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Recent Changes in Medicaid Laws

Nursing home care in Massachusetts costs about $7,000 per month, on average. The Medicaid program, administered by the Division of Medical Assistance, pays for almost 70 percent of that care.

In part to deal with soaring Medicaid costs, Congress enacted the Deficit Reduction Act in February of this year. Many of the Act’s provisions will make it more difficult for seniors to qualify for Medicaid without making themselves destitute. For example:

• The “lookback period” for asset transfers made to individuals prior to the filing of the Medicaid application has been increased from three years to five years.

• The disqualification period (one month disqualification for every $6,960 transferred) begins to run on the date of admission to the nursing home, rather than on the date of transfer.

• The purchase of an annuity will be considered a disqualifying transfer of assets unless the state is named as remainder beneficiary, in specified circumstances.

• If the applicant spouse, or the applicant spouse and the healthy spouse, own a home with more than $500,000 of equity, they will be ineligible for Medicaid. (An effort is being made in the state legislature to increase this amount to $750,000).

Massachusetts has not yet implemented the Medicaid-related provisions of the Deficit Reduction Act. For now, and until implementation (I’ve heard estimates ranging from late July to the end of September), the old rules will apply. 

Accordingly, seniors may want to consider transfers to irrevocable trusts, deeds reserving life estates, annuity purchases, gifts, accelerated Medicaid applications, and other actions which could help them to qualify for Medicaid assistance while still preserving some assets for their loved ones. They may also want to look into the purchase of qualifying long term care policies (at least two years of coverage of at least $125 per day) as a way to prevent state recovery on a Medicaid lien against the primary residence.

July 11, 2006

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