Baby boomers and seniors need to watch how Congress votes on the Budget Reconciliation Package in January. Part of the package would make it much more difficult for seniors to obtain Medicaid for nursing home care.
Medicaid is the only government program that helps pay for long term care, including care in a nursing home. The reason why this is so important is that, as we are living longer, more and more of us are spending at least some time in a nursing home. At rates which now often exceed $10,000 per month, the possibility of receiving Medicaid becomes increasingly essential.
Under the current law, there are two key time periods: 1) the “Look Back Period” and 2) the “Penalty Period”. The “look back period” is the number of months that the finances of all applicants for Medicaid are examined . Currently it is the previous 36 months (60 months where a Trust is involved). Looking through 36 months of back bank statements, every large transfer will be singled out for explanation. If it turns out that there was a gift during this time, the second time period, the “penalty period,” comes into play.
The “penalty period” means that you must wait to be eligible for Medicaid for as many months as you could have paid for in a nursing home with that gift. In essence, the government does not want you giving away all of your assets one day and receiving Medicaid the next. This “penalty period” starts running the month after you make the gift. For example, if the amount of a gift in December would give you a five month penalty period, you would not be eligible for Medicaid until the following June.
Under the new law, the results would be much more severe. Let’s take the example we used above, flesh it out a little, and see how the outcome might change: You want to help your son and his new bride buy a house. You give him $40,000 to cover the downpayment. Although it is most of your savings, you feel comfortable because your pension and Social Security cover your expenses and you have a little extra put away in case of a short term emergency. Your health is good and you are not concerned about the necessity of long term care in the near future. The Medicaid laws that have been in effect for years would give you a penalty period of about five months and you feel comfortable that it would be well more than five months before you needed a nursing home. In fact, it is four years before you need a nursing home. Most of your emergency fund is depleted. Here is the change with the proposed law: anyone in these circumstances will now have to wait the five months after applying for Medicaid for coverage. With nursing home costs on the rise, the new legislation can effectively put this person out on the street, or, more likely, at home with no care.
The way this legislation brings about this tragic state of affairs is simply by changing the date when the Medicaid penalty period for gifting begins running. As we know, this has always started running when the gift was given, so if you gave something to your children a few years before you needed Medicaid, your penalty period would probably be over when you applied. The new law would only start the penalty period when you apply. In addition, any gift within five years (raised from three years) before the date you apply would keep you off Medicaid for the full penalty period, even if you are penniless when applying.
These provisions are buried in over 700 pages of the new Budget Bill before Congress. It is my understanding that, at this time, it has already passed the two houses of Congresses but with enough differences so that there must a revote by at least one house. The revote will be in the next few weeks. Senior organizations, such as AARP, are opposed to the legislation. If this is a concern of yours and you wish to contact your Congressman, now is the time to act.
Sanford R. Altman is an Elder Law Attorney with the firm Jacobowitz & Gubits LLP in Orange, Dutchess and Sullivan Counties, a member attorney of the AARP Legal Services Network and frequently writes on Elder Law issues for local publications.
