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November 17, 2005
GOOD NEWS FOR SENIORS
This week’s article about the Senior Circuit Breaker Credit is being delayed until next week so that I may discuss the current news about proposed Medicaid changes. The Senior Circuit Breaker Credit is a refund available to seniors who either own their own home, or rent. Last year I got over $34,000 in refunds for seniors. This Massachusetts refund is available even if you didn’t have any taxes withheld, but you must file a tax return to get the refund. The Massachusetts Department of Revenue has just issued their revised guidelines for this credit and I’ll be covering it in depth next week. Now, I’d like to update you on some good news that I received regarding proposed Federal and Massachusetts changes to MassHealth (Medicaid).
First the news from Washington DC. On Thursday, November 10th, the United States House of Representatives Republican leadership announced that they do NOT have enough votes to pass the Budget Reconciliation Bill. Instead of having the Bill voted down, it was pulled from the floor with the plan that it would be reintroduced the following week to try and get a majority vote by Friday, November 18.
This Budget Reconciliation Bill contains proposed law that would require anyone going into a nursing home and seeking Medicaid coverage to “look-back” 5 years instead of the current 3 years. The extension of the look-back period is a change that we can live with. It only affects people who are giving away hundreds of thousands of dollars. The Bill also delays the penalty start date whenever a gift is made. This is the part that is hard to swallow.
The delay in the penalty start date means that any gifts made during this 5 year “look-back” period must be returned and paid over to the nursing home. Currently the penalty start date begins on the date of the gift. The House Bill provides that the penalty will not start to run until you are in a nursing home and have less than $2,000 in assets. It will not matter whether you gave this money to your grandchild for college or whether you had made a pledge to your church. You would have to get the money back or be ineligible for Medicaid. Hopefully, your legislators in Washington understand that this is unfair and unworkable. AARP is against this delay in the start date and is quoted as follows;
AARP said, “We agree that steps should be taken to close real loopholes that allow people to improperly qualify for Medicaid. However, the extended look back period and the change in the penalty date would deny coverage to those eligible for Medicaid at precisely the time they need assistance and have no remaining assets, leaving them no other way to pay for needed long term care.”
We are hoping that the Republican led House of Representatives will understand the harm that this provision will have on middle and upper middle class Americans, and that they will eliminate this provision from their budget. I’ll let you know what happens next week.
The update for Massachusetts is that on Wednesday, November 9, 2005, the Massachusetts Senate passed it’s version of health care reform. Unlike the House bill, the Senate bill includes two provisions favorable for seniors that were submitted by Senator Harriet Chandler. Senator Chandler’s first amendment that was passed allows a member of the Massachusetts Chapter of National Academy of Elder Law Attorney’s (MANAELA) to be added as a representative to the Commission on the Future of Aging and Long Term Care in Massachusetts. Our Massachusetts chapter is made up of over 550 attorneys who specialize in helping the elderly and disabled.
The second amendment added House Bill #3100 to the bill. House bill #3100 is very important to anyone who has long term care insurance or is considering buying it. One of the compelling reasons that someone purchases long term care insurance is to protect their home in the event that they need nursing home care. However, Massachusetts regulations say that your home will be protected only if, upon the day you enter the nursing home you have at least two years of coverage remaining on your policy. Most long term care insurance policies pay for home care as well as nursing home care. Using too many days of home care could make your policy a non-qualifying policy, in terms of protecting your home, if on the day you enter the nursing home you have less than 2 remaining years of coverage.
Senator Chandler’s amendment would change the regulations by saying that if you purchase a qualifying long term care insurance policy, your home will be protected in the event you ever need nursing home care. A qualifying policy is one that provides at least 2 years of coverage with at least $125 per day benefit. This law change would allow someone to know when they purchase a long term care policy whether their home is protected. This change would cause many more seniors to consider purchasing long term care insurance and end up saving the Commonwealth money from the spiraling cost of long term care.
The final bit of information for Massachusetts residents deals with your 2002 income tax return. Did you report a capital gain in 2002? The Massachusetts Department of Revenue (DOR) has sent out Notices of Intent to Assess ("NIA") to the thousands of taxpayers who owe capital gains from 2002. This is a result of a mid-year tax change in capital gains tax that occurred in 2002 that was later determined to be unconstitutional. Taxpayers that reported capital gains due to sales in the first half of 2002 are now being billed for additional taxes.
The Corporate Tax "Loophole
Closing" Bill, recently passed by the Massachusetts legislature not only
includes provisions to raise $85 million in new revenue for the
Commonwealth, but also two sections relating to the capital gains rate
change. Those who owe less than $100 in capital gains from 2002 will be
exempt from paying and it allows the Commissioner to forgive interest and
penalties.
The bill has been enacted by the Senate and is on Governor Romney's desk
where he is likely to veto the capital gains provisions. Romney is in favor
of a January 1, 2003 effective date. The January 1, 2003 effective date
would meant that taxpayers who had gains in the last half of 2002(when
capital gains rates had increased) would now be eligible for refunds which
would result in the Commonwealth returning over $240 million to taxpayers.
I’ll keep you posted on any developments.
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