2/8/2006 Bulletin
President Signs Deficit Reduction Act
President Bush signed the Deficit Reduction Act into law this afternoon. The legislation will extend Medicaid's "lookback" period for all asset transfers from three to five years and change the start of the penalty period for transferred assets from the date of transfer to the date when the individual transferring the assets enters a nursing home and would otherwise be eligible for Medicaid coverage. In other words, the penalty period does not begin until the nursing home resident is out of funds, meaning she cannot afford to pay the nursing home.
Because the change in the penalty period start date will likely leave nursing homes on the hook for the care of residents waiting out extended penalty periods, some commentators have dubbed the bill “The Nursing Home Bankruptcy Act of 2005.” Nursing homes could be flooded with residents who need care but have no way to pay for it. In states that have so-called "filial responsibility laws," there has been speculation that nursing homes could seek reimbursement from the residents’ children. North Carolina is one such state: NCGS § 14-326.1 says, in part, that an adult child who “having sufficient income after reasonably providing for his or her own immediate family shall, without reasonable cause, neglect to maintain and support his or her parent or parents, if such parent or parents be sick or not able to work and have not sufficient means or ability to maintain or support themselves” is guilty of a class 2 misdemeanor. This could be interesting!
The bill also will make any individual with home equity above $500,000 ineligible for Medicaid nursing home care, although states may raise this threshold as high as $750,000. Not too many town-based clients will be affected by this, but I have some rural Randolph/Montgomery/Chatham County clients with large old farms who could be affected.
The legislation also:
Establishes new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.
Allows Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.
Sets forth rules under which an individual's CCRC entrance fee is considered an available resource.
One Bright Light: Authorizes states to include home and community-based services as an optional Medicaid benefit. (Previously, states had to obtain a waiver to provide such services.)
In addition, the legislation incorporates provisions in the original budget bill passed by the Senate closing certain asset transfer "loopholes," among them:
The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.
Funds to purchase a promissory note, loan or mortgage will be included among assets unless the repayment terms are actuarially sound, provide for equal payments and prohibit the cancellation of the balance upon the death of the lender.
States will be barred from "rounding down" fractional periods of ineligibility when determining ineligibility periods resulting from asset transfers.
States will be permitted to treat multiple transfers of assets as a single transfer and begin any penalty period on the earliest date that would apply to such transfers.
While the federal law applies to all transfers made on or after today, it also gives the states time to come into compliance. The deadline for states to enact their own laws varies from state to state, but generally is the first day of the first calendar quarter beginning after the end of the next full legislative session. The applicability of this rather complicated provision under North Carolina is currently being sorted out.
Stay tuned!
Bob
