beneficiaries, and
a freeze in payments for home health care providers. The bill also cancels
a scheduled cut in Medicare reimbursements to physicians and provides
medical care to some hurricane survivors.
Here, according to
Bernard A. Krooks, founding member of Littman Krooks in New York City and
White Plains and Harry Margolis, founder and president of
ElderLawAnswers.com, are the three major changes to Medicaid eligibility
rules under the new law.
1. The look-back
period will be 60 months for all asset transfers
Under the old law,
outright transfers were subject to a 36-month look-back period and
transfers to or from certain trusts were subject to a 60-month look-back
period.
Under the new law,
the look-back period – though some asset transfers will be grandfathered
– has been increased from 36-months to 60 -months for all transfers. And
all transfers made within the look-back period will have to be documented
and explained to Medicaid authorities.
2. Start of
eligibility deferred
Under the old law,
the "penalty period" for institutional Medicaid started on the
first day of either the month in which the transfer is made or the first
day of the following month. But the new law postpones the beginning date
for any transfer penalty to the first day of the month in which the
individual is (1) in a nursing home or receiving "waivered" home
care, (2) has spent down his or her savings, and (3) would be eligible for
benefits but for the transfer.
States do have,
however, the option of starting the penalty period in the month of asset
transfer or in the month following asset transfer. For example, in New
York, it's the month following the month of transfer and in Massachusetts
it's the first day of the month in which the transfer occurs.
The point,
basically, is this: Imagine you transfer $50,000 that would normally
disqualify you for 12 months based on your state’s costs. Before, if you
transferred $50,000, you’d be free and clear after a year (measuring
from transfer date). Now, the measuring doesn’t even start until the
person would otherwise be eligible (but for the transfer), so they will
have to wait an entire year from the date they are already impoverished
and seeking care, or will have to wait for the five-year period (from #1
above) to expire. This could even unwittingly affect gifts for someone
made years earlier before they even anticipated needing Medicaid.
The upshot of this
change? Individuals, in most states, must own less than $2,000 in
non-exempt resources when applying for Medicaid. To establish this date,
the nursing home resident or any prospective applicant must apply for
Medicaid coverage and be approved (but for the transfer).
3. Equity in home
will count
Under the old law, a
person's home was exempt regardless of value, if certain conditions were
met. Under the new law, the equity in a Medicaid applicant's otherwise
exempt home will be countable to the extent it exceeds $500,000. Thus, a
person with equity in a home of more than $500,000 would not be eligible
for Medicaid. Of note, states will have the option to raise the limit to
$750,000.
Seniors and their
adult children may need to consult with qualified and competent
professionals who can evaluate issues and recommend potential solutions,
including long-term care insurance, reverse mortgages and home equity
loans.
Another provision of
the new law will give all states the authority to set up Long Term Care
Partnership programs, or programs that encourage residents to buy private
long-term care insurance by relaxing Medicaid nursing home benefit
qualification rules for private policy holders who exhaust private
benefits. Up till now, only California, Connecticut, Indiana and New York
have been permitted to operate partnership programs.
February 2006— This column is
produced by the Financial Planning Association, the membership
organization for the financial planning community, and is provided by
McGuire & Co., LLC, a local member of the FPA.
(Back to
Financial Planning Page)
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