Medicaid Reform Bill Update

The U. S. Congress will soon do battle over the House and Senate versions of the budget deficit reduction packages.  Of particular interest to our clients are the proposed Medicaid cuts effecting seniors. 

The House Bill proposes the harshest cuts and would have a deep impact on the planning that seniors are presently able to do to preserve their assets.  The most troublesome measures in this bill (H.R. 4241) are: 

(1) Lengthening the lookback period to 5 years; (2) Providing that the penalty period begin to run when the Medicaid applicant enters the nursing home; (3) Requiring disclosure of any transaction exceeding $100,000 (with monthly transactions of $5,000 or more treated as a single transaction) within the 5-year lookback, and deeming such transaction to be an improper transfer unless the applicant proves otherwise; (4) Requiring disclosure of annuities of either institutional or community spouse and making the state either the primary beneficiary or the alternate beneficiary to community spouse and/or minor/disabled child; (5) requiring application of "income first" rule; (6) Counting home equity exceeding $500,000 as an available resource unless community spouse and/or minor/disabled child live there.

A fierce fight in the reconciliation conference committee is under way, as both houses of Congress attempt to reconcile the House and Senate proposals and come up with the official budget bill.  It is our understanding from reading the bills that any changes will not be retroactive.  What that means to us is that our clients who need to do planning should do it before the reconciliation bill is signed into law and becomes effective.