The Deficit Reduction Act of 2005: Your Long Term Care Planning
By Nancy J. Brady, RN, Esq.
And Linda Faith Marshak, Esq.
In past columns we have addressed the Medicaid eligibility rules.
As the result of legislation passed in January 2006, those rules are in the process of being changed- making it even more difficult to obtain Medicaid benefits to cover the cost of nursing home care.
We expect the rules for home care benefits to be changing as well. This column will give a brief overview of how the new changes will affect Medicaid eligibility for nursing home benefits.
To begin with, should you or your loved one need nursing home care, Medicare may pay for the nursing home for a short time- up to 100 days.
In order for Medicare to cover the nursing home stay, certain criteria must be met, including a three day hospital stay within one month of nursing home admission, and the individual must need "skilled" care- such as daily physical therapy, or the services of a registered nurse for certain treatment.
At any time during the initial 100-day stay in the facility, if the individual no longer needs or is no longer improving from these services, Medicare can decide to discontinue coverage.
At that point, there are three options - the patient can be discharged, pay privately, or apply for Medicaid to cover the continued stay in the nursing home.
In order to be eligible for Medicaid, an individual can have no more than $4,150 in assets in his name at the time of application.
When counting assets Medicaid directs that all assets of the individual be included- savings, IRA's, annuities, cash value of life insurance, savings bonds, etc. (There are special rules for the primary residence.)
Under the old rules, when applying for Medicaid three years worth of financial statements for all assets owned during the thirty six months immediately prior to the nursing home application had to be provided.
If any assets were transferred during that three months, Medicaid asked to whom the assets were transferred, and the value as of the date of transfer.
A formula was then applied to determine the individual's eligibility or "pick up" date for Medicaid coverage. For example, if an individual applied for Medicaid to begin coverage as of December 1, 2005, all financial data going back to December 2002 would be submitted with the application for Medicaid.
If that individual transferred or gave away assets to his children on two separate occasions, at a value of $200,000 in October of 2003, and again a value of $54,792 in December of 2004, we would apply the old rules and formula as follows to determine eligibility:
The transfer of $200,000 in October of 2003 would not count towards eligibility because it falls outside of the three-year look-back period (unless it was transferred to a trust, then a five year look-back period may apply).
We then divide the $54,792 by the average cost of nursing home care in the borough in which the applicant resides ($9,132 in Queens). Therefore, the applicant would have a penalty period for six months, under the old rules beginning on the first month following the month of transfer.
Provided there were no other assets transferred during the three years look back period, that individual would have been eligible for coverage as of July 1, 2005.
Under the changes to the federal law as enacted in January, there is now a five-year, or 60-month look back period for all transfers, and the penalty period or period of ineligibility now begins on the date of application instead of the date of transfer.
So, using the same example as we used above, the applicant has made a transfer of $254,792 within the five years prior to application, and dividing that amount by $9,132 will have a penalty of 28 months. This means the applicant will have to find a way to pay the nursing home for 28 months before Medicaid will be available.
These changes to the law are at the federal level. The individual states will enact these changes, as well as others. It is not possible to discuss all of the proposed changes in this limited space.
However, it is advisable for anyone eligible for long term care insurance to purchase a policy, and for anyone concerned with protecting their assets from the costs of long term care to consult with an attorney who is familiar with these rules, how they may affect you individually and what plans can be put into place to begin to protect your assets.
The attorneys would be happy to meet with your group or organization to discuss these and other issues. See our display ad in this publication.