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Summary of 2006 Federal Medicaid Law

Brian E. Barreira

Included in the 2006 federal budget was a harsh new Medicaid law, which took effect on February 8, 2006, the day President Bush signed the new budget. (Medicaid is known as MassHealth in Massachusetts.)

How are gifts affected by the 2006 law?
Any gift made on or after February 8, 2006 will be negatively affected. (A sale that is made below the fair market value of the asset would continue to be considered a gift. Paying any expense for someone else, such as helping a grandchild with college expenses, may also be considered a gift.)

What are the changes under the 2006 Medicaid law?
Under the 2006 law, you may be disqualified from receiving Medicaid for 5 years no matter how much you gave away.

How will long-term care insurance be affected?
Currently, Massachusetts law provides that certain long-term care insurance policies automatically preserve a person’s home from lien or forced sale. It appears likely that the current Massachusetts law will be changed. The 2006 federal law appears to encourage state plans known as long term care partnership plans, and the federal law does not appear to grandfather the current Massachusetts law.

How will valuable homes be affected?
One of the requirements in the 2006 federal law is that equity in a home above $500,000 must be spent (by reverse mortgage or home equity loan) before government assistance can be obtained from Medicaid to pay for nursing home care. States have the option of raising the $500,000 figure to as high as $750,000. Massachusetts did so, and the $750,000 figure will be indexed for inflation, but not until 2011.

How will annuities be affected?
The 2006 federal Medicaid law requires that the primary beneficiary on an annuity be the state. If the state has any legitimate claim for reimbursement for Medicaid expenses, the state will then enforce its claim against the annuity to the extent of the state’s claim. If the state’s claim ends up being less than the value of the annuity, then the secondary beneficiaries will be entitled to receive the rest of the annuity.

How will the 2006 law affect nursing home care?
This law won’t just harm the middle class elderly. It will probably also devastate the nursing home industry. Many people enter nursing homes for rehabilitation under Medicare, and by the time they apply for MassHealth (Medicaid) and learn that their prior gifts disqualified them from the program, they will have a large debt to the nursing home that they will be unable to pay. Nursing homes may require potential residents to apply for Medicaid (MassHealth) and receive approval before entering the nursing home.

Contact Brian E. Barreira today

Call the office of Brian E. Barreira at 508-747-8282 to schedule an appointment today. He has offices conveniently located in Plymouth and Hingham, Massachusetts, so he is always easy to reach.