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Deficit Reduction Act of 2005

To understand the changes one first need to understand what Medicaid was originally. One of the most common misconceptions is that Medicaid is an insurance program like Medicare. Medicaid is in reality a Federal-State welfare program. It was designed to pay for the long term care needs of indigent (very poor) Americans who were wards of the State.

The genesis of so-called "Medicaid Planning" by Elder Law Attorneys exploited "loopholes" in the Medicaid law, allowing even very wealthy seniors to go on Medicaid by, among other things, gifting their assets to children, sometimes even after they were in a nursing home. The result: millionaires receiving Medicaid "welfare" benefits from the government.

The abuse of the Medicaid program lead Congress to take action in 2005 with the Deficit Reduction Act (DRA). One of the changes made by the DRA increased the look-back for asset transfers from 3 to 5 years, but the most significant change was moving the penalty for asset transfers from the date of the transfer to the date of Medicaid application. The result: gifting of assets effectively disqualifies seniors from Medicaid assistance. Furthermore, those who are disqualified from Medicaid open their children up to lawsuits in states like Pennsylvania that have "Filial Responsibility Laws." (1)

The Federal Government's message is loud and clear -- you are on your own. So, how can you protect your savings, your home, monthly income, and quality of life for you and your spouse? The answer is Long Term Care Insurance.

It is important that you make adequate plans for your long term needs. Contact Personal Health Services and a licensed professional will assist you.



1. "New Medicaid Law Means Adult Children Could Be on Hook for Parents' Nursing Home Bills." ElderLawAnswers.com, 8/15/2006.