Medicaid Changes as a Result of the Deficit Reduction Act of 2005

What is the Deficit Reduction Act of 2005?
What are the Major Changes to Medicaid in the DRA?
What are the new Citizenship and Identity Requirements?
How Much Equity Can I Keep in My Home?
Are there Other Changes that effect Long Term Care Medicaid?
What is a Transfer? How Do Transfers Affect Eligibility for Long Term Care Medicaid?
Are Gifts and Charitible Contributions Counted as Transfers?
How Far Back Does the Department Look for Transfers?
When Does a Transfer Penalty Start?
What can I do if the Department Imposes a Penalty on me?
How Does the Hardship Exemption Work?
Where Can I Get More Help?

INTRODUCTION

What is the Deficit Reduction Act of 2005?
The Deficit Reduction Act of 2005 (the "DRA") is a new federal law that was passed in February 2006. The DRA makes several important changes to Medicaid. Vermont changed its Medicaid rules based on the DRA as of January 1, 2007 (for the citizenship rules) and February 1, 2007 (for the financial rules).

What Are the Major Changes to Medicaid in the DRA?
People applying for Medicaid now may have to prove their identity and citizenship. The DRA also made changes to the financial eligibility rules for long term care Medicaid. These changes include counting the home as an asset when it worth more than $500,000, and imposing much stricter penalties for gifts and transfers.

More information about getting long term care Medicaid can be found on our Long-Term Medical Care in Nursing Homes, Residential Care Homes, or in Your Home page.

CITIZENSHIP AND IDENTITY CHANGES

What Are the New Citizenship and Identity Requirements?
You must be a US citizen or qualified immigrant to get Medicaid. Now, you may have to prove that you are a citizen. Some people will not have to prove their citizenship. You will not have to prove your citizenship if you already get Medicare, or if you get Social Security Disability benefits or Supplemental Security Income (SSI). Newborns also do not have to prove citizenship. The State of Vermont has agreed to look for records like birth records that show you are citizen. You will only have to get those documents yourself when the State of Vermont can't find them. The State of Vermont will pay for the cost of getting documents that show you are a citizen. If you need help paying for the cost of a document, you should talk to your case worker about needing that help.

LONG TERM CARE MEDICAID CHANGES

How Much Equity Can I Keep in My Home?
Before this change, your home was not counted for long term care Medicaid. Now, any equity in your home above $500,000 is counted. The equity in your home is the tax assessment minus any loans on the home. If your home is worth more than $500,000, you will not be eligible for long term care Medicaid until you reduce its value. There are several ways to do this. You can take out a home equity loan or reverse mortgage. The money you get from your home's equity is not counted. There may be other options for reducing the equity in your home. You should talk with an attorney before making any decisions about your home.

Are There Other Changes That Effect Long Term Care Medicaid?
Vermont has changed the rules about promissory notes, loans, and annuities. These are options that estate planners use to protect income and resources. If you may need long term care in the next few years and have assets or resources that you would like to spend, give away, or protect, you should talk with an attorney. Because the laws governing long term care Medicaid have changed so much in the past 3 years, be sure that attorney is familiar with these changes. Vermont Legal Aid can refer you to an attorney who can help you. Call Vermont Legal Aid at (800) 889-2047.

What is a Transfer? How do Transfers Affect Eligibility for Long Term Care Medicaid?
A transfer is when you or your spouse give away something of value like money or property. A transfer can make you ineligible for long term care Medicaid if the reason for the transfer was to qualify for this coverage. If you made a transfer, the Department will impose a "penalty" and deny long term care Medicaid. If you made a gift or transfer for another reason, it should not count as a transfer and there should not be a penalty.

Are Gifts and Charitable Contributions Counted as Transfers?
Gifts and charitable contributions of up to $207 a month are not being counted by the Department. This is based on an informal policy for their workers. The Department will ask you to document gifts and charitable contributions that are over $207 per month. If you make more than then the $207 limit for gifts or charitable contributions, you will have to show convincing evidence that the purpose was not to qualify for Medicaid. You would have the right to appeal any decision to impose a penalty based on these gifts.

How Far Back Does the Department Look for Transfers?
When you apply for long term care Medicaid, the Department reviews transfers or gifts you made in the past. The Department "looks back" for transfers you have made in the past. The DRA increased the look-back period from 3 years to 5 years before you apply. This change will be phased-in. The 3 year look-back still applies to transfers made before February 8, 2006. The five year look-back will apply to transfers on or after February 8, 2006.

When Does a Transfer Penalty Start?
Before February 8, 2006, the transfer penalty started when you or your spouse made the transfer. So the penalty may have ended before you applied for long term care Medicaid. Now the penalty period starts when you are eligible for long term care Medicaid. This means that you can be denied Medicaid coverage for long term care for any gift or transfer within the look-back period.

What can I do if Medicaid Penalizes Me?
If Medicaid penalizes you, you can appeal. You can also request a hardship exception. You should only be penalized if you made the transfer or gift "for the purpose of qualifying for long term care Medicaid". If you made the gift or transfer for another reason, you should appeal. You have 90 days after the notice of the penalty to appeal.

What is a Hardship Exemption?
A hardship exemption is a request to the Department that you can’t afford to be penalized. If the Department grants the hardship exception, they will waive some or all of the penalty period.

Hardship exists when the transfer penalty puts your health or life in danger or leaves you without food, clothing, shelter or other necessities of life. You should request the hardship exception within 20 days after the notice of the penalty. You can also request hardship during the penalty period. You have the right to appeal if a hardship exemption is denied.

The Senior Citizens Law Project of Vermont Legal Aid can help with Medicaid appeals and requests for a hardship exception. You can call Vermont Legal Aid at (800) 889-2047 for assistance.

Where Can I Get More Help?
The Senior Citizens Law Project (SCLP) of Vermont Legal Aid can help with questions about long term care Medicaid. The SCLP usually refers clients with more than $25,000 in assets to a private attorney familiar with Medicaid law for help. You can call Vermont Legal Aid at (800) 889-2047.

Vermont Law Help, 2008. This is a website about Vermont law. We give this information as a public service. It is not legal advice. We are not acting as your lawyer.
Always consult a lawyer, if you can, before taking legal action.