The look-back period is extended from three to five years.
Before the act, all individuals applying for Medicaid had to provide, in addition to the application, three years of financial documentation for the eligibility worker to review. The eligibility worker would then discern if any uncompensated transfers or gifts had been made in the preceding three years (36 months).
If gifts have been made, the government will impose an ineligibility period before the person qualifies for Medicaid. Because Medicaid was initially meant to be a welfare program for the truly underprivileged, the government wants to prevent people from transferring their wealth to family members and then immediately becoming eligible for assistance if the transferred funds could have been used to pay for care.
To prevent this, the government uses a delay calculation, based on the date and amount of the gift, that provides the corresponding period of ineligibility (i.e., the penalty period). The penalty calculation is made using the state’s penalty divisor, which purportedly reflects the current average cost of care at a skilled nursing facility in that geographical region of the state.
Transfers where the donor receives goods or services of equivalent value to the amount of assets paid do not affect eligibility.
All applicants who apply for Medicaid after the effective date of the new legislation will be subject to up to five years (60 months) of financial review. Gifts within this time period can reduce Medicaid eligibility, but as with the previous look-back rules, any transfers before the five-year look back, regardless of the amount, would not affect eligibility.
Many applicants who may actually be eligible may not qualify if they cannot provide financial documentation for the five-year period. Many with declining health cannot produce or maintain the required financial documentation. It is also worth noting that all gifts — both to family members, including children and parents, and to charitable institutions — would be subject to these new rules.
The start date of the period of ineligibility is changed to the date a Medicaid application is filed.
Under Medicaid rules a date is designated to calculate the period of ineligibility (penalty) resulting from transfers in the look-back period.
The prior law provided that the date of the penalty calculation (that is, the day the penalty period begins) began on the first day of the month in which a transfer, either individual or serial, was made. The new law appears to set the start date for the penalty calculation at the date an applicant moves into a nursing home and files a Medicaid application.
A concern with this change in the start date of the penalty period is the financial hardship that both individuals and nursing homes will experience. The cost of providing care in nursing homes continues to climb faster than inflation. Increased federal mandates and regulatory requirements have placed tremendous stress on the nursing-home industry.
Approximately 60 percent of all nursing-home residents in the United States are Medicaid recipients. Nursing homes will have no means of being paid for their services by individuals who are ineligible because of this new rule. Yet federal law requires that nursing homes provide care for residents until they can be safely discharged, even if they cannot pay. Thus, because of the restriction on their ability to discharge residents, nursing homes attempt to prevent those who are unable to pay from arriving at their facility. And so if these individuals without Medicaid can’t pay by other means, other facilities will not accept them.
For similar financial reasons, nursing homes will tend to dump indigent individuals at hospitals for needed or contrived medical services to get them out of their facilities, which will further stress an already overstrained hospital system.
And when these patients arrive at hospitals, the system Congress established that pays hospitals a set amount per medical treatment creates the incentive for hospitals to provide care as quickly as possible and then discharge the patients. But hospital workers already under significant pressure to place recovering patients in rehabilitation nursing homes will find they have no options if the individuals cannot pay for nursing-home services with Medicaid.
To illustrate the calculation of the current and former penalties, consider the following example:
Grandfather transfers $40,000 to a grandchild for college expenses. The monthly penalty divisor is $4,300. Under the prior rules the period of Medicaid ineligibility (penalty) would have begun immediately in the month of the gift, resulting in nine months of ineligibility ($40,000 ÷ $4,300 = 9.3). After that, Grandfather would be eligible to receive Medicaid payments.
Under the new rules, Grandfather will be eligible for Medicaid only after his funds are spent down to below $2,000, he has entered a nursing home, and he has filed a Medicaid application. And only then, when his assets are essentially gone, will the nine-month penalty period begin running, leaving Grandfather unable to pay for his care or qualify for eligibility.
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