UPDATES ON MEDICAID ELIGIBILITY
New Numbers for 2009
At the beginning of each year the U.S. Government's Center for Medicare & Medicaid Services updates the eligibility amounts. Here are some of those expected for Texas beginning on January 1, 2009.
On the income side of qualification, the maximum "countable" income - the cap - for Medicaid qualification by an individual will increase to $2,022 per month. In some circumstances, some or all of the institutionalized spouse's income may be paid to the spouse who is not institutionalized, the "community spouse." This minimum monthly maintenance needs allowance has increased to $2,739.00 per month.
On the resources side of qualification, some of the resources of the community spouse can be protected for the benefit of that spouse. This is called the protected resource allowance (PRA). The maximum PRA in Texas has been increased to $109,560. In some restricted cases, the PRA may be increased (expanded) above this maximum amount if the non-countable resource income of both spouses was below the minimum monthly maintenance needs allowance above. The minimum protected resource amount rises to $21,912.
The gift penalty is now one day for each $130.88 that was gifted.
Substantive Changes that were made by DRA 2005 - Effective February 8, 2006
Extension of the Old Look-back Period to Five Years.
Presently, the Medicaid Program imposes a period of ineligibility for nursing home benefits to an individual who transfers assets for less than fair market value (we’ll call them gifts) within the three-year look-back period immediately prior to the date of filing the Medicaid application. Under the new rule, that look-back period will be extended to a five-year period.
Example: Under the old rule, if Ms. Smith gave her son an outright cash gift of $100,000.00 on November 15, 2002, the gift would not penalize Ms. Smith with Medicaid eligibility if she waited to apply for Medicaid more than 36 months from the date of the gift. Under the new rule, Ms. Smith’s cash gift would result in a penalty if she applied for Medicaid any time before the full five-year look-back rule had run its course.
While this change will have some impact, we don’t believe that it is a very substantial change or that its implications are nearly as significant as the next change. Its effects will be devastating to many people seeking assistance from Medicaid with their nursing home expenses.
New Transfer Penalty Period Beginning Date.
Presently, the Medicaid Program begins the penalty period for gifts on the first day of the month in which the individual makes the gift. Any gifts that were made prior to February 8, 2006 are “grandfathered” and the penalty period is determined under these old rules. Under the new rule, for any gifts made on or after February 8, 2006, this penalty period will not even begin until the individual applies to qualify for Medicaid benefits, and would have been eligible, except for the asset transfer (gift) and the corresponding penalty period.
Example: Using the facts illustrated in the prior example, under the old rule, the penalty period would have begun on November 1, 2002, and would have ended 854 days later ($100,000 divided by $117.09 per day) or two years and 124 days after the first day of November, 2002. Under the new rule, the penalty period would not even begin until Ms. Smith had been admitted to a Medicaid qualified nursing home, was in a Medicaid bed, had medical necessity for being in the nursing home, had total countable resources of less than $2,000 and her income was less than $1,809 per month. Only then would the penalty period begin to run for any gift made after February 8, 2006 and would last for one day for each $117.09 that was transferred as a gift.
Let’s consider the implications of this change in the hypothetical case of a grandmother who wants to help her only granddaughter through vocational school. Suppose on February 10, 2006, for love and affection, she gave her granddaughter $10,000 to pay her vocational school tuition. Suppose two years later, this grandmother has lost her health, has no home, and has spent all she had remaining after the gift on caring for herself and her medical bills. Her medical condition requires her to be in a nursing home and she entered the facility on March 1, 2008. The penalty period for the gift she gave over two years ago begins on March 1, 2008 and Medicaid will not make any payments towards her medically necessary nursing home care for 85 more days, almost 3 months.
Who is going to pay for those three months of care until the grandmother is qualified? The grandmother’s only child is deceased. Her only grandchild no longer has the money and cannot afford to pay anything towards her grandmother’s care as she is divorced with a small baby to care for. Who is going to pay? The nursing home can’t afford to absorb the costs that will probably exceed $12,000. The government isn’t going to pay because she’s not qualified for Medicaid. Who will pay for her care? What will the nursing home do? Will the nursing home take her to the hospital on the pretext that she has an acute care need and then refuse to readmit her to the nursing home when the hospital finds there is no such need? Will the nursing home call a cab and put her and all her worldly possessions in it and pay the fare to her granddaughter’s home?
