Changes in New York Medicaid Eligibility Rules Mandated by Federal Legislation:
One Giant Step Back for the Elderly and Infirm

On February 8, 2006 President Bush signed legislation known as the Deficit Reduction Act of 2005 which substantially alters the eligibility rules for Medicaid and which will result in many of our elderly impoverishing themselves before they ever can become eligible for Institutional Medicaid, frequently referred to as nursing home Medicaid. This article will review some of the most significant changes of the new law and other New York developments.

Gifts and Transfers for Less than Fair Market Value

When a person applies for Medicaid to pay for nursing home care and certain nursing home like care services, the applicant and his or her spouse, if married, must provide records of their finances and assets. Gifts or transfers for less then fair market value could in some instances disqualify the applicant for Medicaid payments for nursing home care. In particular the new law (referred to as DRA 2005) extends the look back period, the period, which Medicaid will scrutinize, from three years to five years. The new five year look back period will be gradually implemented after Feb. 8, 2009.

The most severe aspect of the DRA 2005 is not the “look back” but the way a penalty is applied, assuming there has been a gift or less than fair market value transfer. Under DRA 2005 which applies only to transfers made on or after February 8, 2006, the disqualifying period is the later of the first day of the month of the transfer or the date the person is in a nursing home, has exhausted all their funds, has applied for Medicaid and would be eligible for Medicaid but for the gift, and at that date the penalty is imposed.

Example: Mr. and Mrs. Smith have a granddaughter who had been accepted to medical school and they pay $100,000 for her tuition, room and board and expenses for the two years of medical school. Four years later Mrs. Smith who has developed Alzheimer’s needs nursing home placement. Based on assets and income Mrs. Smith would qualify to have Medicaid pay the $12,000 per month for care but after reviewing their records Medicaid denies them because of the gift four years before for educational expenses. Medicaid uses the average cost of nursing home care in the area of New York where the nursing home is located to determine how long Mrs. Smith would be ineligible for Medicaid payments. Using current figures Mrs. Smith would be ineligible for 9.94 months of nursing home coverage calculated by dividing the total gift ($100,000) by the average monthly cost of a nursing home in New York City in 2006 ($9,131) to come up with a 9.94 of nursing home costs. Note, that if Mrs. Smith had applied for Medicaid five years and one month after the gift there would be no period of ineligibility because the look back period is five years and transfers prior to that are not reviewed.

Note, DRA 2005 is radically different from the prior law which still covers all transfer of property made before February 8, 2006. Under the prior law even if the transfers had occurred within the look back period the penalty period began the month after the transfer so Medicaid would deem Mrs. Smith eligible for Medicaid because ($100,000 ÷ 9131=9.94) created a penalty which began and ran in the year of the gift.

Hardship Waivers

DRA 2005 provides that states must offer an opportunity to request a waiver of the imposition of a penalty because it would deprive a person of medical care or endanger a person because it deprives a person of food or shelter. Under the law, utilizing the example above, the Smiths, or the nursing home with the permission of the Smiths could seek a hardship wavier from the imposition of the penalty period for the tuition gift. New York State is required to provide notice, timely determinations and an appeal. Historically, hardship waivers have been granted infrequently.

Community Medicaid and Transfers

Not all the news on the legislative front this year was bad news. Although the imposition of the transfer rules for eligibility for Community Based Medicaid including home care was threatened it is not part of the new law. There is still no penalty for the transfer of assets by a person who is applying for community-based Medicaid, which includes home care and hospital services and the month after transfer a person can apply for services.

Spousal Refusal is Still the Law

Both for Community Based and Institutional Medicaid a non-applying spouse has the right to refuse to make her or his income and resources available to the applicant and Medicaid must determine eligibility on applicant’s income and resources alone. The budget bill provision that would have eliminated spousal refusal for both home care and nursing home cases will not be implemented. Even where spouses are living together “spousal refusal” will continued to be honored in New York State.

Conclusion

In this brief article it is not possible to discuss all the changes of the DRA 2005, which will be the subject of a future article. However, because of these changes it is now more important than ever that you consult with an experienced elder law attorney before asset transfers.

— Jeffrey G. Abrandt, Esq.

	Jeffrey G. Abrandt, Esq. is a partner at Goldfarb Abrandt Salzman & Kutzin, LLP with offices in NYC and White Plains, New York. He was formerly Attorney-incharge of The Legal Aid Society Brooklyn Office for the Aging. He has successfully litigated class actions involving the rights of nursing home residents, the Medicaid program, expanding the rights of applicants and recipients. For many years he taught a course on elder law at the New School for Social Research, and is a frequent lecturer on elder law and related issues. He is Co-Chair person of the Practicing Law Institute’s Annual Elder Law Institute program.

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