'DRA Could Bite Boomers On Parents' LTC Needs

Advisors are starting to field questions about how filial responsibility laws could come back to bite boomers whose parents are contemplating Medicaid as a way to receive long term care.

These laws, many of which have been on the books for years, are in place in 30 states and could be used to get children to shoulder more of the responsibility for their parents’ LTC needs, according to several Web sites including everydaysimplicity.blogspot.com, doaskdotell.com and the National Center for Policy Analysis site.

On the NCPA site, in an analysis brief by Matthew Pakula, “The Legal Responsibility of Adult Children to Care for Indigent Parents,” it is suggested that “if even a few states began to more systematically enforce their laws, their action could help reduce the explosive growth of Medicaid’s long term care benefit.”

The laws may become more relevant since the passage of the Deficit Reduction Act of 2005, which was signed into law by President Bush on Feb. 8, 2006. DRA changes the penalty period for asset transfers from three years to five years and changes the date that period begins to the date the parent transferring the assets enters a nursing home and is eligible for Medicaid.

Kevin Brosious, a certified public accountant and a certified financial planner, says questions about the new law came up with one client since its passage. That client ultimately went to an elder attorney to further investigate what the changes could mean, he adds.

“The purpose of the law change was to get Medicaid back to a program that provides basic health coverage to people who do not have the funds to provide for themselves, which is a good thing,” he says.

For some, however, it could have implications for planning for LTC. For instance, Brosious says, he could see nursing homes screening individuals for transfers before a commitment to a bed is made. Questions could be raised, he continues, that include: “Does this mean the individual needing care has to remain at home? Or will the facility sue the children for the assets after the fact? What if the transferred funds have already been spent?”

Brosious also says “anyone applying for Medicaid must disclose and produce any interest in annuities, all transfers within the past 5 years, and a statement as to the remainder beneficiary status. An annuity will be treated as a transfer unless the State is named as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the annuitant under this title. Annuities were used extensively prior to the DRA; now that option is much less attractive.”

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