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March 16, 2006
LEGISLATIVE UPDATE
As you all know, the Deficit Reduction Act (DEFRA) was signed by the President on February 8, 2006. This is the law that says that if you need nursing home care, the state will look back at the last 5 years to see if you made any gifts. If you had made any gifts, they would have to be returned to you and paid over to the nursing home before the state will begin to pay for your nursing home care.
In Massachusetts the draconian rules under this Deficit Reduction Act are not yet being implemented. This is because the Division of Medical Assistance has not yet issued regulations to adopt these changes. We anticipate MassHealth will issue emergency regulations within the next few weeks to implement the following changes;
1) INCREASE IN LOOKBACK PERIOD – We currently have a 3 year lookback for gifts. This will be increased to 5 years. The way this works is that when you apply for MassHealth (Medicaid) you need to provide up to 3 years of bank statements (soon to be 5 years under DEFRA). MassHealth will then look at the bank statements and ask you to explain what any withdrawal over $500 was for. Anything that you cannot explain will be treated as a gift.
2) DELAY IN DISQUALIFICATION PERIOD START DATE – This will be the real problem area for many seniors. In plain english this provision says that if you need nursing home care and have made any gifts within the last five years, the gifts will have to be returned and paid over to the nursing home.
Is this so bad? You bet it is. What if your spouse had dementia or Alzheimer’s and went to the bank making random withdrawals to purchase scratch tickets or to lend to new “friends” who needed additional funds to play keno? Would someone stricken with Alzheimer’s know 4 years from now what he spent the money on? I doubt it. These gifts will cause him to be ineligible for benefits if he needs nursing home care within 5 years.
3) TREATMENT OF ANNUITIES – This change primarily affects single individuals that need nursing home care. Single individuals who need nursing home care may not have more than $2,000 in assets. This amount has not changed in many years. In order to achieve MassHealth eligibility a single person could purchase an annuity to reduce their assets to below $2,000. Upon the person’s death, the balance of the annuity would be paid to his heirs.
The change under DEFRA requires that the state be named as a beneficiary of the annuity to the extent that the state has made payments to the nursing home.
In other news, President Bush has issued his fiscal year 2007 budget and included even more cuts to Medicare and Medicaid. U.S. Senate Budget Committee chair, Judd Gregg (R-NH) and his committee has approved a scaled back version of the President’s budget that does not affect Medicare, Medicaid and Social Security. Gregg said that the budget does not include more cuts because there are not enough Senate votes to pass them.
MASSACHUSETTS MEDICAID UPDATE - On the state level we are working on several bills for seniors in Massachusetts. There are two ways in which a bill can become a law in Massachusetts. The quickest way is that it be included as an amendment in the budget. The other way is that it be introduced as a bill, get assigned to a committee and eventually be voted on by the House and Senate.
This is the second year of a two-year legislative session, and it ends July 31, 2006. As of that date any bills which have not passed expire and must be refiled for the next session beginning on January 1, 2007. Committees have a bill reporting deadline of March 15, the date by which they must take action on bills in their committee. Given that very few of the 8,000+ bills filed this session have made it out of committee, it is likely that many bills will be put into a “study”. This is the equivalent of non-passage.
We are attempting to get the following two bills included as part of the budget to avoid their languishing in a committee:
1) Community Spouse Resource Allowance – The community spouse resource allowance is the amount that a married couple may keep if one spouse needs nursing home placement. This amount is adjusted annually for inflation and now says that a married couple may keep one-half of their assets up to $99,540. Prior to the year 2003 married couples were able to keep all of their assets up to the asset limit. We are seeking a change back to 2003 so that married couples may keep all of their assets up to the asset limit of $99,540. Here is an example:
Example: Fred and Mary are married. They have $50,000 in countable assets. Fred has a stroke and needs nursing home care. Under today’s rules they may only keep one-half of their assets or $25,000. If the rule were to change back to what we had in 2003, Mary would be able to keep all of the $50,000 because it is less than the maximum of $99,540.
2) Community Spouse Resource Allowance (Part 2) – Many times the spouse living at home is allowed to keep more than the minimum amount allowed because her income is very low. When this occurs, the Division of Medical Assistance imputes a certain amount of income from her assets to determine the maximum amount that she is allowed to keep. Unfairly, the Division of Medical Assistance uses the interest rate for a five year CD, the highest interest rate available, to overly inflate the imputed income, resulting in allowing the spouse at home the least possible amount of assets.
We are requesting that since seniors in this situation never invest in long-term certificates of deposit, and never receive the amount of income that the state is imputing that they use a lower, more realistic interest rate.
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