Illinois Elder Law Attorneys Negotiate Better DRA Rules

Illinois officials have reached a compromise on rules for implementing the asset-transfer provisions of the Deficit Reduction Act of 2005 (DRA).  The agreement, which elder law attorneys in the state played a key role in negotiating, removes some of the harshest provisions that were proposed by the state's Department of Healthcare and Family Services (HFS) and were rejected by a legislative committee earlier this year.  

While the resulting compromise still includes provisions elder law attorneys are not happy with, the agreement is “something that’s livable for seniors,” according to Aurora, Illinois, ElderLawAnswers member attorney Diana Law, as quoted by GateHouse News Service.

On May 10, 2011, the state legislature's Joint Committee on Administrative Rules (JCAR) unanimously placed a prohibition on DRA-compliant transfer rules that would have applied retroactively three years from November 1, 2011.  The rules also did not give credit to a Medicaid applicant for partial return of assets, included a rebuttable presumption that every annuity has a market value, and set the home equity limit at $500,000, among other controversial provisions.

Under the compromise agreement, which takes effect January 1, 2012, Medicaid applicants who made transfers prior to November 1, 2011, will be covered under the former rules by a generous hardship waiver allowing them to sign affidavits stating they relied on the old rules for transfers.  Those making transfers after November 1 will have to clear a much higher hardship bar. 

In addition, Diana Law and Chicago-based ElderLawAnswers member attorney Janna Dutton told ElderLawAnswers that:

• Partial returns are not allowed for transfers that occur after January 2012, and after a penalty period is determined by the DHS.  Partial returns are allowed if made prior to a determination of a penalty period or that occur prior to January 1, 2012. Comments Law: "Since it took Illinois so long to implement the rule, they had time to not only review other state’s rules but how 'clever Medicaid planners' (as they referred to us on several occasions) got around new rules.  They were adamant that Illinois would not allow for 'reverse half a loaf' planning. If the applicant can prove that the transfer was made for reasons other than to qualify for Medicaid, they will have the opportunity to apply for an undue hardship waiver, but we will have to see how that all plays out practically speaking under the new rules.";

• The home equity limit has been raised to $750,000;

• The rebuttable presumption that every annuity has a market value has been removed;

• Punitive criteria not included in the DRA regarding when homestead property can be transferred to a caretaker child has been modified and now does not exceed DRA requirements;

• Penalty periods may commence for individuals receiving Medicaid care in the community provided that they need a long-term care level of care at the time of the transfer.  Recipients must be receiving community care services through the Department on Aging or in-home care (also known as community care program) services.

Law says that she and Chicago elder law attorney Kerry R. Peck launched the "Task Force for Senior Fairness" in May 2010 after learning that new rules would be coming to Illinois under DHS’s new director, Julie Hamos.  

"As a Task Force, we have put in hundreds of hours writing comments, proposing language and lobbying to the legislators on JCAR," Law told ElderLawAnswers. "Our motto the entire way was, 'Give us DRA, not DRA PLUS'."

In late September, task force members sat down with JCAR staff and Hamos to try to negotiate some of the controversial provisions. 

As Dutton related to ElderLawAnswers, "Because of the persistence of the elder law bar in communicating its concerns to the members of the JCAR, it directed the Department to negotiate with the bar or face a continuing prohibition of its proposed rules.  In the end and actually only a couple of days before the Commission was scheduled to vote again on the prohibition of the rules, the Department and the elder law bar were able to agree on language considered fair by the elder law bar."

To see a document reflecting the changes to the existing rules as of October 6, 2011, click here.  Our thanks to East Alton, Illinois, ElderLawAnswers member Leonard Berg for sharing the draft rules with us; Mr. Berg emphasizes that the final version of the rules has not yet been made available.