The Medicaid Ineligibility Period
Under the Deficit Reduction Act

ualifying for Medicaid benefits for long-term care has always been difficult; however, the Deficit Reduction Act of 2005 has made this cumbersome process even more confusing.  The Deficit Reduction Act of 2005 (DRA), which was signed into law by President Bush on February 8, 2006, has imposed many restrictions on when and if you will qualify for benefits to cover your long-term care expenses.

Prior to the DRA, an applicant for Medicaid benefits could give away assets in order to qualify
for long-term care benefits.  The general rule was that for every $6,700 you gave away, you became ineligible for Medicaid benefits for one month.  This “ineligibility” period began the
month in which the gift was made.  For example, if you had transferred $67,000 in January 2006, you would have been ineligible for Medicaid benefits for long-term care for 10 months.  This ineligibility period would have started January 1, 2006, and continued through October 31, 2006. 

Under the DRA, if you need care within five years of making the gift, this ineligibility period does not begin until both of the following conditions are met:

The applicant is assessed by the Area Agency on Aging as requiring a nursing home level of care AND

The applicant is otherwise financially eligible for Medicaid benefits.

In the example above, the same gift of $67,000 made on or after February 8, 2006, has a much different outcome.  Only when an applicant spends his or her resources down to the appropriate limit ($8,000 if their income is under $2,022 per month, or $2,400 if their income is over $2,022 per month) does the ineligibility period begin.  This means that the gifted assets may have to be used to pay for care through the ineligibility period. However, planning can be done to get through the ineligibility period. There are a variety of options that can be explored.