Congress Passes Bill Containing Punitive New Medicaid Transfer Rules

By a vote of 216-214, the U.S. House of Representatives has passed budget legislation that will impose punitive new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. The Deficit Reduction Act of 2005 now goes to President Bush for his promised signature.

Several Republican moderates who had supported the bill when it was voted on in December changed their votes after learning details of the legislation and under intense pressure from groups like AARP, but in the end the vote switches were not enough to defeat a bill that the Congressional Budget Office says will reduce or bar benefits for millions of Medicaid recipients. The measure is estimated to save $39 billion over five years.

Rep. Frank LoBiondo (R-NJ) cast the deciding vote, breaking a 214-214 tie. All House Democrats and 13 Republicans voted against the bill. Republicans who voted yes in December but no in the final vote included Reps. Jim Gerlach (PA), Jim Ramstad (MN), Rob Simmons (CT) and John Sweeney (NY). (Click here to see the full vote.)

Democrats attacked the measure as an assault on Medicaid patients and other vulnerable groups, and said it was a prime example of the powerful influence of lobbyists for corporate interests like drug manufacturers and health insurers, who got much of what they wanted in closed-door negotiations with Republican lawmakers.

"This is a product of special interest lobbying and the stench of special interests hangs over the chamber," said Rep. John Dingell (D-MI).

The Impact on the Elderly

The legislation will extend Medicaid's "lookback" period for all asset transfers from three to five years and change the start of the penalty period for transferred assets from the date of transfer to the date when the individual transferring the assets enters a nursing home and would otherwise be eligible for Medicaid coverage. In other words, the penalty period does not begin until the nursing home resident is out of funds, meaning she cannot afford to pay the nursing home.

Because the change in the penalty period start date will likely leave nursing homes on the hook for the care of residents waiting out extended penalty periods, ElderLawAnswers has dubbed the bill 'The Nursing Home Bankruptcy Act of 2005.' Nursing homes will likely be flooded with residents who need care but have no way to pay for it. In states that have so-called "filial responsibility laws," the nursing homes may seek reimbursement from the residents' children.

The bill also will make any individual with home equity above $500,000 ineligible for Medicaid nursing home care, although states may raise this threshold as high as $750,000.

The legislation also:

• Establishes new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.
• Allows Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.
• Sets forth rules under which an individual's CCRC entrance fee is considered an available resource.
• Requires all states to apply the so-called 'income-first' rule to community spouses who appeal for an increased resource allowance based on their need for more funds invested to meet their minimum income requirements.
• Extends long-term care partnership programs to any state.
• Authorizes states to include home and community-based services as an optional Medicaid benefit. (Previously, states had to obtain a waiver to provide such services.)