New Medicaid Eligibility Rules
Florida responded to the Deficient Reduction Act of 2005 (the “Act”) by changing some its Medicaid eligibility rules. The Act was signed into law on February 8, 2006, and its impact has produced some wide reaching consequences to persons now attempting to qualify for Medicaid. Historically, persons who ordinarily would not qualify for Medicaid were able to do so by careful estate planning in advance of anticipated major medical expenses. However, Florida’s recent changes have made it more difficult for estate planners to qualify a person for Medicaid using typical gifting and asset management techniques. This article highlights some of the new changes to Medicaid eligibility.
One of the major changes to Florida’s Medicaid eligibility has been the calculation and start date for the penalty period. Under the old law, the penalty period before a person could receive Medicaid support began on the date a particular gift was made. The classic case is gifting ones assets away to a person’s children in an effort to get beneath the $2,000.00 Medicaid countable assets. When this was done, the penalty period would begin on the month the gift was made. Under the new law, the starting date for the penalty period is postponed until the later of one of the following events: 1) the date a person would be eligible for Medicaid support; 2) The first day of the month a gifted asset is transferred; or, 3) The first day following the end of an existing penalty period. In a majority of situations the penalty period will start on the date that an individual first applies for Medicaid because that is the time at which a person (in theory) becomes eligible.
The method that is used to calculate the length of the penalty period has also changed. The new method is the cumulative value of all gifts made divided by $5,000.00. The number that is derived by this simple mathematical formula is the number of months of the penalty period. For example, suppose you gift $25,000.00 to your children on November 24, 2008, in an effort to get beneath the qualifying countable assets for Medicaid. The number of penalty months preventing you from taking advantage of the Medicaid support services will be $25,000.00/$5,000 = 5 months. When you apply for Medicaid on March 1, 2009, you will not be able to take advantage of Medicaid’s resources until August 1, 2009, because the start date of your eligibility to receive government benefits is postponed by the five month penalty period.
The new law also eliminates the rounding down to a whole number when calculating the penalty period. The new method of calculating penalty periods includes the remainder from the division formula. The remainder is the number of days of the penalty period beyond the total number of months. For example, suppose you gift $27,000.00 to your children on November 24, 2008. The calculated penalty period becomes 5.4 months. ($27,000.00/$5,000 = 5.4 months). The penalty period is not rounded down to 5 months (as it was under the old law) but instead becomes 5 months, 12 days (.4 multiplied by 30 days = 12 days). Using this new calculation, your application for Medicaid benefits on March 1, 2009, makes your eligibility date for receiving benefits August 12, 2009.
Historically, Florida’s Medicaid rules would not count the value of ones homestead property to determine eligibility. The general assumption was that it was exempt as a countable asset under Florida’s Homestead laws. However, the new rules allow the equity in ones homestead to be considered as a countable asset for eligibility purposes provided that the applicant is not survived by a spouse nor has a person who is your descendent that is either under the age of 21, blind or disabled and permanently resides in the residence.
Florida has presently set the minimum homestead equity value in a person’s homestead at $500,000.00. Thus, if you own Florida real property and it is considered your homestead and its present value is $600,000.00, you will have a $100,000.00 countable asset making you ineligible for Medicaid support provided you have no surviving spouse nor a person who is your descendent that is either under 21, blind or disabled and permanently resides in the residence. If one of those conditions exists, then the homestead equity above $500,000.00 is not considered a countable asset.
Florida has also clarified the types of annuities that are not countable assets for Medicaid eligibility. If you purchased an annuity after November 1, 2007, and it was structured to begin making equal payments immediately to you over your anticipated life expectancy, the purchase of such annuity will generally not be a countable asset. In addition, at your death, the annuity must be structured to make the State of Florida the primary beneficiary of the death benefit unless, at the time of purchase, the purchaser of the annuity is survived by a spouse, minor or disabled child. In such case, at the time of purchasing the annuity, the State of Florida may be named as the contingent or secondary beneficiary. The important message here is that the State of Florida must be named as a beneficiary up to the amount needed to repay the amount of benefits received.
Based on the new Medicaid eligibility rules, if you are considering purchasing an annuity, you should ask your sales representative about an annuity that will begin making scheduled payments immediately and the payments be equally distributed over your actuarial life span.
The last significant change to Florida’s Medicaid eligibility rules is the look back period. Florida historically looked back 3 years for any and all asset transfers for non-trust property and 5 years for trust properties. Under the recent changes, the look back period has been changed to 5 years regardless of where the asset transfer originates. However, it remains unclear whether the new look back period takes effect immediately or in December of 2010.
This article is intended to help you understand the recent changes to Florida’s Medicaid rules. It is also intended to help you understand the difficulty your estate planner is faced with in his or her effort to qualify a person for Medicaid using transfer techniques of your possessions into non-countable Medicaid assets. The message you should take from this article is not to wait till it’s too late to qualify for Medicaid. Qualification takes time and careful planning, so talk to an estate planner who is familiar with Medicaid and can set in motion a plan to preserve your legacy to your family.