Posted August 30, 2010

This is a summary of the Proposed Changes to Medicaid Eligibility – by Janna Dutton, of Dutton & Casey, P.C. a firm that specializes in Elderlaw. I thought it was important to share with my readers as I get many questions about Medicaid that I am not qualified to answer.  So here is some general information and remember to always consult an attorney regarding this!

The Illinois Department of Health and Family Services has released a series of proposed regulations which it will be publishing in the Illinois Register on August 13, 2010.  These regulations, in part, implement the federal Deficit Reduction Act provisions passed in February of 2006.  For those in the Chicagoland area that are interested, there will be a 45-day public comment period as well as public hearings scheduled for September 13, 2010 at 9:00 a.m. at the Michael A. Bilandic Building, 160 North LaSalle Street, Chicago, Room 500.

The proposed regulations contain numerous and significant changes to eligibility for Medicaid coverage of long term care services.  To say they are lengthy would be quite an understatement, so below are some of the most notable changes:

1.  Five Year Look-Back

As of the date of implementation of the proposed regulations, applicants for Medicaid coverage of long term care (skilled nursing, supportive living, and the community care and in-home services programs) will be required to account for and document all financial transactions occurring during the five years prior to the date of application, or February 6, 2006, whichever is later.

2.  Retroactive Application of More Punitive Transfer Penalty Rules

The Department is proposing to apply new punitive penalty rules to transfers of assets which have occurred since February 8, 2006.  As of the date of the implementation of the new rules, transfers of assets for less than fair market value, meaning gifts, will result in the applicant being ineligible for Medicaid coverage for a certain time period.  This time period does not begin until the month the person is eligible for Medicaid, meaning in need of long term care services and having an approved Medicaid application (but for the imposed penalty period).  The penalty period is calculated by dividing the total uncompensated value of assets transferred by the average monthly cost of long term care services at the private rate in the community in which the person’s nursing home is located at the time of application.  The result is the transfer penalty period of ineligibility in number of months, days, and portion of a day.  For example, if a person makes gifts to grandchildren of a total of $65,000 in June of 2006, and then applies for Medicaid on or before May of 2011, assuming an average private rate of $4000, they will be deemed to be ineligible for Medicaid for a period of approximately 16 months and 7.5 days beginning with the month that their Medicaid application for nursing home care is approved.

In addition, the Department will no longer allow a penalty period to be reduced by a partial return of the funds gifted.  In order to reduce a penalty period, the entire amount transferred during the five year look-back period will need to be returned.

3.  Spouses Must Disclose Separate Assets

Historically, the State has allowed spouses of nursing home residents applying for Medicaid to refuse to disclose their separate assets without affecting the Medicaid eligibility of nursing home residents.  The proposed regulations will no longer allow spouses to refuse to disclose their separate assets. If they do, the only way the nursing home Medicaid applicant (or community spouse) will be allowed to receive Medicaid benefits is if they assign their support rights to the State of Illinois to allow the State to take legal action against the non-disclosing spouse, or, if they can prove that it is an undue hardship.

4.  Exempt Homestead Property Limited to $500,000 of Equity

Under the proposed rules, a person is not eligible for long term care coverage of the person’s equity in homestead property exceeds $500,000.  The federal law allows equity of up to $750,000.

5.  Strict Limitations on Annuities

At application and upon redetermination, a Medicaid applicant/recipient and community spouse must disclose any interest either or both may have in any annuity or similar financial instrument.  The disclosure must include a statement that the State of Illinois becomes the remainder beneficiary to the extent of Medicaid paid out.  Failure to make this disclosure may result in denial or termination of Medicaid coverage.

The purchase of an annuity which does not name the State as a remainder beneficiary will be considered a penalized transfer of assets.

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