What will happen to this poor lady? Unfortunately, this is the critical question that we anticipate will be asked innumerable times in the future once the full impact of the DRA 2005, especially this provision, is felt across America.
In an apparent effort to answer these questions, DRA 2005 requires each state to have a process whereby a hardship waiver can be granted if application of the transfer penalty results in the deprivation of medical care that would endanger the applicant’s health or life, or of food, clothing, shelter or other necessities of life.
Presently in Texas, hardship waivers can be granted by appealing to a fair hearing officer appointed by the Texas Health and Human Services Commission. However, there is no state court judicial review of the hearing officer’s decision. If one disagrees with the decision, the only remedy is to file a new lawsuit in court if there is a reasonable basis for doing so, which may not be too likely.
But to obtain such hardship relief, someone has to be in place to file the appropriate paperwork and push through the application for hardship relief. Do you think the State of Texas is going to be granting these hardship waivers often when to do so would be effectively defeating the purpose of DRA 2005 and depleting its Medicaid budget on people who did not plan well?
Restriction on the Sale of Medicaid Qualified Annuities.
Presently, the Medicaid Program allows an individual/Medicaid applicant who purchases an irrevocable and non-assignable, actuarially sound, level payout Medicaid qualified annuity, to name anyone as the beneficiary. Under the new rule, if an individual/ Medicaid applicant purchases such a Medicaid qualified annuity, he or she will have to name the respective State of Texas Medicaid Program as the primary beneficiary. This means that if the amount of Medicaid assistance paid for the individual is greater than the amount of the annuity, nothing will be paid to the remainder beneficiaries. And if the non-institutionalized spouse (or a minor or disabled child) is the first beneficiary, the secondary beneficiary must be the State of Texas Medicaid Program. So it will collect from the annuity if that first beneficiary does not survive or if they transfer the annuity for less than fair market value.
Elimination of the “Asset First Test”.
Presently, the Medicaid Program allows a community spouse to increase his or her Community Spouse Resource Allowance (“CSRA”) to whatever amount is necessary so that he or she can achieve his or her Minimum Monthly Maintenance Needs Allowance (“MMMNA”), without first taking into consideration the monthly income received by the institutionalized spouse. Under the new rule, which is defined as the “income first rule”, a community spouse will first have to take into consideration any monthly income received by their institutionalized spouse when evaluating his or her opportunity to achieve his or her increased MMMNA amount.
Texas has already adopted this rule for all applications now being filed. There is an exception for cases in which the snapshot date (the first day of the month in which a period of 30 days or more of institutional care began) was before September 1, 2004.
Limitation on Home Equity.
Presently, the Medicaid Program allows an individual/Medicaid applicant to exclude the entire value of his or her homestead. Under the new rule, an individual/Medicaid applicant would be allowed to exclude a homestead with an equity value of no more than $500,000.00 with few exceptions and with this amount being indexed for inflation starting in 2011. However, in this area of Texas it is highly unlikely that any person attempting to qualify for Medicaid would have that much equity in a homestead.
Section 6041 of DRA 2005 permits states to increase cost sharing for any group of Medicaid beneficiaries subject to certain limitations. Cost sharing could be imposed and/or increased for any item (e.g. prescription drugs, durable medical equipment) or service (e.g. hospital stays, doctors’ visits, occupational, physical or speech therapy sessions). Obviously the individuals who would be forced to pay these added costs are already at or below the income and asset eligibility thresholds for Medicaid. So they will likely be forced to choose between food, winter heat and medical care. Although not part of DRA 2005, perhaps such sad circumstances could eventually lead to “family responsibility” as discussed below in some detail.
Also changed were rules regarding (1) the purchase of life estates in homes owned by someone other than the Medicaid applicant and (2) the use of promissory notes and loans in planning for Medicaid qualification. DRA 2005 also permits the expansion of state long-term care partnership programs that encourage the purchase of long-term care insurance in exchange for keeping more assets when applying for Medicaid. At the present time, Texas does not offer such a program but it may be considering one in the foreseeable future.