Persons faced with the possibility of a nursing home stay in the near future have in the past transferred a certain amount per month out of their name. That was a legal possibility under the old law. It is not under the new law.
Under the old law, the state set a monthly "divisor" amount. This is based upon the average cost of one month in a nursing home and is currently about six thousand dollars ($6000). Thus, for every $6000 a person transferred out of their name, the state would impose a one month penalty. During that penalty period the person could not get Medicaid. In Michigan, all fractions were dropped. That meant that if anything less than 1 was transferred, there would be no penalty at all. For example, if a person transferred $5400, that is .9 of the $6000 divisor. Since the Michigan law said that all fractions should be dropped, there was no penalty. If the person transferred $11,400, or $6000 x 1.9, the fraction would be rounded off to 1, and there would be only a one month penalty.
Penalties under the old law started in the month the transfers were made. Thus, anyone could make monthly transfers during the look-back period and that penalty could have expired by the time of the nursing home stay. In addition, a person in the nursing home could make fractional transfers with no penalty at all.
Under the new "Deficit Reduction Act" law, none of this is possible. The new regulations, set to go into effect in Michigan on July 1st, 2007, say that no fractions can be dropped. Every gift or transfer made during the look-back period will be added up. There is no maximum limit on the penalty period. Fractional amounts will be calculated into a daily penalty. The penalty will start at the time the person enters the nursing home.
I have found that many persons think they can still give a certain amount away per month and not create a problem with Medicaid. Much of this is caused by confusion with the gift tax law, which allows twelve thousand dollars ($12,000) to be given to a person per year without gift tax consequences. This is an estate planning law, not a Medicaid law, and such persons need to know that this could cause ineligibility for Medicaid. Furthermore, many persons are not aware that the Medicaid laws have changed and may still be "gifting" as permitted under the old law.
Anyone who has made gifts after the date President Bush signed the new "Deficit Reduction Act" (February 8th, 2006) may have created a problem for themselves, their loved ones, or the nursing facilities that serve them (because such facilities may be stuck with a non-paying client). At Heritage we are trained in the new law and can help correct these problems and advise such persons when needed. We remain available to assist the elderly and those who care for them.