2009 Changes in Medical Assistance
October 2009
The 2009 Minnesota Legislature made several changes to the Medical Assistance rules and regulations. Some of these took effect August 1, 2009 and others take effect January 1, 2011, and only after the Center for Medicare and Medicaid Services (CMS) has approved the changes.
What has changed?
1. Five-year look-back period. This has not changed. What this means is that, when a person applies for Medical Assistance, he/she is asked whether or not any gifts have been made in the last 5 years. If the answer is “no,” the applicant simply goes to the next question. If the answer is “yes,” the county wants to know when the gifts were made, how much they were worth, who received the gifts, etc. Also, the county imposes a period of ineligibility, depending on the amount of the gifts. This is one of our main Medical Assistance planning tools.
2. Regifting. Another of our main tools in Medical Assistance planning is making transfers, applying for Medical Assistance, and then regifting the assets back. For example, let’s say Axel, a single person, goes into a nursing home. He makes a gift of $100,000 cash to his only child, Bob, and this brings his assets down to $3,000. He then applies for Medical Assistance. The county approves his application for medical services but denies it for long term care services. The reason for the denial is the transfer. The county says he will be ineligible for about 20 months ($100,000 divided by $5,006, the current SAPSNF amount.) Axel has no money with which to pay his nursing home expense. But Bob regifts Axel various amounts over the next several months. Let’s say he regifts $50,000 over the course of 10 months. Bob can contact the county and advise them of his regifting. This will shorten the period of ineligibility from 20 months to about 10 months. Thus, Axel can be eligible for Medical Assistance long term care services in only 10 months.
The legislature passed a bill that affects this planning strategy.
What does the legislation do?
The legislation provides that, in order to reduce or eliminate the period of ineligibility, any amounts regifted must be returned within 12 months and that the total amount must be returned. This would eliminate the regifting strategy described above. However, there are a couple of things to remember:
- The legislation is not effective until January 1, 2011.
- It must be approved by CMS.
This legislation appears to contradict federal law and thus, approval from CMS is not assured.
3. Pooled Trusts. When a disabled person receives government benefits such as SSI or RSDI, and acquires some property, the receipt of which puts them over asset limits for public benefits, they can usually do a Special Needs Trust. This sets aside the assets so they are not counted against the disabled person. There is a payback provision so that Medical Assistance gets paid back when the disabled person dies. The one problem is that persons over age 65 cannot do a Special Needs Trust. In the past, the remedy for this was that such persons could do a Pooled Trust. This is similar to a Special Needs Trust except that assets of numerous disabled persons are “pooled” together. This legislation prohibits Pooled Trusts for people over age 65.
This takes effect January 1, 2011, and needs CMS approval.
4. Month of application. Under current law, one can apply for Medical Assistance on the last day of the month and receive coverage for the whole month. In addition, an applicant can purchase assets and/or pay bills in order to reduce their assets to the required amount. This could include purchasing a prepaid funeral, paying off a credit card, buying an appliance for the house, etc. Under the new law, a person can still apply on the last day of the month, but they can’t reduce assets by purchasing excluded assets or paying non-health care related bills. The only bills they can pay to reduce assets in the month in which the application is submitted is health care related bills.
This takes effect January 1, 2011.
5. Estate Recovery. In the past, the Medical Assistance program had little right to recover funds advanced to a pay for medical care. For example, if a Medical Assistance recipient is married, and the spouse is not living in a long term care facility, the spouse is able to retain some assets. This is known as the Community Spouse Allowance. This can vary between $31,094 and $109,560 (2009 amounts). In the past, once the couple reduced their assets to the community spouse allowance, the assets making up this allowance were the community spouse’s property and were hers to do with as she saw fit. Any assets in her estate at the time of her death could be inherited by her children.
This has changed dramatically in the past few years. First, upon the death of the Medical Assistance recipient, Medical Assistance can recover amounts advanced from his or her assets. However, this will probably be minimal, at best, because the recipient could not have more than $3,000 in assets any way to qualify for the program. Now, Medical Assistance can even recover from the community spouse’s estate, even if the community spouse never received Medical Assistance.
Because of this, where a married person is involved, getting the ill spouse on Medical Assistance is only one part of the puzzle. The other part is finding a way for the assets in the community spouse’s name to pass to the children. The new legislation purports to make any asset transferred by death liable for Medical Assistance recovery. These include:
- Securities and brokerage accounts listed with a TOD beneficiary
- POD accounts, joint accounts, etc.
- Life estates, revocable trusts
The apparent purpose of this legislation is to “undo” the result in In re the Estate of Francis E. Barg, a Minnesota Supreme Court case.
Real estate, because of the extensive public records maintained, is particularly vulnerable to claims and/or liens by Medical Assistance.
Transfers executed during the surviving spouse’s lifetime would stand a better chance of being effective than those effected by reason of the surviving spouse’s death.
This change takes effect July 1, 2009, but must receive CMS approval.
6. Special Needs Trust and Pooled Trusts. For Special Needs Trusts and Pooled Trusts, if an application or renewal form is filed after July 1, 2009, the trustee must submit annual accountings to the commissioner regarding the trust. The filing must include:
- copy of trust instrument
- an inventory of the beneficiary’s trust account and its value
- itemized distributions during the accounting period
- any changes to the trust instrument during the accounting period
We welcome you to contact us to discuss Medical Assistance in more detail.