This week marks the second anniversary of the federal Deficit Reduction Act and elder law attorneys, two years later, are still interpreting the sweeping changes in Medicaid law effected February 8, 2006. While the law contains provisions that could affect anyone, it most immediately impacts middle class elderly and their families.
Families want to know what they can and cannot do under the law which, for the most part, provides severe penalties for gifting if, at a later date, the person who gifted needs Medicaid to pay for his or her long term care. The thought brings to mind a statement I heard a few years back by a speaker who is a law school professor, “one wonders how long the government figures people must plan ahead to become disabled.” Apparently the government believes Americans must plan their disabilities at least five years in advance. A gift innocently given to a child or grandchild or even to a charity may become a justification within five years after it is given to deny payment for nursing home care and also, for that matter, Medicaid at-home care.
The good news is that there is an at-home Medicaid program and the services, once received, are generally well received. Until a few years ago, the program known as the Department of Aging Home and Community Based Waiver, had minimal effect except in metropolitan areas such as Philadelphia and Pittsburgh. It is being more widely used now in the suburban counties. Applications for Medicaid, whether in a nursing home or at home, are still no proverbial walk in the park. There are income limitations for the Waiver program that affect at-home applications that do not affect nursing home applications. Then, in July, 2005, the Pennsylvania State Legislature in Act 42 applied the same eligibility requirements for Medicaid Department of Aging HCB Waiver as apply to applicants for Medicaid in a nursing home. This has raised some interesting questions.
Here are some examples. For married couples, the date when a spouse enters the nursing home, the admission date, is when the government begins its “snapshot” of assets to determine how much the spouse at home is allowed to keep. When neither spouse enters a nursing home and both remain at home, what is the “snapshot” date for assets. What is the “admission date” for home.
Before Act 42 of 2005, the married person who received Waiver services at home simply transferred his assets into the name of his spouse who was not receiving services and, provided their income was low enough, the failing spouse could receive care under Waiver. After Act 42, how much is the healthier spouse permitted to keep.
Under federal law, where an adult child has remained in the home for two years or more and provides care preventing her parent from going to a nursing home, the adult child may be considered a “caretaker child” and the home may be transferred into her name. With Medicaid Waiver requirements being the same as nursing home Medicaid, the “caretaker child” provision should still allow these transfers.
If gifting has been done by a parent who lives at home and Waiver services are requested, how and from when is the penalty under the Deficit Reduction Act calculated. The penalty begins to run when the person is “otherwise eligible” for Medicaid. This calculation is easier to run when the person is in a nursing home and determined to be “otherwise eligible.” A friend who is an elder law attorney in New Jersey tells me they are beginning to refer to this issue as the “never ending penalty” or, alternatively, the “never beginning penalty period.” She advised that it is in litigation and should be resolved soon.
Here are a few “safe harbour” ideas in the meanwhile.
Keep detailed records. If disability strikes and an application needs to be completed for Medicaid, it is critical to have detailed records showing how and why money was spent.
Use the minimal permitted gifting amount, if needed. The Pennsylvania Department of Public Welfare has advised that amounts that total no more than $500 in a calendar month will not be questioned. This is not per person or per transaction.
Consider a written family agreement. If compensation is being paid for services or contribution toward household expenses or rent, there should be a written agreement entered into in advance and signed by everyone. Income should be included on the receiver’s tax return. Seek legal help if there is still confusion. Your specific case may raise additional questions.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.