Updated DRA Rulemaking Chart

Subject

Current Rule

Proposed (DRA) Rule

Required by DRA?

Eligibility – Current assets

$2,000 for single person; $3,000 for couple

Same

Not changed by DRA. The figures are taken from SSI eligibility standards, which have been adopted by most states including IL to determine Medicaid eligibility.

Eligibility limit – Home equity

Not specified

$750,000, adjusted annually for inflation

Yes. DRA sets $500,000 limit, but states may raise it up to $750,000; figures must be adjusted annually based on Consumer Price Index

(42 USC 1396p (f)(1))

Transfer of homestead property

Allowed to spouse, minor child, adult child who is blind or disabled, sibling who lived in home at least 1 year, or child who lived in home and served as person's caretaker at least 2 years prior to his/her

institutionalization

Same, but more documentation is required for transfer to a caretaker child (see below)

Not changed by DRA. These provisions were already in federal law before DRA (42 USC 1396p (c)(2)(A)). The State determines whether a caretaker child qualifies for this exemption.

Exempt assets

Include: homestead property, personal items and household goods; property or equipment needed for income or self-support (up to $6,000 total equity value); one vehicle for each spouse (if needed for transportation or employment); prepaid funeral/burial funds (see below).

Same, with additional definition of "homestead property". Non-homestead property for sale remains exempt for 6 months, subject to extension, while good faith efforts to sell continue. Higher, annually adjusted limit for prepaid funeral contracts (see below). Income producing farmland property and personal property used to farm the land (e.g. vehicles, equipment) is also exempt.

Not changed by DRA. Rules are generally based on SSI eligibility criteria. Federal law allows states to include other exemptions for Medicaid purposes

(42 USC 1396a (r)(2)(A)). 

Look back period

3 years for most transfers; 5 years for transfers to certain trusts

5 years for all transfers

Yes. DRA requires a 60-month (5-year) look back for "any other disposal of assets (other than to trusts already subject to 5-year look back) made on or after the date of enactment of the Deficit Reduction Act of 2005" (2/8/06).

[42 USC 1396p (c) (1)(B)(i)]

3-month backdated eligibility

Granted as of "the first day of any month, prior to the month of application, in which the client meets non-financial eligibility requirements" (Section 120.60(a)(2).

Granted if applicant meets both financial and non-financial eligibility criteria during each of the 3 months prior to application. Assets above the eligibility limit do not count against the applicant if they are spent on approved medical expenses (spenddown), prepaid funeral arrangements, or legal fees up to $10,000.

Not addressed by DRA.

Allowable transfers

May be made to community spouse, minor child, blind/disabled adult child, or to a trust for the sole benefit of a spouse or special needs adult child

Same, but more documentation of the transfer is required; if less than FMV is received for an asset, evidence of "good faith efforts" to obtain FMV is required

Not changed by DRA. Existing federal law  includes these provisions and states that a transfer cannot be penalized if "the individual intended to dispose of the assets for fair market value".

(42 USC 1396p(c)(2)(B) and (C))

Penalty period for disallowed transfer

Amount of time applicant could have paid for own care with assets that were transferred; calculated by dividing amount of transfer by monthly cost of care

Same

Not changed by DRA. Is in existing federal law (42 USC 1396p(c)(1)(E)(i)).

Inception of penalty period

Begins when disallowed transfer was made; most penalty periods expire before person applies for assistance

Begins when applicant is institutionalized and has been otherwise approved for Medicaid. At least 10 days notice must be given of an impending penalty period and the person must be advised of their right to appeal or seek a hardship waiver.

Yes. Penalty begins with the later of 1) the date of the transfer or 2) the date when the person is receiving institutional-level care and would otherwise qualify for Medicaid (42 USC 1396p (c)(1)(D)(ii)).

Calculation of penalty period

May be rounded down to nearest whole month

Must be calculated to fraction of a day

Yes. "A State shall not round down or otherwise disregard any fractional period of ineligibility determined…with respect to the disposal of assets" [42 USC 1396p(c)

(1)(E)(iv)].

Aggregation of penalty periods

None – each transfer incurs a separate penalty period

Yes – all penalties must be aggregated into one penalty period

No. DRA states that "In the case of an individual (or individual's spouse) who makes multiple fractional transfers of assets…a State may determine the period of ineligibility" by adding all transfers and treating them as one (42 USC 1396p (c)(1)(H)). CMMS guidance issued on 7/27/06 stated that either aggregation or separate determination is allowed, but the timing of the penalty period is not affected. 

Partial asset return

Penalty period reduced for partial asset return

Penalty period reduced only if 1) assets were transferred prior to 1/1/12 or 2) if assets are returned before penalty period starts

Not changed by DRA. Existing federal law states that a penalty cannot be imposed if "all assets transferred… have been returned to the individual" (42 USC 1396p (c)(2)

(C)(iii)). The CMMS

State Medicaid Manual (3258.1 0(C)(3)) allows states to reduce penalties for partial returns.  A CMMS guidance letter issued 10/28/10 says this SMM provision is outdated, and that either partial return or full- return-only policies are permissible.

Transfers/gifts for less than FMV (general)

Allowed for reasons other than Medicaid planning (attempting to qualify for assistance); any transfer for less than FMV is presumed to be Medicaid planning unless a satisfactory showing otherwise is made

Same, but convincing evidence is now required to rebut presumption of Medicaid planning. Gives examples of acceptable and unacceptable evidence.

