PENDING MEDICAID ASSET TRANSFER RESTRICTIONS

In December the U.S. Senate passed budget legislation cutting the federal deficit by $39.7. Among other provisions, the legislation would impose new restrictions on asset transfers before qualifying for Medicaid coverage of nursing home care. However, because Democrats succeeded in forcing minor changes to the bill before the vote, the House must vote again on the measure.

The proposed new law would extend Medicaid's "lookback" period for all asset transfers from the current three years to five years. But the most significant change is that it would also shift the start of the penalty period for transferred assets from the date of transfer, as is the case now, to the date when the individual would qualify for Medicaid coverage of nursing home care if not for the transfer. In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts.

The legislation also would:

• Make any individual with home equity above $500,000 ineligible for Medicaid nursing home care, although states may raise this threshold as high as $750,000.
• Establish new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.
• Allow Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.
• Set forth rules under which an individual's CCRC entrance fee is considered an available resource.

Because the change in the penalty period start date will likely leave nursing homes on the hook for the care of residents waiting out extended penalty periods, ElderLawAnswers.com has dubbed the bill “The Nursing Home Bankruptcy Act of 2005.”

This legislation will be enacted only if the House of Representatives votes for it a second time. The House narrowly passed the bill the first time in the early hours of the morning with some members absent and with only four hours to review a complex package of provisions. People who are concerned about the impact of this bill, S. 1932, may want to contact their congressional representative. For contact information go to: www.visi.com/juan/congress

-Adapted from From ElderLawAnswers.com “Senate Approves Punitive Transfer Rules As Cheney Breaks Tie” Last Updated: 1/13/2006 and “The Message of the Pending Asset Transfer Changes: Don't Delay Planning” from ElderLaw News From Margolis & Associates January 16, 2006.

01/2006