Medical Assistance Rules

Medical Assistance Rules Affect Nursing Home Planning

by Ronald P. Hammer

HammerMedicare only pays for short periods of time in a nursing home. Medical Assistance, also known as Medicaid or Title XIX, is a welfare program that pays the cost of nursing homes, assisted living and many other forms of long term care when an individual's private insurance, income and savings are not sufficient to pay these costs.

The Deficit Reduction Act of 2005, which became effective February 8, 2006, made several significant changes in the federal law establishing this welfare program, triggering changes in Wisconsin law. The regulations and new procedures are effective as of January 1, 2009. Although many revisions have been made, this article will focus on a few of those revisions which have the most impact directly upon the individuals seeking Medical Assistance.

Long Term Care Partnership Program

The long term care partnership program creates an opportunity for individuals who purchase long term care insurance to keep assets that they would otherwise need to spend on their care. All policies of long term care insurance sold in Wisconsin after January 1, 2009, must qualify for this program. Older policies can also qualify if the insurance company provides the required documentation to the Department of Health Services. The amount an applicant can keep ("exemption") is equal to the amount paid by a qualified long term care insurance contract toward the cost of nursing home, assisted living or in home care. This is an exemption in addition to all of the other existing exemptions for individuals and their spouses.

It is now possible for an individual, or a couple, who own a qualified long term care insurance policy, to become eligible to receive Medical Assistance benefits even though they retain assets equal to the benefits which have been paid by the insurance company for their long term care. This new exemption also allows the recipient, or their spouse, to give away assets equal to the exemption without affecting their eligibility to receive Medical Assistance benefits.

Divestment

As a general rule if an individual or couple gives or transfers assets prior to applying for Medical Assistance they can be denied or at least delayed in the receipt of Medical Assistance benefits. Some of the most significant changes of the new law are with regard to such transfers, which are referred to as "divestments".

Look back period. Applications for Medical Assistance require the applicant to report divestments made during the 5-year period before the application. This time period is referred to as the "look back period".

Penalty Period. The consequence of any divestment is the creation of a period of time during which the individual cannot receive Medical Assistance, even if they otherwise qualify. This period of time if referred to as the "penalty period". The length of the penalty period is calculated by dividing the total value of divestments made during the look back period by the average daily cost of nursing home care. The result is the length of the penalty period.

Divestments made after December 31, 2008, result in a penalty period which is expressed in days. The period does not begin to run on the date of gift. Instead, it is suspended until the individual is otherwise eligible to receive Medical Assistance. In other words, the penalty period does not begin to be satisfied until the individual has consumed all of their available assets, and is actually receiving long term care. As a result, the penalty period will bar the payment of Medical Assistance at a time when the individual is in need of medical care and has no resources in their name to pay for that care. It is for this reason that most people now say that "you can not receive Medical Assistance until at least 5 years after you have made a divestment". Although this is not technically accurate, it does require a great deal of care and planning in order to successfully receive Medical Assistance if a divestment has been made less than 5 years before hand.

Annuities

Annuities are investment insurance contracts that can be converted from an available asset to regular monthly income payments for the remainder of an individual's life. Annuities purchased after March 1, 2004 have limitations on how the future monthly payments are treated. The rules, effective January 1, 2009, add another layer of regulation to annuities in reference to Medical Assistance.

Annuities purchased on or after January 1, 2009, as well as older annuities in which certain actions are taken, are subject to additional requirements. The most significant requirement is that the Medical Assistance recipient must name the State of Wisconsin as the primary beneficiary of any remaining annuity payments after their death. The purpose of this rule is to pay back to the State of Wisconsin Medical Assistance benefits granted during a recipient's lifetime from the future payments made by the insurance company after the recipient dies. The net result is that anyone receiving Medical Assistance will not be able to pass any portion of the annuity payments to their heirs until the State has been fully repaid.

Conclusion

This article does not provide a complete description or analysis of the complex rules that exist regarding a person's eligibility for Medical Assistance. Any planning must be done on an individual basis, since the facts of each situation can lead to different results. Anyone wishing to learn more about these rules will need to consult with an attorney who is experienced in this area of law.