Thursday, March 31, 2011

New York's 2011 Budget Includes Modest Changes to Long-Term Care Medicaid Rules

In my last post, I described the significant changes that were proposed by Governor Cuomo's "Medicaid Redesign Team" as they pertained to the Community Long-Term Care Medicaid program.  Specifically, the proposals included the elimination of "spousal refusal" and the imposition of transfer penalties for the Community Medicaid program.  Longstanding New York law has permitted the "well" spouse to refuse to contribute their income and assets towards the care of the "ill" spouse.  In addition, a person applying for Community Medicaid is permitted to transfer any amount of assets to children or other family members without having those transfers result in a period of Medicaid ineligibility for the person seeking Community Medicaid benefits.

To the surprise of many elder law attorneys and other senior advocates, the budget bill approved last night by the Legislature did not include either the repeal of spousal refusal or the imposition of transfer penalties for Community Medicaid.  One change that we will see will be the expansion of "estate recovery" against the assets of a deceased Medicaid recipient to include "non probate" transfers including transfers from trusts, retained life estate interests and similar "testamentary substitutes."  Under existing law, estate recoveries are permitted only against probate assets, or those that pass via intestacy.

Saturday, March 5, 2011

Cuomo's Budget Proposal Includes Significant Changes to Community Medicaid

It's no secret New York -- like many states -- is facing a significant budgetary crisis.  Medicaid is one of costliest programs administered by the state, and not surprisingly Gov. Cuomo's proposed budget includes significant cuts to Medicaid spending.

From an elder law perspective, the most dramatic of the proposed Medicaid changes is in the area of Community Medicaid.  Under present law, there are no "transfer penalties" associated with a Community Medicaid application.  That is, a medically-needy person living in the community (e.g., other than in a nursing home) can transfer all their non-exempt assets (e.g, assets excluding the home and a $13,800 resource allowance) to children or other persons and immediately qualify to receive Medicaid services.  The proposed legislation would incorporate a sixty-month "look back" period for non-exempt transfers, the same period that is used for eligibility for the nursing home Medicaid program.  Non-exempt transfers made during the look back period would result in a period of ineligibility for Community Medicaid, the duration of which would be determined by the amount of the non-exempt transfers made during the look back period.

The proposed rules also call for the elimination of "spousal refusal," which currently permits a spouse to refuse to make his or her assets or income available for determining the Medicaid eligibility of the other spouse.  Spousal refusal is used routinely in New York to permit an ill spouse to obtain Medicaid coverage without requiring a spend down of the couples' assets.  Only a handful of other states (the most prominent of which is Florida) permits spousal refusal under any circumstance.  Note that the budgetary proposal does not appear to eliminate spousal refusal for nursing home Medicaid cases.

Since enacting controversial legislation is the ultimate "sausage making" process, the final budget is sure to include significantly different provisions than are found in this initial proposal.  Nonetheless I expect that the final bill will include at least some dramatic changes to the Medicaid program that will affect seniors and their families. I will be sure to keep my readers informed as developments unfold.

Obama's New Estate Tax Proposal

With the ink barely dry on the recent federal estate tax legislation that set the federal estate tax exemption at $5 million per person through December 31, 2012, President Obama's recently proposed budget includes a proposal to return the federal estate tax exemption to its 2009 level of $3.5 million per person effective January 1, 2013.  The President's proposal would also include the current "portability" provision that permits the allocation of any unused estate tax exemption upon a first spouse's death to be "added to" the surviving spouse's exemption upon the death of the surviving spouse.  If approved, the new rules would place some limits on the use of valuation discounts and GRATS that are commonly used in planning for clients with larger estates.

At first glance I think this plan is a good start.  It would allow the vast majority of estates pass without being subject to a federal estate tax, while bringing in some revenue from the wealthiest American families to help reduce the budget deficit. Of course none of that will help unless Congress and the President are able to rein-in the entitlement programs (e.g. Medicaid, Medicare, Social Security).

Click here for more detail about the President's proposal.