Slightly more than a year after passage of the federal Deficit Reduction Act, the Pennsylvania Department of Public Welfare (DPW) issued guidelines describing how the Act will change Medicaid procedures, starting with applications filed March 5, 2007 or later. The new guidelines tell us more about how the Deficit Reduction Act will affect Pennsylvania applicants.
One of the most significant changes applies to community spouses – that is, the spouses of persons who apply for Medicaid.
Federal law provides that a community spouse is entitled to a certain minimum monthly income. Often, a community spouse’s income falls below that amount, and the question becomes where the community spouse will get the rest of the income.
Before the new rules, Pennsylvania authorized community spouses to use some or all of their excess financial resources (that might otherwise be spent down) to generate needed income. Through a process that involved an initial denial and appeal, DPW would stipulate that the community spouse could put excess resources into an annuity for the community spouse, instead of spending those resources down.
That process has now changed. Many couples that would have been authorized to use excess resources for the community spouse’s benefit under the old rules face an outright denial of benefits.
Under the new “income first” rule, a community spouse must look first to the Medicaid applicant’s income to make up any shortfall in the community spouse’s allowed income. The result will be that many more married couples will end up spending down significantly more money to qualify for benefits.
On the other hand, new rules applying to annuities offer such couples additional options to use excess funds to help the community spouse. Problem is, such annuity options are not a built-in part of the approval process, as they were before the new rules. With the right planning, community spouses could end up as well off, or better off, than under the old rules. But they will have to know, before applying, what options best suit their circumstances and how to put the right pieces into place.
As a result, professional advice from an elder law attorney is more important than ever when a married person applies for Medicaid.
As before the new rules, the state imposes a period of Medicaid ineligibility when an applicant has given away assets, without receiving fair market value in return, during the “look-back period” prior to application. The number of months of ineligibility is based on the amount of the gifts.
The first change lengthens the look-back period – the time for which DPW will look to see if gifts were given.
The new rules lengthen the look-back period from 36 to 60 months for all gifts made on or after February 8, 2006 (the date President Bush signed the Deficit Reduction Act). Because this change applies prospectively, the expanded look-back period required on new applications will phase in between 2009 and 2011.
For gifts given on or after February 8, 2006, the penalty period will run when a Medicaid applicant would otherwise have qualified (but for the gift), rather than from the month the gift was given (as under previous law). As a result, seniors who have made gifts could face Medicaid ineligibility if they need to apply within five years.
The guidelines consider factors such as sudden onset of illness, and other exceptions to ineligibility. However, it is now more important to consider the consequences of gifts, and to get professional help if gifts in the past few years cause problems with qualifying.
Rules have tightened, and qualification for Medicaid has become more complicated – particularly for married applicants. However, the right advice and planning can still protect assets and enhance the community spouse’s financial future.