October 2010Volume 16Number 2PDF icon PDF version (for best printing)

New Medicaid rules harm women, seniors

In 2005, the Federal Government adopted the Federal Deficit Reduction Act of 2005 (DRA). Long-term care has always been a woman’s nightmare because women typically outlive their ill-spouses by about seven years. The nightmare will get worse if the Illinois Department of Healthcare and Family Services chooses to adopt its unfair version of the “DRA rules” for Medicaid and nursing homes. See the Flinn Report published on August 13, 2010 at <http://www.ilga.gov/commission/jcar/flinn/reg33.pdf>.

The DRA imposes harsh penalties against seniors who gift money for any reason to family members and charities. The penalties will be imposed whenever an Illinois senior has given away money or assets during the five years (60 months) prior to a Medicaid application. Penalties are based upon the per-month cost of care in a nursing home versus the amount of the gift. A senior who gives a gift to a family member or charity will be ineligible for Medicaid services for the period of time that the gift would have covered. Despite the fact that a senior may have used their money to rescue family members during the ongoing Great Recession, IL Medicaid rules presume the money was transferred to qualify for Medicaid long-term care benefits.

The current Medicaid eligibility rules include a “forgiveness factor.” Seniors who give away money or other assets create an immediate Medicaid penalty period of eligibility. That means that the penalty period starts immediately and usually works itself down to zero while a senior is still healthy and/or wealthy enough to cover their own healthcare expenses.

The new rules have no forgiveness factor. They will impose penalty periods of ineligibility that will hang over a senior’s head for five years. Five years is a very long time in the life of a senior citizen.

Consider this common story. During our current and ongoing recession, the adult children of Henry and Betty Senior face the foreclosure of their home. The “kids” come to Henry and Betty and ask to be given $10,000 to help pay the mortgage that is in default. Henry and Betty who love their children and grandchildren, choose to give $10,000 to save the home. Unfortunately, if either Henry or Betty for some other reason need nursing home benefits prior to June of 2015, they will be denied at least two or more months of nursing home payments. They will be “punished" for saving their children’s home even if Henry and Betty have become broke and incapacitated!

Here is another common occurrence. Sam and Sally Aging can no longer handle all of the affairs to stay living in their home. They need help getting to their many doctor appointments, grocery shopping, errands, meal preparation. Like most families, they don’t call an attorney or write up some formal caregiver employment agreement. They just do what most families do. Every month Sam and Sally try to reimburse Suzie by just giving her $500 cash. Unfortunately, if either Sam or Sally Citizen need to apply for nursing home benefits, the DRA will treat the money given to the daughter as a penalty—creating gift. So when Sam or Sally are out of money and in frail health will be denied months of nursing home Medicaid payments.

• Even the smallest gift will be considered a violation and will evoke a penalty

• No partial return will be good enough to remove or reduce the penalty period

• Even charitable gifts will be in violation of the rules and will result in penalty periods

• Annuities to help turn assets into income for the community spouse to help her continue to pay for her needs in the future are under attack

• If care is provided by family members and any compensation is given without a formal contract, the State will target those payments for care as violations

Throughout history, our culture has lauded senior citizens who help their children, grandchildren, and religious organizations. If the family members sacrifice to provide care for their aging parents and they receive even small compensation without a formal contract, their “good deeds” will not go unpunished.

Suddenly in 2005, the federal government and soon Illinois may punish “good senior citizens” who have helped their children, grandchildren, and religious organizations. During this ongoing recession, Illinois senior citizens have given millions of dollars to provide help and support to the younger generation to pay for medical payments, mortgage payments and grocery bills. Illinois seniors must not be punished for ‘doing the right thing!” And in the alternative, if the children have stepped up to provide care to parents and been compensated with the formality of a contract, the Illinois seniors will be penalized for this as well. Charitable donations, helping grandchildren with college, helping out with wedding costs for a grandchild and even small regular church offerings to their local place of worship will be deemed a violation, tallied and added to a cumulative penalty period.

We need to work with the Department of Healthcare and Family Services and our legislatures to ensure that persons are given the opportunity to provide evidence that a transfer was made for a reason other than to qualify for Medicaid. Such transfers should not affect Medicaid eligibility. At the very least, Illinois should provide some safe havens for generous women and Seniors and provide an exemption for undue hardship, gifts to charities and innocent transfers a Senior made while completely healthy. ■


Diana M. Law is in private practice with Law ElderLaw, of Aurora, Illinois, limiting her practice exclusively to elder law. She can be reached directly at diana@lawelderlaw.com.

She is a recipient of the Illinois State Bar Association Young Lawyer of the Year 2010 and the Kane County Bar Association 2007 Outstanding New Lawyer of the Year. Ms. Law is a member of the ISBA Standing Committee on Women and the Law, the National Academy of Elder Law Attorneys (NAELA), and is the First Vice President of the Board of Managers of the Kane County Bar Association.

Ms. Law lectures frequently on elder law subjects to attorneys, medical professionals, and members of the public.


Current Pre-DRA Policy

DRA Policy

Mrs. Smith

Mrs. Smith is a widow and requires nursing care. She is out of funds and applies for Medicaid help with her nursing care costs. Two years ago she gave her son, who had lost his job, $30,000 for to prevent a foreclosure of his home. With a private nursing rate of $6,000 per month, this transfer results in a potential penalty of five months. The penalty begins with the month of transfer and runs for five months. Since it has been two years since the transfer, the penalty has worked itself down to zero and she can obtain Medicaid eligibility for her nursing care immediately. The penalty is essentially “forgiven.”

Mr. Jones

Mr. Jones has given $500 per month to his church for the past 5 years. He is now in need of nursing care and applies for Medicaid. The Department currently does not review transfers that are less than the monthly private nursing rate. Therefore, these charitable contributions do not affect his eligibility for Medicaid payment of nursing services. He is eligible for Medicaid immediately.

Mrs. Taylor

One year ago, Mrs. Taylor gave $12,000 to her grandson to pursue higher education while she was completely healthy. She is now in need of supportive living care due to a stroke. She still has some funds available to pay privately for several months. When her funds are exhausted, she applies for Medicaid. At a private rate of $4,000 per month, the penalty for the transfer made one year ago has lapsed. Once that her funds are exhausted, she qualifies for Medicaid.

Mrs. Smith

Under the DRA, there will be no “forgiveness” of the penalty period. It will not work itself down to zero over the two years since the transfer occurred. The penalty will begin when Mrs. Smith is in the nursing home and eligible for Medicaid. Since she is out of funds to pay privately, Mrs. Smith will have no means to pay the nursing home during the five-month penalty period.

Mr. Jones

Under the DRA, transfers for less than the private rate and multiple transfers will be cumulated as a single transfer. For Mr. Jones, this will mean that his $500 per month charitable contribution will be cumulated over the past five years for a total transferred amount of $30,000. At a private nursing rate of $6,000 per month, he will have a penalty period for five months. The penalty will not begin until he is in the nursing home and eligible for Medicaid. During this penalty period, Mr. Jones will not have the means to pay privately.

Mrs. Taylor

Under the DRA, the transfer penalty does not begin until Mrs. Taylor is in the supportive living facility and eligible for Medicaid. This means not until her funds are exhausted. As such, the penalty would not begin until she has spent her funds by paying privately for several months. Once she is out of money, she will not have the means to pay through the penalty period.

Login to post comments