| The new Health Care Portability and
Accountability Act of 1996 that Congress passed (and the President
signed last week) had a hidden surprise. They threw in a provision that
fundamentally changes the nature of Medicaid planning.
Let me start at the beginning: Medicaid is a welfare program designed
for low-income and low-asset families. A large part of Medicaid’s
budget pays for nursing home care for the elderly. Generally to qualify
for Medicaid, an individual’s countable assets cannot be greater than
$2000 (or for a couple, $3000). However, the law has for years included
several ways for a person to adjust his or her assets to qualify. One of
those methods was to transfer (that is, give away) all or part of your
assets.
Giving away assets has always been risky business. Many people
wrongly believe that they can simply give away their savings and
immediately qualify for Medicaid. That was never the case. Instead, the
law has for years imposed a disqualification period if assets were given
away. The basic premise was “if you could have kept the money and paid
for the nursing home, Medicaid won’t pay after you’ve given the
money away.” Those rules still apply.
The new law, however, seriously intensifies the rules. As of January
1, 1997 (only 5 short months away) it will be a FELONY to give away
assets with the intention of qualifying for Medicaid.
I stress that FELONY means “crime," and “crime” means
potential prosecution, jail time or monetary fines. Anyone who casually
gives away assets to qualify for Medicaid will now be playing a very
dangerous game. The popular misconception that you can easily qualify
for Medicaid even though you have substantial assets must change. You
are now at risk of criminal penalty if you transfer assets.
That strong warning given, I must get technical. Although the new
criminal statute is quite specific, it may not be possible to enforce
the law with precision. It says that a person commits a crime if he “knowingly
and willfully disposes of assets (including by any transfer in trust) in
order for an individual to become eligible for medical assistance under
a State plan under title XIX, if disposing of the assets results in the
imposition of a period of ineligibility for such assistance under
Section 1917(c)”. The statutory references are to the Social Security
Act, part of the United States Code.
To be guilty, you must “knowingly and willfully” dispose of
assets. The purpose of the disposal must be “to become eligible” for
Medicaid. Any other viable reason for disposing of the asset removes it
from the criminal sanction. Finally, there will be criminal sanctions
only “if disposing of the assets results in the imposition of a period
of ineligibility”.
A period of ineligibility is very hard to predict. Under current
rules, a person could make a gift but then wait 36 months before
applying for Medicaid. There would then be no “period of ineligibility”
imposed, and no criminal violation. But the 36 month rule COULD CHANGE
without much warning. The best laid plan can be undercut if Congress
adjusts the penalty period, possibly converting your harmless plan into
a criminal act.
The best advice I can give now is to be very careful. There should be
no more “casual” Medicaid planning done. Don’t listen to the
scuttlebutt or rumors about the rules. If you get bad information, you
could face criminal prosecution. Always consult with a qualified
attorney before you manipulate assets in conjunction with Medicaid
planning.
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NOTE: Congress repealed this provision after about 7 months of
protest from Seniors and from the Press. Read
an article on its repeal. |
