The rules for Medicaid qualification have changed to make it more difficult to receive medical welfare benefits after giving away large assets or significant sums of money. In brief, the application "looks back" sixty months for "transfers" prior to the date of application. The period of disqualification from medical welfare begins from the date one would otherwise qualify, not the date of transfer as under prior law.

The public policy of this Country is clear: one must pay for one’s own care to the extent of one’s own assets before expecting others to do so through tax levies supporting medical welfare. This makes perfect sense. If a neighbor approached, asking us for donations to pay for his long-term nursing home care so that he could be free to give his money to his children, we would all look askance.

Yet many of this author’s clients expect just that when demanding that "the government" pay for care so that they have the "freedom to transfer their assets" to their children. Yet "the government" only gets money from us, the citizens. So demanding that "the government" pay for our care after transfers is really a demand that we all pay for the care of some, so that they can keep their wealth in their family.

Of course, that is not the real issue. The real issue is that folks feel that the high cost and long duration of care are unfair, and that they should not be expected to sacrifice their hard-earned assets "to the nursing home." Until a better answer than high-cost nursing home care is found, however, it seems more than just to expect those who can afford to pay to do so before dipping into the pockets of the rest of us for the cost of care through government exactions to pay for medical welfare.

Medicaid qualification requires clearing three hurdles: medical, income and asset. An applicant is medically qualified if he or she needs skilled nursing care every day. This eliminates many who need regular custodial care but only sporadic skilled nursing care. An applicant is income qualified if his or her income is less than the cost of care. This is a fairly routine inquiry for unmarried applicants, but can be more difficult for married applicants or applicants supporting a disabled child.

An applicant is asset qualified if his or her non-exempt assets do not exceed the threshold. For an unmarried applicant, that threshold is $2,000. For a married applicant, the spouse can keep the family home and other assets, and a certain amount of cash. These assets and amounts have changed, and will be discussed in a future article.

In the last article we discussed a hypothetical Medicaid applicant who transferred her $500,000 home to a child before applying for Medicaid. If that transfer fell within the sixty-month "look-back" period, the parent would be disqualified from Medicaid for a period of 117 months ($500,000 divided by the imputed cost of care, $4,300, rounded up), or nearly ten years. However, the disqualification period does not begin to run until the applicant is otherwise qualified.

Suppose the applicant was determined to need only custodial care, as is often the case with an applicant suffering from dementia. She would not medically qualify until she needed skilled care. If she did not need skilled care until a year had elapsed, the period of disqualification for the transfer would not start until a year after application. Because the prior application had "caught" the transfer, though, it would still be in the records, even if the transfer were made more than sixty months before the actual date of qualification.

There are obvious solutions to this dilemma, the most straightforward of which would be not to give away assets of significant value. Another would be to purchase sixty-month or lifetime-coverage long-term care insurance, which would free one to give away other assets. Another would be to defer application until sixty months had elapsed since the transfer, requiring the retention of the cost of sixty months of care, in this geographic area between $300,000 and $500,000.

All of these strategies have their benefits and pitfalls. You should consult with qualified counsel to determine which might work for you.

The Deficit Reduction Act has been dubbed by some the "nursing home bankruptcy bill." This assertion presumes that those disqualified due to transfers would already require skilled nursing care, presumably already in a nursing home. They would also by definition be destitute as a condition of qualification for medical welfare, with income insufficient to pay the cost of care. This dire result might occur, but this author thinks that there will be a different outcome.

The Maryland Code provides, in section 13-102 of the Family Law Article, that an adult child cannot refuse to provide a destitute parent with "food, shelter, care and clothing." This provision can be enforced by the State’s Attorney in Court. The provision of "food, shelter, care and clothing" can occur in a nursing home.

This author believes that this will be one of the nursing home funding mechanisms that alleviates the current crisis. Surely it is not unethical or immoral at least to require that the child who received the asset from the parent support the parent with the value of that asset. It is certain that Courts will follow this logic and compel payment.

Review your financial plan and be sure that you are not inadvertently caught by this change in the law. Consult with your professional advisor.