By Mark D. Munson
January 13, 2009
Medicaid is a joint federal and state program, known as Medical Assistance in Wisconsin, which provides health care coverage to financially eligible individuals. It is the only program that pays for long-term nursing home care. Federal legislation, effective February 8, 2006, and adopted by Wisconsin, effective February 1, 2008, changed many important aspects of Medical Assistance eligibility. The Wisconsin Department of Human Services’ rules implementing these changes became effective January 1, 2009.
The new rules significantly change how gifts affect Medical Assistance eligibility. The new rules are designed to eliminate or limit the amount that can be gifted while still obtaining Medical Assistance eligibility.
Some of the highlights of these new rules include:
Five-Year Look Back. Gifts made on or after January 1 will need to be reported if the donor or donor s spouse applies for Medical Assistance in the five years following the gift. Previously, the look back period for gifts to individuals was three years. Keeping records of all financial activity for a minimum of five years is now important for anyone who may need or want to apply for Medical Assistance in the future. The look-back period for transfers involving trusts remains five years, as it was before.
Penalty Period Start Date. A more significant change is the penalty period start date. The penalty period is the time an individual is ineligible for Medical Assistance because a gift was made during the look-back period. The length of the penalty period is based on the size of the gift and its computation is not significantly changed, except all gifts within the five-year period will be added together to compute the penalty period. Under the old rules, which apply to gifts made before January 1, 2009, the first month of the penalty period was the month the gift was made. If an individual made a gift in December 2008 that resulted in a penalty period of two months, the individual would be ineligible for Medical Assistance during December 2008 and January 2009. Under the new rules, the penalty period will not start until (1) the individual is in a nursing home, (2) makes an application for Medical Assistance, and (3) is otherwise eligible for Medical Assistance benefits. If an individual makes a gift in January 2009 that results in a two-month penalty period, but doesn’t enter a nursing home and apply for Medical Assistance until June 2013, the penalty period will not start until June 2013 at the earliest and then only if the individual is otherwise eligible. Unless careful attention is paid to the rules, the ineligibility period will begin and apply when the applicant has no funds to pay for his or her care.
Other Changes. The new Medical Assistance rules also significantly change how home equity values, promissory notes, loans, mortgages, and annuities are treated. The State of Wisconsin must be named as either the primary beneficiary for single individuals or the first contingent beneficiary after a spouse on non-IRA annuities owned by an applicant. The exact wording of these designations will be important to make sure the State does not recover more than the amount paid in Medical Assistance benefits for the individual. There are also new provisions favoring the purchase of certain types of long term care insurance.
Summary: The purpose of the new Medical Assistance rules is to require individuals to use more of their own assets to pay for their nursing home care. Many people who give their assets to children or other family members in order to become eligible for Medical Assistance will be faced with a penalty period beginning when they may be least expecting it – when they are in the nursing home with no funds to pay for their care.
Our elder law attorneys agree, asset protection and Medical Assistance planning can still be accomplished; however, the time frame and methods are more restrictive and complex. Proper timing and provision for resources to pay nursing home expenses during a penalty period are more important than ever. These new Medical Assistance rules reinforce the importance of planning sooner rather than later, planning before a crisis occurs, and including flexible provisions in your estate planning documents to allow you to better respond to changes in circumstances. The elder law attorneys at Ruder Ware would be glad to answer your questions about these new rules and how they might affect you or your family. Please contact any of the attorneys in the Trusts & Estates Practice Group of Ruder Ware.
This document provides information of a general nature regarding legislative or other legal developments, and is based on the state of the law at the time of the original publication of this article. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues, and additional facts and information or future developments may affect the subjects addressed. You should not act upon the information in this document without discussing your specific situation with legal counsel.
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