Elder Law Center

One Essex Street

Saugus, Massachusetts 01906

Telephone 781.233.4444   Fax 781.231.2222

December 23, 2004

 FEDERAL WAIVER WILL AFFECT GIFT MAKING

Last year, about this time, I wrote an article called Romney is the Grinch and it dealt with something called the Federal Waiver.  On August 28, 2003 Governor Romney applied for the Federal Waiver. This is a request to the Center for Medicare and Medicaid (the federal government) from the Governor asking for more stringent rules against those who make gifts and later need MassHealth (Medicaid) to pay for nursing home care. The Governor is basically saying that he doesn’t like the federal law and wants to be able to make up his own rules.

 Senator Creedon has filed a Bill, S.B. 688 and Representative Hynes has filed a similar Bill, H.B. 2786. These Bills would prevent MassHealth (Medicaid in Massachusetts) from seeking a waiver of federal law to impose harsher asset transfer penalties on nursing home residents.

 CURRENT LAW - Under the current set of rules, when you make a gift, you are disqualified from MassHealth for a certain period of time. For every $244 you give away, you are disqualified for one day. The disqualification period starts on the first day of the month of the gift. There is a three-year maximum disqualification period on any one gift. The proposed rules delay the start of the disqualification period until you are in the nursing home and out of money.

 PROPOSED LAW – Any gift made within up to ten years will be treated as though you made the gift in order to qualify for MassHealth. If you go to the nursing home within ten years of making the gift, you will be treated as having made the gift on the day you enter the nursing home or when you have less than $2,000, whichever is later. This has a chilling effect on making gifts and affects charities as well as families.

 EXAMPLE - Let’s say that Grandma wants to give Sonny $20,000 towards his 1^st year of college tuition. Let’s also say that in four years Grandma needs nursing home care. What is the result?

 Under the Current Rules: Grandma is considered to have made a gift of $20,000. This gift disqualifies Grandma from being able to get MassHealth coverage for 82 days ($20,000 / $244=82 days). Because the disqualification period of 82 days has gone past, this gift would have no effect on Grandma’s future MassHealth eligibility.

 Under the Proposed Rules: Grandma is also considered to have made a gift. Now in four years when Grandma needs nursing home care, Governor Romney will step in and say, “Wait a minute, you gave Sonny $20,000 four years ago!” Under the new rules poor Grandma is not eligible from benefits for the first 82 days nursing home care. This means that she will have to come up with over $24,000 to private pay for the first 82 days (some nursing homes are now over $300 per day).

 What happens if Grandma doesn’t have $24,000? The nursing home doesn’t have to keep her because she isn’t paying, and Sonny is unable to return the money because he gave all of it to the college. Grandma will be on the street. If Grandma were experienced in MassHealth rules, she could request a Fair Hearing where she would argue that the gift was not made for the purpose of becoming eligible for MassHealth. The gift was made in love and affection for a family member to be able to attend a college of his choice, not to qualify for MassHealth. Grandma should prevail at her hearing.

 The Governor’s plan is to penalize everyone for making gifts five and even ten years ago because HE thinks the only reason you did it was so that you would become eligible for Medicaid. The effect of having this requested change being considered by the federal government means that some people are worried and not making gifts, even though they want to.

 My own feeling is that the law is unfair. Almost every applicant for MassHealth will require a hearing. Adding this requirement to the already time consuming and complicated application process will be the straw that broke the camel’s back. Before you know it we will be waiting over six months for hearing dates and our nursing homes, who don’t get paid during the pendancy of a hearing, will be working off borrowed money, causing even more problems.

 Those unfamiliar with Medicaid rules could request that whatever gifts they made in the past be returned and paid over to the nursing home, this is called a “cure”. Sometimes it is possible to return the money and cure the transfer, but in many cases, the money has been spent and is not available. Unfortunately, this law primarily affects the middle class. The poor will still qualify and the rich can afford to pay for private help. But the real question is whether YOU think this is fair. It’s up to you to call your legislators and ask that they support Senate Bill S.D. 1369 and House Bill H.D. 3609. Passage of these Bills will keep the status quo and allow seniors to make Christmas gifts and other gifts without worrying that they will be disqualified for benefits for up to ten years. Your phone call is important. Your Legislators need to hear your concerns.

 This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).

 Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org

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