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By John M. Bigler This month I'm celebrating 10 years writing for The Suffolk Times. Unfortunately, I'm marking my anniversary with an article I had hoped I would not have to write. Unfortunately, it now appears more and more certain that the Medicaid provisions of the Deficit Reduction Act of 2005 will be passed by Congress and a new Medicaid law will go into effect shortly, one that is Draconian in its effort to eliminate meaningful Medicaid planning for middle-class seniors faced with long-term catastrophic medical expenses.
The new law has several key provisions. First, it would extend the look-back period for all transfers made prior to a Medicaid application to five years from the present look-back of three years. More importantly and most devastating for planning, it would start the period of ineligibility for those transfers that take place during the look-back period not as of the month after the transfer as it is now but rather at the time of entering a nursing home or actually filing an application for Medicaid. This mean, for an example, that a transfer of $100,000, which would currently cause a 10-month period of ineligibility on Long Island starting the month after the transfer, will now not start that period of ineligibility until a person actually goes into a nursing home or applies for Medicaid within five years after the transfer. This provision effectively eliminates the very conservative planning tool called the "rule of halves" which I have described in numerous articles. The rule of halves will simply allow an individual who suffers a catastrophic illness to save half of their assets while spending the other half. Now, that same individual will be forced to pay privately for five years after the transfer. The provisions will effectively wipe out the assets of many middle-class people who are unfortunate enough to suffer a catastrophic illness. This new provision will force many people to transfer significant assets out of fear, simply because they are getting older and are concerned that should they become ill in the future they will not be able to afford the cost of five years of catastrophic medical expenses.
There are other horrific provisions as well. One basic staple of Medicaid law going back to the program's inception was that a homestead - the place where a individual, spouse or minor disabled children lived - was an exempt resource and would not be counted for Medicaid purposes. The new law will provide that any homestead with a value of more than $500,000 will make an individual ineligible for Medicaid benefits. If you thought that home is where the heart is, that does not hold true for this administration.
Another deadly provision regards annuities. One other conservative planning tool has always been to purchase an annuity that would provide a stream of income. An individual needing medical assistance would therefore willingly give up the monthly income provided by the annuity in return for protecting the balance of the assets on death. The idea would be to name a family member as the beneficiary thereby protecting the remaining assets. Now, any purchased annuity will make an individual ineligible unless the local department of social services is named as the primary beneficiary. Effectively, that will eliminate annuities as a viable planning tool.
The administration argues that the wave of the future is long-term insurance and that rather than looking to government benefits individuals need to consider long-term insurance. The problem is statistically only about 20% of the population is eligible for long-term insurance. The insurance is not available for those with pre-existing conditions and it is expensive. Many middle-class individuals simply cannot afford the cost of long-term insurance.
The argument for this type of drastic change in the law is to close the loophole that allowed millionaires to protect their assets by having the taxpayers pay for them. As I explained many times in these articles, it is not millionaires who are applying for Medicaid. It is the middle-class disabled and older Americans that are simply being hung out to dry. Some day the current administration may be known as having brought peace and stability to foreign lands. I doubt it, but only the future will tell. One thing is for certain, however, and that is if this law passes, this administration will forever be known as the one that singled out older Americans, our greatest generation, and disabled Americans as those individuals who would bear the brunt of deficit reductions.
Reprinted with permission of the Suffolk Times © 2006 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
The Senate - by a vote of 51 to 50, with the vice president casting the deciding vote - has passed the Deficit Reduction Act. The House had previously passed a similar version to the bill but now has to meet once again when Congress reconvenes to vote on the new version. If the House passes the new bill, it will go into law. Congress is scheduled to reconvene Jan. 31 and at that time we will find out if the majority of the House of Representatives will agree to support this horrendous act or will have the courage to reject it. Regular readers of my articles will know that I am the eternal optimist. But at this point, even I am skeptical.