Highlights of New Eligibility Requirements for Long Term Care
Approved by JCAR, October 11, 2011
- Effective Date: January 1, 2012, except for pre-January 1, 2011, hardship waivers for transfers before November 1, 2011, (see Hardship Waivers below).
- Extension of Look-Back Period and Beginning Date of Penalty Period: When persons apply for Medicaid coverage for long term care, the State conducts a review, or “look-back,” to determine whether the persons (or their spouses) transferred assets (e.g., cash gifts to children, transferring home ownership) to other persons or parties for less than fair market value (FMV). This look-back has now been extended from 3 to 5 years. Accordingly, the State will look at all transfers of assets made by persons on or after January 1, 2007.
If persons transfer assets for less than FMV, the State will apply a penalty, or “penalty period,” that delays the date they can qualify to receive Medicaid long term care services. Previously, the penalty periods began in the month the assets were transferred. As of January 1, 2012, the penalty periods will begin on the date of the asset transfers or the date the individual enters a nursing home and is found Medicaid eligible, whichever is later. This lessens the opportunity for persons to avoid part or all of the penalty period by transferring assets months or years before they actually enter nursing homes.
- Pre January 1, 2012, Hardship Waivers: For those persons who relied on the old rules (not current) in transferring assets, but for whom there would be penalty periods imposed based on the extended look-back, and who transferred assets prior to November 1, 2011, the State will waive the penalty periods upon presentment of a hardship waiver. This “expedited” waiver must state that the penalized transfer was made in reliance on administrative rules in effect at the time of the transfer and that without the waiver, the person would be deprived of medical care endangering health or life, food, clothing, shelter or other necessities of life.
- Hardship Waivers beginning January 1, 2012: Effective November 1, 2011, persons presenting hardship waivers to the State will have a higher burden to prove that actual hardship exists.
- Annuities, Promissory Notes, Loans, or Mortgages: Annuities, Promissory Notes, Loans, or Mortgages are often used to shelter assets. To discourage this, pursuant to federal law, persons applying for Medicaid long term care services will be required to disclose interests in annuities, promissory notes, loans, or mortgages and to name the State as a remainder beneficiary in annuities, and to directly assign interests in promissory notes, loans, or mortgages to the State upon the person’s death. Additionally, the terms of the annuities, promissory notes, loans, or mortgages are restricted: no balloon payments, no deferral of payments, no cancellation of obligation upon death of persons, and they must be actuarially sound. These requirements exist so that the income from these instruments is available to the persons to pay for their care.
- Resources Not Counted in Determining Initial Eligibility During the Retroactive Months: In determining whether persons qualify for Medicaid, the State looks at their resources. Certain resources in retroactive months (persons may be eligible up to three months prior to the month of application) will not be treated as available in determining initial financial eligibility, including pre-paid funeral/burial contracts up to $10,000 and legal fees up to $10,000. These exemptions are allowed by federal law and increase the chances that persons qualify for Medicaid.
- Allowable Income Producing Property: Federal law allows States to not consider certain income producing property as available to pay for a person’s own care when determining that person’s Medicaid eligibility. This income producing property will now include farmland and certain property formerly labeled as homestead.
- Partial Returns: When persons made gifts for less than FMV that resulted in penalty periods, under certain and specific circumstances, the current practice allows for a partial return of the gift to waive the penalty or a portion of the penalty. Effective January 1, 2012, all of the assets transferred by persons for less than FMV must be returned in order to eliminate the penalty associated with the gift.