Congress finally acted. With the passage of the Deficit Reduction Omnibus Reconciliation Act of 2005, enhancements safeguarding the faltering Medicaid system from the financial bleeding caused by professional Medicaid planning are finally in place.
Medicaid planning is a service primarily provided by elder law attorneys. Its goal is to help clients (some of whom are affluent) qualify a physically or cognitively disabled family member for Medicaid-paid extended care.
The new rules include a number of key provisions to make that more difficult:
1. The look-back period (a period where personal financial history is scrutinized to determine if countable assets were transferred to others) was extended from three years to five. If a transfer is discovered during the five years, an ineligibility period measured in a set number of months is applied, in which the family member is disqualified for Medicaid benefits. The number of months is determined by formula in which the dollar value of the transfer is divided by the average monthly cost of nursing home care (usually the state average).
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2. The ineligibility period now is assessed after a nursing home patient applies for Medicaid-paid care. Previously, it was applied from the date of the transfer. The elder law community had identified this as an exploitable loophole, nicknamed the “half a loaf” strategy: transfer away all countable assets (especially liquid) to a family member except those needed to cover the cost of care during the three-year look-back period. Under this approach, you spend down only those assets. The rest is transferred safely to others, such as family members, and the applicant qualifies ultimately for government-paid care.
The new provisions render the half-a-loaf strategy inoperative for most of the elder law practitioner’s prospective clients.
The legislation restates the government’s position that long term care is first the responsibility of the individual and the individual’s family. Only the truly impoverished should expect government assistance.
Critics of these changes will waste no time in pointing out what they view as the unfairness of narrowing the gate to government-paid care. They will likely exclaim: “The free market is not functional in providing protection to most average Americans, because LTC insurance is just too expensive.” Or: “Some people can’t purchase private LTC plans due to disqualifying health conditions.”
Both are legitimate issues that need to be addressed head on. I don’t propose to have all the answers to these and other points, but I’m convinced the issues can be answered for the most part in favor of individuals protecting themselves rather than continually hauling up government-based solutions.