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Proposed Medicaid transfer limits unfair to elderly, council says
Proposed restrictions on asset transfers, designed to make Medicaid eligibility harder to get for nursing home residents, are unduly harsh, some ISBA lawyers say.
LawPulse reported in the February 2007 issue of the IBJ that the Illinois Department of Healthcare and Family Services (DHFS) was preparing proposed rules to implement the federal Deficit Reduction Act of 2005, PL 109-171 (DRA 2005) 42 USC 1305 et seq. Signed into law on February 8, 2006, that statute dramatically alters the eligibility rules for Medicaid applicants and requires states to adopt regulations implementing its provisions.
Illinois, one of the last two states that has not yet adopted new Medicaid regulations pursuant to DRA 2005, has now issued proposed regulations implementing the federal law.
Big new burden, no new savings
Lawyers helping their elderly and disabled clients plan for nursing home care have been particularly concerned about DRA 2005's changes and the pending rules. As a result of that concern, ISBA's Elder Law Section Council's DRA Task Force assisted in preparing the ISBA Position Paper on DRA Medicaid Transfer Rules for Illinois. The section council adopted the paper at its meeting on September 10, 2010.
Three days later, the council's immediate past chair, Freeport lawyer Heather McPherson, presented the paper as testimony to DHFS at a public hearing in Chicago on the proposed rules. The Elder Law Section newsletter for October 2010 has reprinted the position paper as "The
ISBA voices strong objections to Illinois' implementation of the Deficit Reduction Act of 2005."
Medicaid applicants who are entering nursing homes must disclose any assets given away or sold for less than fair market value within a certain period before their applications, commonly known as the "lookback period." Transfers over the allowable limit during the lookback period result in the applicant's disqualification from Medicaid eligibility for the period that the applicant could have paid for his or her nursing home expenses with the assets transferred.
Before DRA 2005, the lookback period was 36 months. Section 6011 of DRA 2005, which amends 42 USC section 1396p(c)(1), increased this period to 60 months. Additionally, before the effective date of DRA 2005, the lookback period began to run on the date of the disqualifying transfer. Under DRA 2005, the period starts to run only once the applicant is otherwise eligible for Medicaid long-term care coverage.
The position paper states that there are no independent studies demonstrating that Illinois's current rules are inadequate to protect the integrity of the state's Medicaid program. It also contends that the new proposed rules will result in a significant additional administrative burden but no significant budget savings for Illinois's Medicaid program. It identifies seven areas that it maintains require attention to ensure a clear and fair policy in the new rules toward the elderly, people with disabilities, and nursing facilities.
Proposed state restrictions more onerous than federal
First, the position paper argues that the new requirements should apply only to transactions entered into after the enactment of final rules and sufficient notice, such as warnings accompanying the sale of annuities, to the public. It contends that Illinois's existing transfer restrictions should apply to earlier transactions, since, under the federal law, states have discretion in this area.
Second, contrary to DHFS's draft proposal, the paper argues that Illinois should maintain its policy giving Medicaid applicants credit for partial returns of disqualifying transfers.
Third, the paper argues against DHFS's proposed rules that would treat income from a single premium immediate annuity, authorized by federal law and CMS guidelines, as an available asset.
Fourth, the position paper notes that DHFS's proposed rules would disallow a community spouse's right to refuse to disclose his or her assets to DHFS. The paper argues that those rules would encourage divorce, since, if they are adopted, community spouses would have no choice but to divorce their institutionalized spouses to avoid becoming indi- gent themselves.
Fifth, the paper argues that assets owned by the applicant should be verified as of the date of decision, so that applicants might make allowable expenditures such as repairing or improving their marital residence, paying down preexisting debt, hospital stays, medical equipment, prepaid funerals, and legal fees.
Sixth, the paper urges that the rules specifically define nonallowable transfers and avoid unreasonably penalizing Medicaid applicants for commonly made gifts.
Finally, the paper argues that Illinois should not impose additional hardships on the elderly and disabled by mandating more onerous restrictions than those required by federal law. Noting that federal law mandates waivers in cases of undue hardship, the paper says, "The proposed rule contains restrictions on Special Needs Trusts, has inserted hyper-technical requirements which will discourage family members by penalizing good faith compensation for care arrangements, and attempts to re-write well-established law by treating real estate as annuities."
DRA 2005 mandates none of those requirements, the paper says. For DHFS to do so would, it continues, create hardship and generate fruitless and expensive litigation.
DHFS published its proposed regulations in the August 13, 2010, issue of the Illinois Register at p. 11655, available at http://ilsos.net/departments/index/register/register_volume34_issue33.pdf.