Medical Assistance Changes Transfer Rules
Submitted by Jeffrey W Schmidt, Schmitz & Schmidt
Medicaid is the government program designed as a safety net to pay for medical care when an individual or a family can no longer afford that care on their own. The program is a cooperative effort between the state and federal governments. In Minnesota, this program is called Medical Assistance.
With Medicare available to cover basic acute care for individuals over the age of 65 and individuals with disabilities, Medical Assistance is used primarily to pay for long term care. Long term care can include the custodial care people need when they can no longer manage their own activities of daily living, whether that care is provided in their own home, an assisted living facility or a nursing home.
To be eligible for Medical Assistance, a person must be a resident of Minnesota, be disabled or over the age of 65 and meet certain financial criteria. For a single person, only $3,000 of available assets can be retained. For a married couple, a system of protections is in place to ensure that the healthy spouse retains one-half (1/2) of the available assets up to an annually adjusted maximum of $99,540. In addition, the homestead is generally excluded when a community spouse continues to live there. Other excluded assets include one (1) vehicle, all household and personal items and money set aside in a specialized account or insurance policy for funeral expenses.
For as long as the Medical Assistance program has existed, individuals and couples have sought to reduce their assets to become eligible by transferring assets to children or other trusted individuals. Penalties have always been assessed for those transfers, but on February 8, 2006, new Federal laws were passed to make this practice far more difficult. The period for reporting gifts was extended from the 36 months prior to a Medical Assistance application to 60 months prior to that application. Any transfers that must be reported will be penalized by dividing the value of the gift by the average monthly cost for nursing home care. In Minnesota, the current monthly average cost for nursing home care is $4,438. The answer to that division problem is a number of months when the person is not eligible to receive reimbursement for long term care services under the Medical Assistance program. That period of ineligibility only begins when the person applies for Medical Assistance and meets all criteria to be eligible. This means the person must not only have assets reduced to the appropriate level, but they must also be in need of long term care services that could be reimbursed by Medical Assistance.
Before this law was changed, the period of ineligibility always commenced at the time the transfer was made, so it was a manageable task to arrange for sufficient resources to pay for care that might be needed during the period of ineligibility. Under the new laws, however, the period of ineligibility will only begin at some unpredictable future point in time. What is more, that penalty will start only at a time when there are not sufficient financial resources to pay for care and a Medical Assistance application is made and approved.
Making plans to use the Medical Assistance program to pay for long term care is still possible. These new rules have placed a premium on acting as early as possible. These drastic asset transfer changes also make it necessary to seek the advice of a qualified professional whenever long term care is needed or anticipated.