Fratello & Fox, P.C.

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ATTORNEYS AT LAW

             On February 8, 2006, the Federal Deficit Reduction Act of 2005 (DRA) was enacted.  This Act significantly affects Medicaid rules to the disadvantage of today’s Medicaid applicant.  The following are key Medicaid provision changes:

                                                           

»Look-back Period

    The look-back period is the period of time that Medicaid is permitted to review a Medicaid applicant’s and applicant’s spouse’s financial documents to looks for uncompensated transfers.  The period starts on the date of application and extends back in time for five years (previously three years for non-trust transfers). 

»Penalty Period

    When a transfer by the Medicaid applicant, or his or her spouse, for less than market value has been found within the look-back period, you incur a penalty period in which you cannot apply for Medicaid.  The length of the penalty period depends on the amount transferred.  Before the new Act was passed, the penalty period started on the date of the transfer.  The effect of the DRA, in many cases, will be a penalty period that starts at a potentially much later date.

»Home Equity

    Under the new law, if you have equity in a home with equity greater than $500,000.00 (possibly increased up to $750,000.00 depending on future state legislation), you may not qualify for Medicaid.  You will not be disqualified from receiving medical assistance for having too much equity in your home if you live with your spouse, child under twenty-one or child that is blind or disabled. 

»Annuities

    Under the previous law, “actuarially sound” annuities were not considered a resource for the purpose of qualifying for Medicaid.  An annuity is actuarially sound only if it pays out in full over the life expectancy of the annuitant.  The DRA mandates that the State must be a beneficiary in order to exclude the annuity as a resource.  However, a spouse, disabled or minor child may be named as a primary beneficiary of the annuity.  The DRA no longer permits balloon annuities for the purpose of Medicaid planning.

   

This article is intended to highlight only major changes that affect the majority of elder law clients and is not a complete detail of the Act.  It is important to speak with your elder law attorney regarding the above Medicaid changes to determine how these changes may affect you and to determine if any other changes not discussed above apply to you.  Advanced planning is more important now than ever because of the DRA. 

 

Dated: 3/1/2006

Medicaid Update

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