Qualifying for Medicaid After Making Cash Gifts

By KELLY GREENE
January 27, 2007; Page B2

What are the rules about making gifts and then qualifying for Medicaid help with nursing-home bills?

Last year, my in-laws sold their home and gave my wife and me, and her sister and husband, each a $10,000 gift. My sister-in-law and husband claim this money can't be spent for three years in the event that one of the parents might go into a nursing home. I was under the impression that they could give this gift with no strings attached. Any comment?

-- Jack Zader
New Berlin, Wis.

The family members are free to use the money however they wish. But the parents, if they enter a nursing home, could be left in a bind. That's because the Deficit Reduction Act, enacted last February, significantly tightened the rules for qualifying for Medicaid help with long-term care after making gifts.

First, the basics of applying to Medicaid for help in paying long-term care bills: Individuals typically become eligible for Medicaid after using up all but about $2,000 of their cash and investments. (There are exceptions that vary from state to state, but you generally get to keep your house and car.) One way of reaching that threshold without spending the money is to give it to someone else, often your children.

Some limits on this practice have been in place for years, but the hurdles were fairly low. That changed with the new law, which extended to five years from three years the so-called look-back period, during which Medicaid regulators can consider the role of gifts in deciding whether a patient qualifies for long-term-care help, according to Vincent Russo, a lawyer in Westbury, N.Y., who heads the National Academy of Elder Law Attorneys' Medicaid task force.

In the past, if your in-laws applied for Medicaid assistance for long-term care, a government regulator could examine any gifts made in the past three years and possibly assess a penalty. Now, regulators can look at any gifts made as long as five years before the application, he says.

What sort of penalty do you pay for giving away your assets, then asking for Medicaid help to pay for nursing-home care? The timing on that has changed, too. In the past, the penalty period -- meaning the number of months you would be denied Medicaid assistance because of gifts you made -- started at the time you made the gift. So, for example, under the old rules, if you lived in New York City and a year before applying for Medicaid gave away $27,000, equivalent to three months of long-term care in that area, says Mr. Russo, you would be denied help for three months -- starting at the time you made the gift.

But now, the penalty period starts at the time you apply for Medicaid and are in a nursing home. Using the same example, you could face three months of nursing-home bills with no way to pay for them -- unless the gift recipients bail you out.

So, in answer to the question, no one can force the family members to return the money, but the parents might need those funds.

"If transfers are made, [and if] the in-laws wind up in a nursing home during the five-year look-back period and they don't have any other money to pay the nursing-home bill, one of the options is for the kids to return some of that money that was gifted to them," Mr. Russo says.

One big caveat: States, which partly fund Medicaid, are in various stages of implementing the new law, so you may want to seek a few hours' counsel from a lawyer who specializes in elder care to find out what the current rules are where you live, and how they are expected to change. There are attorney directories at naela.org1 and elderlawanswers.com2.

Medicare: What You Should Know if Turning 65

By KELLY GREENE
January 20, 2007; Page B2

When one turns 65, must that person join Medicare? I am under 65. My spouse turns 65 this year. She is covered under my corporate health plan. Must she join Medicare at 65? What are the pros and cons?

-- William Himmelsbach
East Syracuse, N.Y.

The short answer is no, there's no penalty for delaying Medicare coverage when you're eligible at age 65 -- as long as you're still insured through your own job or your spouse's.

But we have a question for you: Are you entirely certain that your wife's coverage will stay the same when she turns 65? If you haven't done so already, it would be worth checking with your benefits administrator to find out whether Medicare would become her primary or secondary insurance coverage.

Medicare is made up of four parts: Medicare Part A, which covers hospital care; Part B, covering outpatient care including doctor visits; Part D drug coverage; and supplemental policies to pay for bills the other pieces don't cover.

There's no charge for your wife's Medicare Part A if she worked for at least 10 years in Medicare-covered employment, or if you have worked for 10 years in such a job and are at least 62 years old. Generally, you are automatically enrolled in Part A if you are collecting Social Security. But if your wife hasn't started those payments by her 65th birthday, she should sign up separately. (You'll find enrollment information at http://www.socialsecurity.gov1, and a month before she turns 65, she should get a copy of the Medicare handbook, "Medicare & You," in the mail, which explains this further.)

Medicare Part B, which is optional, would be your main concern since it costs at least $93.50 a month. As we noted above, as long as you're still working and your wife is covered under your employer's health insurance, she can delay enrolling in Part B without being penalized.

If you decide to quit your job, your wife would need to sign up for Part B within eight months following the month in which your employer-provided coverage ends or your employment ends, whichever comes first. (There's more information in the "Enrolling in Medicare" publication at http://www.medicare.gov2). If you miss that deadline, you would have to wait for the next "general enrollment period," which runs each year from Jan. 1 through March 31, and pay a penalty for waiting.

What about drug coverage? If you and your wife have it through your job, make sure she gets a letter from your employer saying the coverage is "creditable." She'll need it if she joins a Medicare drug plan at a later date. Otherwise, she would have to pay a penalty for enrolling after age 65.

Finally, there's no need to consider a supplemental Medicare policy, also called "Medigap" coverage, until you have Part B, because such policies are designed to fill in the gaps Part B doesn't cover.