Not changed by DRA. Existing federal law states that a transfer will not be penalized if "a satisfactory showing is made to the State" that the transfer was made "exclusively for a purpose other than to qualify for medical assistance"

(42 USC 1396p (c)(2)(C)).

Gifts to family, church or charity

Not addressed separately from transfers in general

"Incidental" gifts to family are not considered Medicaid planning; for charitable gifts, a documented, consistent pattern of giving may serve as evidence of no Medicaid planning intent

Not addressed by DRA or in federal law apart from transfers in general.  Determination of whether or not transfers are made "exclusively for a purpose other than to qualify for medical assistance" is left to the State.

Annuities

Purchase of an annuity during the look back period is permitted if annuity pays out in approximately equal periodic payments over a term that is "actuarially sound" (based upon the estimated life expectancy of the beneficiary)

Allowed if the annuity is irrevocable, non-assignable, actuarially sound and paid out in equal installments, or if purchased with certain retirement funds. Ownership or purchase of any annuity must be disclosed and the State named the remainder beneficiary up to the amount the State paid toward the person's care

Annuities are not counted as assets if they are irrevocable, non-assignable, actuarially sound and paid in equal installments or if purchased with specified retirement funds (42 USC 1396p (c)(1)(F) and (G))

Disclosure of all annuities is also required. DRA appears to subject both compliant and non-compliant annuities to the remainder beneficiary provision, but this interpretation has been disputed.    

Loans, mortgages or promissory notes

Not addressed

Must be in writing with an actuarially sound repayment term, equal payments, and not cancellable upon the death of the lender. A history of consistent repayments by the borrower is required. Any balance remaining at the death of the lender must be assigned to the State (up to the amount paid for the person's care) in the same manner as for annuities.

Yes, except that no requirements are placed upon the borrower and there is no requirement for the State to receive a remainder upon the lender's death.

(42 USC 1396p(c)(1)(I)).

Personal care contracts with relatives or friends receiving payment in return for care

Not addressed

Services, care or accommodations provided by a friend or relative are presumed to be gratuitous and without expectation of compensation; proof of a written agreement predating delivery of care, records of services rendered, or other documentation is required to rebut this presumption

Not addressed by DRA or elsewhere in federal law. Courts in other states have ruled that such contracts are allowable and do not constitute a transfer of assets. (Reed vs. Missouri Dept. of Social Services; Thomas vs. Florida Dept. of Children and Families)

Entrance fees to continuing care retirement communities

Not addressed

Treated as available asset if the resident can access the money to pay for care, if the fee is refundable upon death or departure from the community, or if the fee does not confer an ownership interest

Yes (42 USC 1396p(g))

Life estates (applicant purchases right to live in family member's home)

Not addressed

Allowed if the purchaser lives in the home for at least 12 consecutive months after purchase

DRA states that life estate purchases count as asset transfers "unless the purchaser resides in the home for a period of at least 1 year after the date of the purchase"

(42 USC 1396p (c)(1)(J)).

Spousal refusal to disclose assets

Not addressed

Will not affect eligibility if the institutionalized spouse assigns to the State his/her right to support from the community spouse; if the State claims those rights for a person incapable of making the assignment; or if undue hardship would result

Not changed by DRA. Existing federal law contains assignment of support rights and undue hardship provisions identical to those included in this rulemaking.

(42 USC 1396r-5 (c)(3)).

Transfer of homestead to caretaker child

Allowed if child lived in home for at least 2 years prior to parent's institutionalization and provided care that delayed entry into a nursing home

Same, but proof of child's residency, the parent's need for institutional level care (e.g., a diagnosis of Alzheimer's), and affidavit of child that he/she provided care is now required

Not changed by DRA (see above)

Undue hardship definition

Includes but is not limited to: applicant unable to explain how assets were transferred; denial of assistance would force nursing home resident to move; applicant prevented from living with spouse or near family

Exists when a penalty would deprive an institutionalized person of medical care, food, clothing, shelter, or other necessities of life

DRA states that undue hardship exists when application of an asset transfer penalty "would deprive the individual of medical care such that the individual's health or life would be endangered; or of food, clothing, shelter, or other necessities of life" (42 USC 1396p(c)(2)(D))

Hardship waivers

Granted if it is determined that application of a penalty will cause undue hardship

Applicant has burden of proving that actual, not just potential, hardship exists; evidence of fraud or elder abuse, being forced to move, or being separated from a spouse may constitute evidence of undue hardship. For disallowed transfers made prior to 11/1/11, waivers will be granted if the applicant attests to reliance on old asset transfer rules and that the penalty would cause undue hardship

DRA requires states to provide a hardship waiver process with means to appeal adverse decisions, but does not specify details of the process

(42 USC 1396p (c)(2)(D)).

Asset protection under LTC Partnership insurance policy

Yes, if policy meets DOI rules at 50 IAC 2018 (since repealed)

Yes, if policy meets DOI rules at 50 IAC 2012

DRA sets criteria for LTC Partnership plans that include conformity to NAIC model regulations (42 USC 1396p(b)(1)(C)).  

Prepaid funeral/burial contracts

$1,500 exempt for burial of applicant or spouse; amount reduced by life insurance; irrevocable set-aside for funeral services and burial arrangement up to $4,000 and increased by 3% annually.

Exemption increased to $10,000 (adjustable for inflation). Applies to contracts made directly with funeral homes and to those financed by insurance, trusts or other pre-need arrangements.

Not changed by DRA. Exclusion in old rule was the same as allowed for SSI.