"A portion of the federal law made substantial changes to the Medicaid transfer rules. "
 


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Medicaid

New Medicaid Transfer Rules in Place

by Jeffery D. Stinson

In November 2009, the Indiana Family and Social Services Administration (FSSA) issued a memorandum to its staff detailing its implementation of a federal Medicaid law passed nearly four years earlier.

In February 2006, then-President George W. Bush, signed into the law the Deficit Reduction Act of 2005. A portion of the federal law made substantial changes to the Medicaid transfer rules. The Act required each state to incorporate these new provisions into their individual state Medicaid plan. Indiana originally proposed rules implementing the Act, among other draconian provisions, in August 2008. These rules were vigorously fought be several organizations representing disabled and elderly Hoosiers as well as many other interested individuals. As a result, the Indiana General Assembly passed a law in March of 2009, limiting the scope of these new rules and prohibited application of the new rules prior to October 1, 2009. (see http://www.severns.com/medicaid/Breaking_News.html for a detailed history of the proposed rules and subsequent statute).

Despite the ability to put the new transfer rules in place on October 1, 2009, FSSA has stated in its memorandum that it will not apply the new rules to transactions occurring prior to November 1, 2009.
Key Provisions of the New Rules:

  • New rules create a 5-year look-back on all transfers, but the look-back will be phased-in after November 1, 2009. The 3-year look-back period will continue to apply to transfers not involving trusts before that date.

  • The penalty period for non-exempt transfers begins the month after which the transfer is made or the date which the individual is eligible for Medicaid and would otherwise be receiving institutional care, whichever is later. Before implementation of the rules, the penalty for a gift would begin the month after the transfer is made.

  • The State will no longer round down in calculating penalty periods of ineligibility. Before passage of the rules the State of Indiana would round down fractional portions of penalty periods. For example, if the applicant's penalty period was calculated to be 3.7 months, Indiana rounded this penalty down to three months. The new rules require that even a fractional interest be penalized.

  • All transfers made during the look-back period will be lumped together to calculate the period of ineligibility.

  • Individuals will automatically be protected from harsh penalties resulting from small gifts to charities and family members, when those cumulative gifts are less than $1,200 per year.

  • Portions of transferred assets that have been returned to the Medicaid beneficiary will not be penalized.

  • The purchase (or conversion) of an annuity to exempt assets from the Medicaid resource test, is equivalent to an uncompensated gift of assets unless the provisions of the annuities meet specific requirements. The annuity must be a retirement annuity or be actuarially sound, paying out in equal installments, and cannot provide for a balloon payment at the end of the annuity. The State also must be the named remainder beneficiary of the annuity for the value of services the State paid on behalf of the recipient. If the annuity is purchased following the passage of the rules or a certain transaction (such as modifying a payment schedule or changing a beneficiary) occurs with a previously purchased annuity, then the Medicaid agency may include the entire purchase price in a transfer penalty calculation.

  • The purchase of a promissory note, loan, or mortgage is considered a transfer of assets unless the repayment terms are actuarially sound, provide for equal payments, and prohibit cancellation of the balance due upon the death of the lender.

  • The purchase of a promissory note, loan, or mortgage is considered a transfer of assets unless the repayment terms are actuarially sound, provide for equal payments, and prohibit cancellation of the balance due upon the death of the lender.

  • The purchase of a life estate in the home of another is a transfer of assets unless the purchaser resides in the home for at least one year after the date of purchase.

  • Changes were also made to the treatment of Continuing Care Retirement Communities and Life Care Admission Contracts, the ability to shift assets before income to support a non-institutionalized spouse, and the hardship waiver proceedings for those who did not intend to jeopardize Medicaid benefits when transfers were made.

Individuals who wish to review the effect of the new rules on their current plans or want to review asset protection options under the new rules should contact Severns & Stinson at (317) 817-0300 to schedule an appointment.

To view a copy of FSSA memorandum click here.


Information and articles from our website are presented as a public service by Severns & Stinson. We help our clients protect their assets and their rights to health care and long-term care. This article is general in nature and is not to be taken as legal advice to any particular person. Consult an attorney for specific legal advice for your circumstance.

Severns & Stinson is an Indianapolis Elder Law firm that helps older adults, persons with disabilities and their families plan for long term care needs, protect assets and get the care they need.


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Information and articles from our website are presented as a public service by Severns & Stinson. We help our clients protect their assets and their rights to health care and long-term care. This article is general in nature and is not to be taken as legal advice to any particular person. Consult an attorney for specific legal advice for your circumstance.

 
 
 


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