| BRAINTREE- Today’s seniors are living longer
and the baby-boom generation is just beginning
to retire. According to a new U.S. Census Bureau
report, commissioned by the National Institute
on Aging (NIA), entitled 65+ in the United
States: 2005, the United States population aged
65 and over is expected to double in size within
the next 25 years. By 2030, almost 1 out of
every 5 Americans, over 70 million people, will
be 65 or older.
Federal Medicaid grants to states, which
primarily pay for the long-term care needs of
senior recipients, have skyrocketed and are now
the fifth largest federal budget item – weighing
in after Social Security, defense, federal debt,
and Medicare.
Millions of seniors have long assumed that
the Medicaid program (enacted in 1965 to provide
health care services to low-income children
deprived of parental support, their caretaker
relatives, the elderly, the blind, and
individuals with disabilities) would eventually
cover the cost of their long-term care needs.
However, few are aware that The Deficit
Reduction Act (DRA) of 2005, which was signed
into law on February 8, 2006, dramatically
changed the eligibility requirements for
Medicaid. This bill places new restrictions on
the ability of seniors to transfer assets before
qualifying for Medicaid coverage for nursing
home care, making it more difficult to qualify
for Medicaid benefits.
Medicaid imposes a period of ineligibility
for nursing home benefits on individuals who
transfer assets for less than fair market value.
Prior to February 8, 2006, the penalty (or
ineligibility) period was based on the value of
any assets transferred during the three years
prior to application for Medicaid benefits,
commonly referred to as the “look-back period”,
and the penalty period started on the date the
assets were transferred. Those rules had
relatively little effect since any penalty
period usually had expired by the time an
individual applied for Medicaid.
Under the provisions of the DRA, the penalty
period for transferred assets now starts when an
individual who transferred the assets becomes
medically eligible for Medicaid. In addition,
the “look-back” period has been extended from
three years to five years. In effect, seniors
who had divested themselves of their assets in
order to qualify for Medicaid may find
themselves ineligible during a period of time
when they need funds to pay for a nursing home,
by virtue of the new start date for the penalty
period.
Buying long term care insurance may become
part of a Medicaid planning strategy, providing
enough coverage to cover the five-year look-back
period and any penalties that may have been
incurred. This long-term care coverage could
provide coverage during the gap penalty period,
allowing a senior to then apply for Medicaid to
pay nursing home costs.
A reverse mortgage can serve as a valuable
and important resource in this situation,
providing funding for long-term care insurance
premiums, making them more easily affordable. By
tapping in to home equity through a reverse
mortgage, the burden of purchasing long-term
care insurance can be alleviated, providing a
source of liquidity that may otherwise not be
available.
Consultation with an elder law attorney is
recommended to assess your status and determine
the best strategy for your individual situation.
ABOUT THE AUTHOR: George Downey is the
Founder of Harbor Mortgage Solutions, Inc. in
Braintree, MA, which specializes in conventional
residential and reverse mortgages for senior
homeowners. Mr. Downey can be contacted by email
at GDowney@HarborMortgage.com; by phone (781)
843-5553 or (800) 599-8700; or by visiting
www.HarborMortgage.com. |
