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Medicaid Changes for Long-Term Care Assistance

When the Deficit Reduction Act (DRA) was signed into law on February 8, 2006 few people realized the extent of the changes it made to long-term care Medicaid eligibility. Florida began applying these changes on November 1, 2007. Two of the biggest changes were to the “look back” period and how penalties would be calculated. The “look back” period refers to the time before filing an application for Medicaid. Under the old law this period was three years. Additionally, penalties are now calculated differently, making it even more difficult to qualify for Medicaid.

The DRA extended the “look back” period from three years to five years. This means that an applicant’s financial records can be reviewed for the five year period immediately prior to the application date. This is to find any improper transfers of assets by the applicant or the spouse. An improper transfer is any transfer, gift, or other giving away of assets for which the “giver” does not receive fair compensation in return.

An improper transfer of any type of asset can trigger a penalty. This applies to cash, CD’s, stocks, bonds, investment accounts, life insurance policies, annuities, real estate, and more. The reason for the transfer doesn’t really matter – just the fact a transfer was made is enough to cause a penalty. There are no exceptions for helping a family member who needs medical care, college tuition, a down payment for a home, or for donating to a charity, church or temple.

Let’s say Mr. Smith helped out his granddaughter with college tuition two years ago by paying $5,000 to the university. At the time Mr. Smith did this good deed he was healthy and applying for Medicaid was the furthest thing from his mind. Now two years later Mr. Smith has had a stroke and will need a nursing home for the rest of his life. Even if he otherwise meets all the eligibility requirements for Medicaid he may not be eligible immediately because of the gift of tuition money two years earlier. Mr. Smith is penalized for something he did two years ago when Medicaid was not even a consideration!

The penalty is a time penalty that prevents a person from qualifying for Medicaid for a certain number of months. Under the old law the penalty period ran from the date of the improper transfer. Under the new law, the penalty period begins after the applicant would otherwise be eligible. So now that Mr. Smith is in the nursing home and needs help paying the bill, he must wait for the penalty period to expire and in the meantime figure out how to pay for his care. Keep in mind that the greater the value of the improperly transferred asset, the longer the penalty period.

The new law can impact anyone who made innocent transfers or gifts in the past, not knowing they would need long term care later. In other cases people “panic” and make improper transfers or gifts when suddenly faced with the expense of long term care. However, it is possible under the Medicaid rules to correct improper transfers and avoid a penalty period even under the new law.

The DRA made significant changes to the Medicaid “look back” period and to the way penalty periods are calculated. These changes have made it more difficult to qualify for financial assistance. Medicaid planning is complex and the look back period and transfer penalties are just part of the eligibility process. Because of these changes it is more important than ever to seek the advice of a qualified, experienced Elder Law attorney to help deal with these important issues.

— Randal L. Schecter
Elder Law Attorney
(386) 672-2550