Changes in Medicaid Law 2006

On February 1, 2006, the United States Congress passed sweeping changes in rules regarding Medicaid Eligibility.  The law is worded so that each state has to bring its Medicaid program into conformity with these changes.  The law is currently effective in Arizona (2017-2018).

Here are some of the major changes in the law:

1.  It will no longer be possible for a Medicaid Applicant to engage in monthly gifting of his assets to anyone (except a spouse).  Under the prior law, monthly gifts  were permitted if they did not exceed the average cost of a nursing home bed in the county in which the gift was made.  In Arizona, this law is now implemented with a presumption that monthly gifts not to exceed $500 are permissible.

2.  The state's Medicaid Agency will be interested in any gifts that an applicant has made after the date that the President signs the law and within 5 years of making application for Medicaid.  Previously, the state's Medicaid Agency was only interested in gifts that were made within 3 years of applying for Medicaid (unless the gift involved a trust - in which case there was a 5 year look-back period even under the old law.)

3.  Any gift made after the effective date of the new law and within 5 years of applying for Medicaid will trigger an eligibility penalty period.  Under the old law, there was an eligibility penalty period, too, but it began to run from the date the gift was given.  Under the new law, the eligibility penalty period begins to run from the date that the person applies for Medicaid and is otherwise medically and financially eligible.

4.  Under the old law, the well spouse of a  Medicaid applicant could purchase a highly specialized kind of an annuity that would permit the ill spouse to qualify for Medicaid immediately.  If the well spouse died before all of the money in the annuity was returned from the annuity company, the kids could be named as remainder beneficiaries.  Under the new law, you can still do the annuity, but if the well spouse dies, the State or the nursing home spouse has to be named as the remainder beneficiary, unless there is a minor or disabled child. 

5.  Under the old law, a person could qualify for Medicaid even if they owned a house of unlimited value.  Under the new law, there will be a limit to the amount of equity that a person can have in their house and still be Medicaid eligible.  "Equity" means the difference between the value of the house and the balance of any mortgage or other lien against the house.  Under the new law, states can elect to impose either a $500,000 cap on equity or a $750,000 cap on equity.  The $500,000 maximum is the limit in Arizona.

Is it still worthwhile to consult with a Medicaid Planning attorney concerning these rules?  Absolutely.  Most rules have their exceptions, some have their limitations.  Just as estate tax planning attorneys help their clients avoid tax pitfalls, so too can Medicaid Planning attorneys help their clients to conform to the requirements of law while exercising every legal advantage.