Affording long-term care is an important concern both for older citizens and their families.  Medicaid, the one government program that pays for an unlimited period of long-term care, has been an important option in solving families’ long-term care concerns. Within the past year, however, changes in both Pennsylvania and federal law will make access to Medicaid more difficult. While the changes in federal law became effective on February 8, 2006, Pennsylvania is still in the process of issuing regulations, and it may not be until 2007 that the full impact of these changes will be felt.

     This article will discuss the specific changes that have been made to the Medicaid rules in the areas of: (1) gifting of assets as a way of accelerating Medicaid eligibility, and (2) the definition of what assets will be counted for Medicaid eligibility purposes.

 

     Please contact Mr. Hagan to discuss any specific questions you may have concerning how these new rules may affect Medicaid eligibility for yourself or  your parents, spouse, or other family members.

 

 

CHANGES IN THE

GIFTING-OF-ASSET RULES

 

     Eligibility for Medicaid will depend not only on what countable resources the individual owns at the time of application, but also on whether the applicant gifted assets within the “look-back” period before entering the nursing facility or applying for Medicaid. Such gift transfers will trigger a period of ineligibility based on the amount gifted divided by a state divisor. 

 

FIVE YEAR LOOK-BACK RULE

Under new federal law, the look-back period will be 60 months for gifts made after February 8, 2006. (The old rule looked back only 36 months for most gifts.)

DELAY IN COMMENCEMENT OF PERIOD OF INELIGIBILITY 

      Under the old rules, if a Medicaid applicant made gifts during the look-back period, the starting period of ineligibility would commence as of the month in which the gift was made. Now the starting period of ineligibility will not begin to run until all of the person’s remaining assets have been exhausted.

     NOTE:  Without question, this delay in the beginning of the ineligibility period is the most severe and potentially most harmful change made by federal law, since by definition the person will have nothing left to pay for nursing care during the penalty period. 

 

ANNUITIES

    Annuities purchased for the Medicaid applicant or his or her spouse during the look-back period will be treated as a gift of assets under the new law, unless the annuity contract names the state as the remainder beneficiary for the total amount of Medicaid that will be paid on behalf of the annuitant. In addition, the annuity must be irrevocable and non-assignable, be deemed actuarially sound, and provide for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments allowed.

 

PROMISSORY NOTE, LOAN, OR MORTGAGE

     Funds transferred in exchange for a promissory note, loan, or mortgage during the look-back period will be treated as a penalizing gift, unless the note, loan, or mortgage:

 

1.       Has a repayment term that is actuarially sound, i.e., the term must not exceed the lender’s life expectancy;

2.       Provides for payments to be made in equal amounts during the term, with no deferral of payments or balloon payments allowed; and

3.       Prohibits the cancellation of the balance due upon the death of the lender.