Deficit Reduction Act of 2005

1
Deficit Reduction Act of 2005

• Long Term Care Eligibility Highlights
• Ginni Hain
• Center for Medicaid and State Operations
• SHIP Directors Conference
• Crystal City, Virginia
• June 11, 2007

2
DRA LTC Eligibility Provisions

• Transfer of Assets
• Income First Rule
• Substantial Home Equity
• Continuing Care Retirement Communities
• State Long Term Care Insurance Programs

3
Transfer of AssetsLook-Back Period

• Extended look-back from 36 to 60 months
• Applicable to transactions on or after 2/8/6
• Until 2009, there is no change to the look- back,
  i.e. look-back 36 months
• After 2/8/9, look back to any transfer on or
  after 2/8/6
• Effective 2011, look-back 60 months

4
Transfer of AssetsStart Date for Penalty Period

• Previously, penalty began in month of transfer,
  or, at State option, the following month
• For transfers made on or after 2/8/6, the penalty
  begins the later of
• First day of the month during, or at State
  option, following, the month of transfer, or
• The date the individual is eligible for Medicaid
  and receiving institutional care.

5
Transfer of AssetsStart Date for Penalty Period

• A new penalty period cannot begin until the
  expiration of an existing penalty period
• Penalty periods require an adverse action notice
• Notice must include information about undue
  hardship exceptions

6
Transfer of AssetsPenalty Calculation

• Prohibits rounding down or disregard of partial
  penalties, i.e. fractional transfers that result
  in a penalty period of less than one month
• Some States already do this it may not be a
  change in your State

7
Transfer of AssetsOption to Combine Penalty
Periods

• States may combine the total, cumulative value of
  all transfers and treat as a single transfer
• Penalty would begin on the earliest start date of
  the penalties.

8
Transfer of AssetsOther Transactions as Transfers

• Promissory Notes, Loans Mortgages must
• Have a repayment plan that is actuarially sound
• Have payments in equal amounts, no deferred
  payments, no balloons
• Must prohibit cancellation upon death
• Unless all of the above are met, treat the
  transaction as a transfer

9
Transfer of AssetsLife Estates

• The purchase of an LE in anothers home is a
  transfer unless the purchaser actually resides
  there for at least one year after purchase
• The transfer amount is the full amount of the
  purchase and is not reduced by residency that is
  less than one year
• Even if the one-year requirement is met, the
  purchase must still be for fair market value, or
  it is subject to penalty

10
Transfer of AssetsUndue Hardship

• Hardship exists when the individual would be
  deprived of
• Medical care, such that life or health would be
  endangered
• Food, clothing, shelter or other necessities of
  life

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Transfer of AssetsUndue Hardship

• States must
• Notify individuals that the hardship exception
  exists
• Have a timely process for determining undue
  hardship
• Have an appeal process for adverse decisions
• Allow the facility to file for hardship with
  consent of the individual or representative
• States may provide up to 30 days bed hold days
  while the hardship decision is pending

12
Transfer of AssetsAnnuities

• Individuals who apply for Medicaid must disclose
  any interest the applicant or community spouse
  has in an annuity.
• The Medicaid application form must include notice
  that the State must be named as a remainder
  beneficiary, after a community spouse or minor or
  disabled child.

13
Transfer of AssetsAnnuities

• Applies to annuities purchased on or after 2/8/6
• Could include other transactions on or after
  2/8/6
• Failure to name the State as a remainder
  beneficiary in the appropriate position will
  result in the purchase of the annuity being
  treated as a disposal of an asset for less than
  fair market value.

14
Transfer of AssetsAnnuities

• Annuities purchased by or on behalf of the
  Medical Assistance applicant/recipient must
• Be part of a legitimate retirement plan (IRA,
  retirement account, pension plan, etc.) based on
  the Internal Revenue Code, or . . . .

15
Transfer of AssetsAnnuities

• . . . . or
• Be all of the following
• irrevocable and non-assignable,
• actuarially sound, and
• Have equal payments (no deferred or balloon
  payments)
• If not, treat as a transfer

16
Treatment of AssetsAnnuities

• State must notify the issuer of the annuity of
  the States right as remainder beneficiary.
• State may require the issuer to notify the State
  of changes in income or principal being withdrawn.

17
Income First Rule

• Some States already apply this rule now
  mandatory
• In post eligibility, to calculate the Monthly
  Maintenance Needs Allowance (MMNA)
• Consider the Community Spouses income, and
• Any income that could be made available to the
  Community Spouse from the Institutionalized
  Spouse
• If there is still a shortfall, only then may the
  Community Spouse Resource Allowance (CSRA) be
  increased to generate income to make up the
  shortfall

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Substantial Home Equity

• New test for payment of LTC services
• Not part of the regular eligibility resource
  test. The home is still fully excluded in the
  eligibility resource test.
• Only used for LTC Services eligibility test

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Substantial Home Equity

• Use existing methods for determining value
• Use SSI rules to determine equity interest
  (share)
• To receive Medicaid payment of LTC services, home
  equity may not exceed 500,000, (or up to
  750,000 at State option)
• State must allow hardship exceptions

20
Continuing Care Retirement Communities
(CCRC)Entrance Fees

• The entrance fee is an available resource if all
  of the following are met
• The entrance fee can pay for care if other
  resources are exhausted
• The entrance fee or remaining portion are
  refundable upon death or termination of contract
• The resident does not have an ownership interest
  in the community

21
Qualified State Long Term Care Insurance
Partnerships

• Partnership between Medicaid, the insurance
  industry, and individuals
• Goal To encourage individuals to take personal
  responsibility for planning for future long term
  care needs

22
Qualified State Long Term Care Insurance
Partnerships

• Provides for a disregard of assets during
  Medicaid eligibility determination equal to the
  amount of LTC benefits paid by the policy
• Also provides that those assets will be protected
  in the estate recovery process

23
Qualified State Long Term Care Insurance
Partnerships

• Policies must meet specific rules and
  regulations, and specific inflation protection
  standards to be considered Qualified policies
• The State Insurance Commissioner may certify that
  the policies meet these requirements
• States must have approved State Plan Amendments
  to implement a Partnership

24
Qualified State Long Term Care Partnerships

• As of 5/1/7, eight new States have approved
  Partnership Programs Florida, Georgia, Idaho,
  Kansas, Minnesota, Nebraska, Nevada and Virginia.
• The five States that had Partnerships before
  2/8/6 may continue their programs as long as
  consumer protections are not reduced
  California, Connecticut, Indiana, Iowa, and New
  York

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• Thank you for your interest!
• Questions?
• Ginni Hain
• Director, Division of Eligibility, Enrollment,
  and Outreach
• Disabled and Elderly Health Programs Group
• Center for Medicaid and State Operations
• Centers for Medicare and Medicaid Services
• ginni.hain_at_cms.hhs.gov
• 410-786-6036