Deficit Reduction Act of 2005

January 26th, 2006

The Federal Deficit Reduction Act of 2005 (“DRA”), if enacted, will dramatically change the legal landscape of Medicaid. The DRA seems to be headed for enactment in early February 2006 by an extremely narrow margin in both the Senate and the House, unless industry groups and constituents are able to persuade a few representatives to change their votes.

The main features of the DRA are designed to tighten Medicaid eligibility rules. First, the “look back period” on transfers of assets that must be considered on an application for Medicaid will be increased to 60 months for all transfers. Under current law, the look back period on outright transfers is 36 months, and on certain trusts is 60 months.

Second, the penalty period (for transfers of assets) during which an applicant is ineligible for Medicaid would commence only when he or she is in a nursing home (or receiving an institutional level of care), and when his or her application for Medicaid would have been approved but for the penalty period.

Third, if a Medicaid applicant has equity in her home in excess of $500,000 (or $750,000 at the state’s option), such excess must be counted on her application for Medicaid. (This rule will not apply when the spouse or minor, blind, or disabled child lives in the home.)

The net result of these and other changes in the DRA is that planning and paying for long-term care will become even more difficult. In addition, the quality of care at nursing homes may deteriorate with declining revenues as a consequence of the DRA.

o learn more, visit our New York Elder Attorney Information Site.

Entry Filed under: Medicaid Planning