The Deficit Reduction
Act of 2005 (DRA)
passed the House on
February 1, 2006 and
was signed by the
President on February 8, 2006.
The most significant change brought about
by the new law is that the Medicaid
lookback period has been increased from
three years to five years, and the penalty
period starts when the Medicaid applicant
would otherwise be eligible, i.e., once the
applicant physically or mentally needs a
nursing home, and has less than $2,000
(excluding the value of a home). Under
prior law, the penalty period began when
the applicant made a gift.
For example, suppose Mary had $33,000,
and wrote the following checks in 2006
totaling $14,000: $7,000 to a university so
that her only granddaughter could be the
first in the family to attend college; $5,000
to help pay for home health aids so that
her ailing sister could continue to live at
home; and $2,000 to her church. On April
1, 2007, Mary suffers a stroke. Determined
to stay at home, she pays for private home
care at $8,500 per month, which along
with extensive care from her family,
enables her to remain at home. Near the
end of two months, having only $2,000
left, she applies for nursing home
admission and Medicaid.
Under the old law, Mary would qualify for
Medicaid, because the penalty period
(totaling two months of penalty for the
$14,000 she transferred) would have
begun when she made the gifts, i.e., in
2006. However, under the new rules,
Mary’s penalty period begins when she
runs out of money (on June 1, 2007) and
continues for two months. The nursing
home is within its rights to refuse
admission without a source of payment.
Other changes include the following:
The law states that most of its changes are
effective immediately. One bit of very
good news is that it is only effective for
transfers made on or after February 8,
2006. In other words, older transfers are “grandfathered” under the old rules.
However, even in states like
Massachusetts where many of the changes
do not need the legislature to alter state
statutes, it appears that most state
Medicaid agencies are continuing to apply
the old rules until they can implement the
new regulations. Massachusetts’ Division
of Medical Assistance has indicated that it
intends to enact emergency regulations
implementing the DRA very soon.
At this point, the new law has many
ambiguities and raises many questions that
elder law attorneys are attempting to
resolve.
Finally, a clerical error in Congress caused
the House to approve a slightly different
version of the DRA than the Senate.
Because President Bush signed the Senate
version, Oklahoma elder law attorney Jim
Zeigler filed a suit requesting the DRA be
declared unconstitutional.
