Recent Medicaid Legislation Imposes Harsh Penalties on Abusers
Everyone knows the horror stories about the high cost of long-term care for the elderly. Running at a national average of $45,000 a year, full-time nursing home care can quickly deplete an elderly American’s entire life savings. Medicaid, on the other hand, provides full coverage. However, to receive benefits under Medicaid, the recipient must usually be impoverished.
With the stakes so high, many families have long used various tactics to skirt the rules and acquire coverage for an aging relative who needs costly medical care. For instance, if the patient isn’t poor when nursing home care is required, he simply gives away all of his assets to children or other family members. In an attempt to curtail this abuse, the government imposes a three- to five-year “look back” period, during which any gifts or transfers of assets will be counted as part of his estate for the Medicaid-eligibility test.
Families have discovered that there’s no requirement forcing them to return these assets to their elderly relative. At the same time, the family is generally under no legal obligation to provide their elderly relative with medical care or financial support. Instead, they can “just say no” when the Medicaid agency investigates the patient’s financial resources and assesses the family’s willingness to pay for the health care. By declining to take care of their elderly relative, the family often created a situation in which the government had no choice but to extend Medicaid coverage after all, even though the patient violated the eligibility rules.
Congress attempted to criminalize Medicaid planning in 1997 and 1998 with Medicaid reform legislation, which first made it a criminal offense, subject to both imprisonment and fine, to apply for Medicaid coverage when the senior “knowingly and willfully disposes of assets . . . in order . . . to become eligible for medical assistance and which results in a period of ineligibility being imposed. . . .” then the law was changed to make it a criminal offense to advise for a fee individuals on how “to dispose of assets…in….order…to become eligible for medical assistance when such advise results in a period of ineligibility being imposed…” This law has been declared unenforceable and unconstitutional by the United States Attorney General but is still on the books. In other words in advising you on transferring asses so that you’ve made a gift within three years, or transferred assets to a trust within five years, of applying for Medicaid coverage, your advisor may have done more than bend the rules. He or she may have broken the law. The fines range from $10,000 to $25,000, with jail time of up to five years a possibility.
Perhaps the present system does need reform. Medicaid is often the second biggest item in state budgets, and observers expect Medicaid costs to increase by at least 10 percent per year. Today 69 percent of the nation’s 1.5 million nursing home residents receive Medicaid benefits. A 1993 study by the General Accounting Office in Massachusetts, for example, revealed that more than half of the applicants for Medicaid had transferred assets out of their estates in order to qualify for benefits. The law allows Medicaid authorities to collect reimbursement for benefits paid out to patients who receive them during a period of ineligibility, but that assumes the patient has assets left, but many times they do not.
To attempt to control runaway Medicaid costs, Congress passed these measures which may unnecessarily frighten the elderly and their advisors. Widespread outcry against these sanctions may doom them to repeal in the future. But for now, if you or a loved one need government assistance, you may wish to contact a knowledgeable attorney who can help you.
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Attorneys Judith Sterling and Michelle Tucker are both CPAs and licensed attorneys. They are the first two attorneys in Hawaii to be certified by the American Bar Association (ABA) accredited Estate Law Specialist Board, Inc., as Estate Planning Law Specialists, and are so certified by the Supreme Court of Hawaii. The Supreme Court of Hawaii grants Hawaii certification only to lawyers in good standing who have successfully completed a specialty program accredited by the ABA.
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