Deficit Reduction Act of 2005

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

DRA LTC Eligibility Provisions Transfer of Assets Income First Rule Substantial Home Equity Continuing Care Retirement Communities State Long Term Care Insurance Programs

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

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.

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

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

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.

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

Transfer of AssetsLife Estates • The purchase of an LE in another’s 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

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

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

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.

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.

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 . . . .

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

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 • State may require the issuer to notify the State of changes in income or principal being withdrawn.

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 Spouse’s 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

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

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

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

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

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

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

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

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@cms.hhs.gov 410-786-6036

Deficit Reduction Act of 2005