Every so often, Congress changes the rules of Medicaid (know in California as Medi-Cal) eligibility for nursing home coverage. In recent years, the federal law has been fairly stable, wtih no modifications since 1993. But in February, Congress enacted and President Bush signed the 'Deficit Reduction Act of 2005," which includes new rules governing Medicaid's treatment of asset transfers made on or after the date of enactment.
To understand the changes, you will need some familiarity with Medicaid's basic eligibility rules. Read on...
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Nursing home residents much pay their own way until they run out of savings, at which point they can qualify for Medi-Cal to cover their cost of care. The general rule is that to qualify for Medi-Cal, the nursing home resident may have only a small amount of "countable" assets ($2,000). Medi-Cal applicants who have given away assets in order to reduce them are penalized by a period of ineligibility for benefits.
The penalty period is calculated by dividing the amount transferred by what Medi-Cal determines is the average private pay cost of a nursing home in the state. In California, the average cost is $5,031. A senior who gives away $50,310 will have a penalty -- a period of ineligibility for benefits -- of 10 months.
The new rules make this penalty more punitive by delaying its start. Under the old law, the penalty period would begin as soon as the assets were transferred. Under the new law, the penalty period stays the same, but does not begin until the senior has entered a nursing home and is otherwise eligible for Medicaid coverage, in other words, is practically out of money.
While the federal law applies to all transfers made on or after February 8, 2006, states have several months to enact their own compliant laws. It is unclear what will happen for transfers made after February 8 but before California comes into compliance. Commentators suggest that it depends upon when the application is filed. If the application is filed under old state laws, those will apply. If the state has enacted new laws, those will apply.
In addition to changing the transfer rules, the new legislation also limits protections for homes. Under current law, if a nursing home resident intends to return home or has a likelihood of returning home, the house is exempt from the limit on countable assets.
Under the new law, the equity that is exempt is capped between $500,000 and $750,000. California will choose its number within that range. There are exceptions to this cap: if the spouse or the nursing home resident or a disabled or minor child is living in the house, the cap does not apply.
It is unclear whether current Medicaid recipients will have their eligibilty reassessed in consideration of their home's current market value and equity.
-- Adapted from ElderLaw News, Spring 2006