SUBJECT:
LONG-TERM CARE ELIGIBILITY CHANGES DUE TO DRA OF 2005
DISCUSSION:
The Deficit Reduction Act 2005 (DRA), signed into law by the President on February 8th, 2006, created numerous changes in the eligibility requirements for long-term care services under Medicaid. Long-term care services include Nursing Facility and other vendor levels of care as well as home and community based (HCB) services. The changes addressed in this memorandum are:
- The beginning date for periods of ineligibility (penalty periods) for transfers for less than fair market value (FMV) is changed.
- Partial month penalties will be determined when the amount of a transfer is less than the average private pay rate or there is a remainder after dividing the transfer amount by the private pay rate.
- The look-back period for all transfers is changed to 60-months.
- Individuals with home equity that exceeds $500,000 are ineligible for long-term care services.
The changes related to transfers of property only apply to transfers made on or after February 8, 2006. All transfers that occurred before February 8, 2006, are to be handled in accordance with current policy. There is no change in the manner in which we determine whether a transfer is without fair and valuable consideration.
The home equity provision applies to all applications or requests for long-term care coverage filed on or after January 1, 2006.
Lengthening of the Look-Back Period
Section 6011 of the DRA of 2005 (DRA) amended Section 1917(c)(1)(B)(i) of the Social Security Act to lengthen the look-back period to 60 months for all transfers of property occurring on or after February 8, 2006. Previously, the look-back policy for transfers not involving annuities or trusts was thirty-six months. Transfers of annuities and trusts had a look-back period of sixty months.
Change in Beginning Date for the Period of Ineligibility
Section 6011 of the DRA of 2005 amended Section 1917(c)(1)(D) to change the beginning date of the period of ineligibility for Medicaid vendor or HCB benefits. For transfers occurring on or after February 8, 2006, the beginning date for the period of ineligibility is the first day of the month in which the transfer occurred or the date the individual would have been eligible for institutionalized level of care (were it not for the penalty period), whichever is later. Current policy on multiple periods of ineligibility (figured consecutively) remains the same.
EXAMPLE:
Claimant transferred $40,000.00 to his daughter on February 15, 2006. On March 3, 2006, claimant applies for Medicaid vendor benefits. Claimant is eligible for assistance beginning March 2006 except for the transfer. Since March is the first month of eligibility, the penalty period would begin in March as the transfer occurred after February 8, 2006.
EXAMPLE:
Claimant transferred $40,000.00 to his daughter on November 15, 2005. On March 15, 2006, claimant applies for Medicaid vendor benefits. Claimant is eligible for assistance except for the transfer. Since the transfer occurred prior to February 8, 2006, the penalty will be based on the previous rules and the penalty period would begin with the month of the transfer or in this example November 2005. Using the private pay rate of $2758.00 as of November 2005 the transfer penalty will be 14 months (14.5 rounded down) and the first month of eligibility would be January 2007.
Change in Policy on Partial Months of Ineligibility Due to Transfers
Section 6016 of the DRA of 2005 amended Section 1917(c)(1)(E) of the Social Security Act to prohibit the disregard of fractional periods of ineligibility that result from transfers of property for less than fair market value. Previously, policy allowed for the disregard of a transfer penalty, if the penalty was determined to affect less than half of a month. The DRA of 2005 requires States to impose partial months of ineligibility. The effective date of this change is February 8, 2006.
The current private pay rate for nursing home care is $2852 per month. The daily rate is $93.76, which is calculated by multiplying the private rate by 12 months and dividing by 365 days ($2852x12= $34,224/365 =$93.76). To calculate months of ineligibility, divide the amount of the transfer by the monthly private pay rate of $2,852. For partial month ineligibility, divide the remaining amount by the daily rate of $93.76 to determine the number of days of ineligibility within a month. Round down the number of days of ineligibility when a partial day of ineligibility exists.
EXAMPLE:
An individual makes an uncompensated transfer of $30,534 in April 2006, the month s/he applies for Medicaid coverage of long-term care services. The uncompensated transfer amount of $30,534 is divided by the average monthly rate of $2,852 and equals 10.7 months. The full 10-month penalty period runs from April 1, 2006, the month of transfer, through January 2007 with a partial month penalty calculated for February 2007. See the steps below for calculating the period of ineligibility.
| Step #1: | $30,534 |
uncompensated transfer amount |
÷ $2,852 |
monthly rate | |
= 10.7 |
number of months for penalty period | |
| Step #2: | $2,852 |
average monthly private pay rate |
x 10 |
ten-month penalty period | |
$28,520 |
penalty amount for ten full months | |
| Step #3: | $30,534 |
uncompensated transfer amount |
-$28,520 |
penalty amount for ten full months | |
$2,014 |
partial month penalty amount | |
| Step #4: | $2,014 |
partial month penalty amount |
÷ $93.76 |
daily rate | |
= 21.48 |
number of days for partial month penalty |
For February 2007, the partial month penalty of 21 days would be added to the ten month penalty period. This means that the Medicaid program would authorize payment of long-term care expenses beginning February 22, 2007.
Substantial Home Equity
Previously, policy exempted the equity of a primary homestead in determining eligibility for Medicaid for nursing facilities or other long-term care services. The definition of a homestead has not changed. Section 1030.010.05 of the online manual defines a home as real property that is furnishing shelter to the individual, the individual's spouse or dependent child. A mobile home that is furnishing shelter is included in this definition regardless of whether the mobile home can be moved or who owns the land on which it is located. All the land on which the home is located is considered part of the home so long as the land is adjoining and there is no other home on the land. Land in a city or town must be in the same city block. Land in rural areas is considered adjoining even though a road may separate two tracts.
Section 6014 of the DRA of 2005 created a new subsection to Section 1917 of the Social Security Act. Section 1917 (f)(1)(A) limits the claimant's portion of equity in a home for an individual to $500,000 for those individuals applying for Medicaid long term care services. The change is effective for applications for these services filed on or after January 1, 2006.
Home equity and ownership are to be verified. If a claimant's equity in their primary home is over $500,000, they are not eligible for Medicaid under MA vendor, PACE or HCB. The claimant may be eligible for other programs that do not include long-term care services.
The home equity policy does not apply in the following conditions:
- the spouse of the claimant is living lawfully in the claimant's home,
- the claimant's child, who is under age 21, is living lawfully in the claimant's home, or
- the claimant's child, who is 21 or over, is blind or permanently and totally disabled and is living lawfully in the claimant's home.
Claimant may use a reverse mortgage or home equity loan to reduce the equity in the home. Verification of the proceeds of the loan is required. Do not consider the payments to claimant from either type of loan as income. Inform the claimant that proceeds from a reverse mortgage or home equity loan must be spent. Any of the money retained the following month by the claimant from that payment is a resource and transfer penalties apply to improper disposition of the assets.
NECESSARY ACTION:
- Review this memorandum with appropriate staff.
- Begin applying a partial month's penalty for transfers made on or after February 8, 2006, when a transfer amount does not equal a number of whole months.
- Begin using the 60 month look-back period for all transfers made on or after February 8, 2006.
- The date of ineligibility for transfers made on or after February 8, 2006 is the first day of the month in which the transfer occurred or the date the individual would have been eligible for institutionalized level of care, whichever is later.
- On-line manual updates will follow.