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February 2006 news alert! The federal government passed new Medicaid reforms (see below) to shift more of the burden of long-term care costs to individuals and their families.

The government forsees a huge wave of long-term care expenses with the aging of the baby boomers, knows we have no social insurance in place to accomodate it, and that most people remain unaware their retirement portfolio is at significant risk. So it's sending the message that individuals (other than the very poor) must plan to pay for their own long-term care. Its most prominent platforms today for delivering the news are Medicaid reform and a state by state education program. It has focused on limiting access to Medicaid dollars for long-term care expenses by the middle class and wealthy in order to send its message. The 2006 Budget Deficit Reduction Act enacts the following reforms concerning long-term care:

• proposed passed requirement that anyone with home equity greater than $500,000 would be ineligible for Medicaid even when they have no other assets remaining. This would require sale of the home or a reverse mortgage to stay in it. Sale of the home would make all the proceeds available for care before Medicaid would kick in. (This home-equity rule would not apply to those with a spouse, disabled child or minor child living in the home.)
• proposed passed extending the "look-back period" from 3 years to 5 for asset transfers from one's one's estate for purposes of Medicaid eligibility
• proposed passed beginning the period of ineligibility for Medicaid, when one has transferred assets out of their name within the five year lookback period, from the date of the first transfer to the date of application for Medicaid benefits
• proposed passed requiring that the State be made beneficiary of any annuities when one is otherwise eligible for Medicaid
• proposed passed a life estate will be counted as an asset unless the "transferee" resides in the home for at least one year after the date of transfer
• proposed passed requiring that deposits to continuing care communities be counted as available assets for Medicaid eligibility purposes
• proposed passed expansion of state "Partnership" programs that allow people who purchase eligible long-term care insurance to automatically qualify for Medicaid when their policy runs out

1. O'Brien, Ellen. "Medicaid's coverage of nursing home costs: Asset shelter for the wealthy or essential safety net?" Georgetown University Long-Term Care Financing Project, May 2005.

Copyright © Martha H. Bowes, 2005, 2006, 2007