MEDICAID’S FIVE-YEAR NIGHTMARE

On February 9, 2006, the Federal Government passed the Budget Reconciliation act of 2006 which included a rider that changed Medicaid regulations. It is not likely that it would not have passed on its own merits, so Congress decided to attach it as a rider to this bill.  Despite its being marginalized as a “rider”, this is one of the most important Medicaid regulations passed in the last twenty years and will affect millions of elderly residents of this country in the years to come.

Two specific parts of this legislation have already had a devastating effect on the Medicaid application process for many indigent elderly:

(1) Records must be provided for a period of five years prior to the month of application.Note:  this regulation was implemented in stages by stating that new applicants would not have to go back further than February 1, 2006, but is in full force at this time.

(2) During the five year period prior to the Medicaid application, no gifting to children, relatives or friends would be allowed.  All gifting would have created a disqualification period based on the amount of the gift (Medicaid calculating formula). The disqualification period would begin at the time of placement in a health care facility and the time of application.  Explanation:  Keeping a parent at home and applying for institutional Medicaid will not help as the disqualification period does not begin until placement in a health care facility.  A family would have to wait the entire five years after the gift to avoid the imposition of a penalty.

Congress justified the change in Medicaid regulations by stating that individuals should not be able to qualify for Medicaid if they transferred assets. But the IRS states that you may gift $13,000 per year to children or others.  The underlying truth is that the Federal Government is bankrupt, Medicaid is a huge expenditure in the Federal Budget every year and this was about SAVING MONEY at the expense of senior citizens.  The ramifications are devastating and it was shoved down the public’s throat.   And because it was passed as a “rider” on the Federal Budget Reconciliation Act of 2006, and not as a separate bill, it has never been effectively covered by the media.

Let’s consider the following case scenario’s:

Case I:        Jane Smith is an 86 year old female, lives off her income and can afford to gift $ 13,000 per year, (as per IRS guidelines)), to her children every Christmas. Her total assets are around $250,000. When Jane turns 88, she is disabled by a major stroke, requiring long term care in a nursing home.  (Many Nursing Homes in New Jersey cost over $120,000 per year.) After two years in the nursing home, Jane’s assets are depleted. She applies for Medicaid coverage, but is disqualified on the basis of the gifts that she gave to her children during the five year period.  (Note: Jane may appeal to Medicaid on the basis of “onset of catastrophic illness”, but based on her age, we speculate that her appeal would be denied.) Jane must now go to her children and request that they return the gifts.  Most probable case scenario:  the children have spent the money and would have to take out a loan to return it!!

Case II:       John March is a 90 year old man who has been in a nursing home for two years and has exhausted his resources and must apply for Medicaid.   His son, Jim, the designated Power-of-Attorney, goes to Medicaid on his father’s behalf.  John has never kept great records, but is able to locate three years of bank statements (with a few missing.)  He meets with the Medicaid caseworker, remits the paperwork and is given a list of missing documentation.    Jim looks at the list and is flabbergasted.  Going back five years, he must get all the missing bank statements and accompanying checks, documentation on all large deposits (including where they were generated, every 1099 and tax return) and a large number of  missing personal documents. Three weeks later, after going to several banks and ordering all the documents, he receives them, and remits them to Medicaid.   He gets another letter from Medicaid stating that several deposits showed that John had two closed accounts in another bank, cancelled a life insurance policy and cashed out an annuity four years ago.  Now Jim has to start all over with banks and insurance companies.  And this goes on and on.  FIVE YEARS IS A LONG TIME!!!

On the surface, one might shrug his/her shoulders and accept the ramifications of these regulations without giving them much thought.  But close examination shows how these regulations have discriminated against senior citizens in order to save money for the federal government.