By: Michael Jon Shalbrack

Illinois recently adopted rules and regulations in connection with the Deficit Reduction Act of 2005 (DRA), which will directly impact planning for nursing home and long-term care for family members under Medicaid. These new rules, effective as of January 1, 2012, will likely make it more difficult to become eligible for Medicaid benefits while also protecting one’s assets.  An understanding of these rules is necessary to plan for the possibility of a family member moving into a nursing home or long-term care facility.  The following is an overview of some of the changes that are being implemented:

  • Look Back Period. The look back period for the disclosure of non-trust transfers of assets by an applicant has increased from 36 months to 60 months.
  • Spend Down Issues. While the amount of non-exempt assets that an applicant can keep to be eligible for Medicaid has not changed dramatically under the new rules, when the spend down is actually met has changed.
  • Penalty Period. In the event of ineligible transfers of an applicant’s assets, under the new rules the penalty period does not begin until the spend down has been met and the applicant is holding only $2,000 in non-exempt assets.  Previously, the penalty period began on the date of the application and determination of the spend down.  This is a significant change that warrants careful planning.
  • Home Equity Limit. The new rules impose a limit on home equity held by a Medicaid applicant of $750,000.  Prior to January 1, 2012, there was no limit on the amount of equity one could have in a residence to be eligible for Medicaid.  The home equity limit does not apply if the applicant’s spouse or dependent adult child continues to reside there.
  • Institutionalized Spouses and Community Spouses. If a transfer from an institutionalized spouse to the “community spouse” creates a penalty period, adjustments will need to be made between the spouses should the community spouse thereafter apply for Medicaid benefits.
  • Prepaid Burial Accounts. Under the new rules, there is a $10,000 limit on prepaid burial accounts.
  • Backdating Expenses. Medicaid coverage may be backdated for up to three months prior to the month of an application.  The new rules add increased scrutiny to the types of expenses that are eligible for coverage during this three-month backdate period.
  • Refusal of Community Spouse to Disclose or Participate. If the community spouse does not participate or cooperate in the application process, under the new rules the applicant must assign his or her rights of support to the State of Illinois.  Pursuant to Illinois laws requiring the community spouse to pay support for the other spouse, upon this assignment of rights, collection activities could be undertaken by the State against the community spouse for support and medical expenses.
  • Medicaid Qualified Annuities. The new rules provide that the State of Illinois must be named as the remainder beneficiary under a Medicaid Qualified Annuity, after the surviving spouse or an adult disabled child.
  • Hardship Requests. Waivers of penalty periods may be granted to applicants under the new rules, but a higher burden is on the applicant to establish the hardship eligibility. Among the factors considered are special medical conditions, diminished mental capacity, or limited financial ability of the applicant, and whether the applicant’s spouse is living in a certain facility.  A waiver will not be granted for any hardship deemed to be created by the applicant.
  • Return of Assets to Applicant. Under the new rules, the return of assets to the applicant after an ineligible transfer does not eliminate the penalty period.