Your Estate Matters
New rules will affect access to nursing-home Medicaid
ON FEB. 8, President Bush signed into law the Deficit Reduction Act of 2005. This hotly contested law affects food stamps, student loans and child support enforcement, among other federal programs, as well as Medicaid.
The legislation was passed by the U.S. House of Representatives by a very close vote, and there is currently a lawsuit challenging the constitutionality of the law.
We do not yet know how the new law as it relates to nursing-home Medicaid will be implemented in Hawaii. We have been told by a representative from the state Department of Human Services that nursing-home Medicaid applications will continue to be processed as under the rules in place prior to enactment of the DRA. However, applications for nursing-home Medicaid accepted after Feb. 7, 2006 will be reviewed under the terms of the DRA sometime in the future.
On review, if the eligibility worker for the state agency determines that the Medicaid recipient should not have qualified for Medicaid under the DRA, then that person could be denied Medicaid.
Under the DRA, an individual is ineligible for nursing home Medicaid if that individual has equity in a home of more than $500,000. States have the alternative of raising this equity threshold to $750,000. Hawaii has yet to announce whether it will select $500,000 or $750,000 as the home-equity threshold.
Many Hawaii seniors who own otherwise ordinary homes have recently seen the value of their homes shoot up. According to the Honolulu Board of Realtors, the median sales price of a single family home on Oahu in the fourth quarter of 2005 was $620,000. So the state's decision will have a large impact on whether Hawaii's seniors can retain their homes.
There are certain exceptions where home equity will not be limited to the cap discussed above. One exception is if there is a spouse living in the home.
The law extends Medicaid's "look-back" period for asset transferred from three to five years. Christmas gifts, gifts to charities and payment of school tuition for children or grandchildren are some of the transfers that will need to be revealed on the Medicaid application and will cause problems in qualifying for nursing-home Medicaid, if made in the five years prior to a Medicaid application.
Any transfers of assets within the five-year look-back period will be evaluated for assessing a penalty period. This is the period for which Medicaid will not pay for custodial long-term care. The penalty period will start when the applicant would otherwise be eligible for nursing home Medicaid, but for the transfers made in the look-back period.
For example, in March 2006 Grandfather pays $19,907 to the University of Washington for one year's nonresident undergraduate tuition for his granddaughter. Granddaughter and her parents cover travel and living expenses, books and supplies. Grandfather unexpectedly suffers a stroke in February 2007 and ends up needing skilled care at a nursing home. Over the next 24 months, Grandfather spends over $175,000 on nursing home care and ends up broke in March 2009. At that time, Grandfather applies for nursing-home Medicaid and is told that he would qualify but for the $19,907 in tuition he paid in March 2006.
Because Grandfather paid granddaughter's tuition in 2006, he will not be able to access Medicaid for almost three months. Grandfather has no money to pay for his nursing home expenses and Medicaid will not pay.
The DRA legislation also establishes new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary on an annuity. It is unclear whether the state needs to be named as the beneficiary on an annuity for a spouse who is not on nursing home Medicaid when the other spouse is on nursing-home Medicaid.
There are many other provisions in the law that affect planning to access nursing-home Medicaid and filing a successful application for such Medicaid.
With the average cost of nursing homes currently about $88,000 a year in Hawaii, coupled with the new legislation, it is more important than ever to plan for long-term care. There are fewer planning options and planning early is more important that ever. A qualified elder law attorney can guide you in developing a plan to protect assets, and to access quality long-term care should you or someone you love need it.