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Elder Law Center One Essex Street Saugus, Massachusetts 01906 Telephone 781.233.4444 Fax 781.231.2222
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December 1, 2005
U.S. HOUSE CUTS SENIOR BENEFITS
On Friday, November 18, 2005 the U.S. House of Representatives approved spending cuts that adversely affect everyone except the wealthy. The Budget Reconciliation Bill, which would save the government just under $50 billion, passed 217 to 215. There were 14 Republicans joining all House Democrats in opposition. The House must now work out a compromise agreement with the U.S. Senate before it goes to the President for enactment.
House Democratic leader Nancy Pelosi (D-Calif.) said that the bill is “immoral” because it “contains more than $70 billion in tax cuts mostly for America’s wealthiest and decimates the very programs that millions of middle-class Americans rely upon to get ahead.”
The tax part of this bill extends the lower tax rates for capital gains and dividends that were scheduled to expire in 2008 to 2010. Taxpayers making more than $200,000 a year receive 80% of the capital gains tax cut value and those with incomes over $1 million receive over 50% of the tax cut value. The House will also be voting on the repeal of the estate tax, a tax that affects only the richest Americans.
When you think about all these tax cuts and our government’s willingness to spend millions, probably billions, on foreign aid, doesn’t it make sense to take a little better care of our own citizens? If you are unfortunate enough to need long term care in a nursing home, should that mean that you have to spend every dime you ever earned before the government will step in and help? Isn’t that why Medicaid was started in the first place? For seniors, the House bill has a one-two punch that will knockout anyone who ever needs nursing home care. The first part of the change is an increase in the look-back period. The second part of the change is called the elimination of the disqualification period start date and means, if you made a gift within five years of entering a nursing home, the gift will have to be returned and paid over to the nursing home before being eligible for MassHealth. LOOK-BACK PERIOD INCREASE – The House approved increasing the look-back period for all transfers or gifts from 3 years to 5 years. This means that when someone needs MassHealth (Medicaid) to pay for their nursing home care, they must tell MassHealth about any gifts they have made in the last 5 years. Just because you made a gift during the look-back period, it doesn’t necessarily mean that you are ineligible for benefits. Our current system says that you must disclose the gift and compute the disqualification period for the gift. In Massachusetts we divide the gift by $232 to determine how many days you are disqualified for having made a gift. Here’s an example:
Example: On January 1, 2006 Mary gives her church $50,000. To compute the disqualification period we divide $50,000 by $232 and the answer is 216 days ($50,000/$232= 216 days). This means that if Mary needs nursing home care within 216 days from the time that she made the gift, she must private pay because she is not eligible for MassHealth. After 216 days go by, the penalty period will have passed and this gift will not affect Mary’s eligibility for MassHealth in the future.
ELIMINATION OF DISQUALIFICATION PERIOD START DATE - This recommended change would mean that any gift made within 5 years of needing nursing home care would have to be returned and paid over to the nursing home. Let’s go back to the example above where Mary gave her church $50,000 and see how this elimination of the start date would affect her. Let’s also assume that after making the gift to the church that Mary still had $300,000 in savings and unfortunately for Mary, a year after making the gift she had a stroke and needed nursing home care. Here is the result: Poor Mary has been paying $10,000 a month for her nursing home care. After 30 months she has spent all of her money, her $300,000 is gone. Now that she has less than $2,000 (the asset limit for MassHealth) the penalty period now starts on the $50,000 gift. This means that she must pay for the next 216 days the only problem is that she doesn’t have any more money. The church has to refund the money to Mary or she will be evicted from the nursing home for failure to pay. What if you can’t get the money back? You would have to request a hearing and either request a hardship waiver or argue that you made the gift, not to qualify for MassHealth, but for other reasons such as love and affection or for estate planning purposes. It would not matter whether the gift was to Mary’s son, her church, or a hurricane relief fund. Mary would not be eligible for MassHealth and would face nursing home eviction proceedings for non-payment. Does this seem fair to you? President Bush and his Republican lead House of Representatives think so. Maybe you should give them a call? So let’s do a quick review, President Bush and his Republican cronies in the House want to cut income taxes on dividends and capital gains. They also want to eliminate the estate tax on multi-millionaires. These tax cuts will cost the government about $70 billion. I won’t even mention the billions being spent on rebuilding a seacoast city that is below sea level! In order to provide these incentives for the rich some cuts have to be made and here they are:
· $11.8 billion in Medicaid cuts affecting poor women, children and seniors · $844 million in food stamp cuts · $4.9 billion cut in child support enforcement · $577 million for eliminating foster care assistance to grandparents stepping in to care for relatives’ children · 14.3 billion cuts to student aid. How can this be good when college education costs are skyrocketing??
The holiday season is here. Before you write that check and make a gift, you might want to ask whether the recipient will agree to give it back to you just incase our Republican legislators have their way. This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different). Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org
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