Deficit Reduction Act Changes in Medicaid
The federal government passed sweeping changes in the Medicaid rules when they passed the Deficit Reduction Act on February 8, 2006. Ohio revised many of it's rules on October 1, 2006 to comply with this new law. The two biggest changes relate to asset transfers.
The legislation: (1) extends Medicaid's "lookback" period for all asset transfers from three to five years, and (2) changes the start of the penalty period for transferred assets from the "date of transfer" to the "date when the individual would otherwise be eligible for Medicaid coverage". In other words, under the revised rules, period of ineligibility does not begin until the nursing home resident is out of funds.
On a related topic, Ohio just increased the "average monthly private pay rate from $4806 to $5247. This is the number used when calculating improper transfer penalties.
The Deficit Reduction Act:
- Establishes a $500,000 cap on the homestead exemption.
- Establishes new rules of the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.
- Allows Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.
- Requires all states to apply the so-called "income-first" rule to community spouses who appeal for an increased resource allowance based on their need for more funds invested to meet their minimum income requirements.
- Extends long-term care partnership programs to any state. Ohio has not yet adopted such a plan.
- The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.
- Funds to purchase a promissory note, loan or mortgage will be included among assets unless the repayment terms are actuarially sound, provide for equal payments and prohibit the cancellation of the balance upon the death of the lender.
- States will be barred from "rounding down" fractional periods of ineligibility when determining ineligibility periods resulting from asset transfers.
States will be permitted to treat multiple transfers of assets as a single transfer and begin any penalty period on the earliest date that would apply to such transfers.