Major Changes to the Medicaid Long-Term Program Passed by Congress

On February 1, by a vote of 216 to 214, which followed a Senate vote of 51 to 50, the House of Representatives passed legislation known as the “Deficit Reduction Act” or “DRA” for short. Included in this legislation are significant changes to the Medicaid long-term care program which, in Washington State, includes Medicaid for nursing home care and, under COPES, for “community-based” care. Under this law, all transfers, whether made to individuals or to trusts, will be subject to a five-year “look-back period.” In addition, the law changes the starting date for transfer penalties imposed when gifts are made in such a way as to foreclose much Medicaid gifting that previously had been allowed under the program’s rules. For single applicants, the DRA also limits the equity in a residence that can be considered exempt to $500,000 and tightens the rules about how annuities affect eligibility for benefits.

This is, to be sure, a very brief summary of a very complex and, in some places, it seems, hard to decipher law. We will strive to provide a better summary and appropriate web links as matters become clear. We are, of course, able to meet with existing and prospective clients about the impact of this legislation.
 

State of Washington Estate Tax

On May 17, 2005, Governor Gregoire signed into law a bill establishing a Washington state estate tax for estates of $1.5 million or more (for deaths occurring in 2005 on or after May 17th) and estates of $2 million or more beginning January 1, 2006. State estate taxes can be deducted from federal estate taxes. Gifts made during life are not subject to state gift tax.
 

Medicaid Estate Recovery

Until recently, if a Medicaid recipient had intended to return home, whether or not such a return was likely, Medicaid did not put a lien on the recipient’s home. However, now, Medicaid, if it adopts rules implementing a new law, will be able to put a lien on property even if the Medicaid recipient intends to return home if Medicaid determines that the recipient will be unable to return home. The new law also, among a few other changes, provides that Medicaid can recover against life estates or joint tenancy interests that deceased Medicaid recipients may have had at their deaths.
 

SSI and Clothing as Income

As of March 9, 2005, the Social Security Administration finalized regulations which included a rule change regarding clothing as in-kind income. Previously, clothing, along with food and shelter, was considered as in-kind income for SSI recipients. With the publication of the final regulations, clothing received by SSI recipients will no longer be considered as in-kind income and thus will not reduce the recipient’s SSI benefit amount.
 

SSI and Car Values

As of March 9, 2005, the Social Security Administration finalized regulations which included a rule change regarding car values. There is no longer a $5,000 limit on the value of a car held by a recipient of SSI.