NYS Adopts Restrictive Medicaid Eligibility Rules

On July 20, 2006, the State of New York Department of Health released an Administrative Directive that sets forth how New York State will implement the federal Deficit Reduction Act (the &#8220DRA”). The DRA has made numerous changes to the law making it much more difficult for seniors and the disabled to become aeligible for Medicaid nursing home benefits.
Most of the new changes apply to individuals who apply for Medicaid coverage on or after August 1, 2006. The new law provides that the look-back period for Medicaid nursing home benefits will be extended from 36 months to 60 months for all assets transferred (gifted) by the applicant or his/her spouse on or after February 8, 2006. This will result in a phase in of the 5-year look-back gradually over time. For example, if a Medicaid application is filed on February 8, 2010, documentation will be required for only four years (going back to February 8, 2006). A full five years of documentation will be required commencing February 8, 2011.
Of particular concern is the begin date of the Medicaid penalty period for asset transfers. The new law provides that for all transfers made on or after February 8, 2006, the penalty period will start to run only when the applicant is receiving nursing home services for which Medicaid coverage would be available, but for the imposition of a transfer penalty. At that time, the applicant must be at or below Medicaid's asset eligibility level of only $4,150 (plus certain other exempt assets such as IRA's in pay status). This means that the penalty period typically will not even start until an individual is in a nursing home and has assets below $4,150. The absurd conclusion is that when assets are transferred on or after February 8, 2006, an applicant will not qualify for Medicaid nursing home benefits for a period of time, but will have no funds to pay for such care. Asset transfers prior to February 8, 2006 are governed under the old law which provides that the penalty period commences the first day of the month after the month in which the assets were transferred.
The new law also provides for restrictive home equity guidelines. Under prior law, an individual applying for Medicaid could have equity in his primary residence of any value, and could still qualify for Medicaid nursing home benefits by expressing an intention to return home. Under the DRA, an applicant will not longer be eligible for Medicaid nursing home or home care benefits in New York unless his/her equity in the home is less than $750,000, This limitation does not apply if a spouse, minor child or certified blind or disabled child resides in the home. The ADM provides that the fair market value of the home may be established by an appraisal from a real estate broker or other qualified dealer or appraiser.
The ADM also provides that an individual must first submit a Medicaid application in order to determine financial eligibility, even if he/she will be disqualified because of prior transfers. Medical bills as well as an irrevocable pre-need funeral agreement may be used to offset excess resources.
New York State's ADM reiterates the DRA's position regarding the purchase of a life estate in another's property. If an applicant purchases a life estate on someone else's home, he or she must reside in the home for one year after the transfer in order for this transfer to be exempt from the imposition of a penalty period.
Fortunately, the exemptions for transfers to a spouse, disabled or minor child remain intact. In addition, the exemptions for the transfer of a home to a caretaker child residing in the home for two years prior to institutionalization or to a sibling with an equity interest who has been residing in the home for at least one year prior to institutionalization are also unchanged.
Although the new law makes it much more difficult to protect assets, it does provide many planning opportunities. Seniors and the disabled are urged to contact an elder law attorney and plan as far in advance in order to protect their assets.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law and special needs planning, estate planning, Medicaid planning, guardianships, estate administration, trusts and wills. The firm has offices in Forest Hills, Great Neck, and Brooklyn, NY. Mr. Fatoullah has been named a &#8220fellow” of the National Academy of Elder Law Attorneys and is a former member of its Board of Directors. He also serves on the Executive Committee of the Elder Law Section of the New York State Bar Association. Mr. Fatoullah has been certified as an Elder Law Attorney by the National Elder Law Foundation. Mr. Fatoullah is a co-founder of Senior Umbrella Network of Queens. This article was written with the assistance of Stacey Meshnick, Esq., who supervises the Medicaid Department at the firm. The firm can be reached by calling 718- 261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES.