The Medicaid Spenddown in Minnesota: How is it Different under DRA 2005?
Medicaid rules are complex and confusing and lots of misinformation exists because people aren't aware of the extent of the rule changes following 2005. The following is an explanation prepared in 2007 explaining the changes.
A. Prior to DRA 2005
Mildred lives in a apartment in Duluth. She transferred $ 25,000 on February 7, 2006 to her daughter, who does not live with her. Her remaining assets are within the asset limits allowed for a single person (currently $3,000, countable assets include cash, bank accounts, non-homestead real property, real property agreements including contract-for-deeds, life estate interests, stocks, bonds, and other liquid assets), a $1500 burial fund and an prepaid burial trust that cost $5000. She applies for Medicaid Home Care (known as MA or Medical assistance in Minnesota) in March 2006. She is fully eligible for MA, because there is no transfer penalty for Medicaid in the community. She receives home care for the next two years. In two years, she has a stroke, and can no longer manage the stairs to her apartment. In February 2008, she goes to a nursing home and applies for Medicaid. Medicaid “looks back" three years to see what, if any assets she transferred during that time. The $25,000 she transferred in February 2006 is revealed in that look-back. This is not a problem because the transfer occurred before the new law was enacted. The penalty period began in March 2006, a month after she made the $25,000 transfer. The penalty was just under three months, (monthly income limit of $9,576 in 2006) so when she was admitted to the nursing home in February 2008, the transfer penalty had long ago expired, and she is fully eligible for Medicaid to pay for her nursing home care.
B. Transfer of Assets Post DRA 2005
The new law does not change the current rules for community based care. Assuming the same set of facts, but that Mildred makes the transfer February 8, 2006, she is still eligible for Medicaid home care in March 2006. However, because her transfer was made on or after February 8, 2006, the date the law was enacted, it falls under the new rules. Now, when she enters a nursing home and applies for Medicaid in February 2008, the Medicaid agency will look back and see this transfer that was made two years before, in February 2006. The three month penalty period that was caused by this transfer will first begin to “run" in the first month in which she is in a nursing home, has applied for Medicaid and is eligible to receive Medicaid, except for the transfer. Mildred’s penalty period runs for 3 months from February 2008 to April 2008. In those 3 months, Medicaid will not pay for her nursing home care. Her daughter or someone else must pay for it out of the transferred assets or other funds, or Medicare may pay. Medicaid will not start paying until May 2008.