In 1985, the House Committee on Energy and Commerce issued the following statement:
“Medicaid is, and always has been, a program to provide basic health coverage to people who do not have sufficient income or resources to provide for themselves. When affluent individuals use Medicaid qualifying trusts and similar techniques to qualify for the program, they are diverting scarce federal and state resources from low-income elderly and disabled individuals, and poor woman and children. This is unacceptable to the Committee.”
This serves as the basis for the recently enacted The Deficit Reduction Act of 2005. After 20 years, it signed into law on February 8, 2006, and it includes some major changes in Medicaid’s eligibility rules. This could have a pronounced effect on the need for long term care insurance.
Significant changes to the eligibility rules include:
Look-back period – The look-back period has changed from 3 years to 5 years. If assets were transferred in the 5 years prior to applying for Medicaid, those assets will still be considered as the applicant’s assets and will be included in the equation to pay for care.
Change in the start of the penalty period – Previously, the penalty period for someone transferring assets started on the date the transfer was made. The law now states that the waiting period begins on the date the applicant files for Medicaid. For example, if assets were gifted away two years ago and a person then applied for Medicaid, the penalty period would start from the date the money was gifted, and the person would have to wait only one year before Medicaid eligibility. Today, the penalty period begins when the application for Medicaid is made, which means in this example, the penalty period would end five years after the gift was made.