CMS Issues Guidance on DRA to State Medicaid Offices

Category: Elder Law,

Courtesy of Elderlawanswers.com, at long last, the Centers for Medicare and Medicaid Services (CMS) has finally given guidance to the State Medicaid directors on the provisions of the Deficit Reduction Act (DRA).

Some of the guidelines provided:

The lookback period is 60 months for any transfer of assets made on or after the date of enactment of the DRA (February 8, 2006).

• The period of ineligibility will begin with the later of the first day of a month during or the month after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance under the state plan and is receiving institutional level of care services that, were it not for the imposition of the penalty period, would be covered by Medicaid.

• Once a penalty period is imposed, it is not tolled but instead will continue to run if an individual subsequently stops receiving long-term care.

• The state must be named as a remainder beneficiary on an annuity purchased on or after February 8, 2006. CMS states that the provisions of 1917(c)(1)(G), which set forth required criteria if an annuity purchased by or on behalf of an annuitant who has applied for medical assistance is not to be treated as a transfer of assets, are "in addition to those specified in 1917(c)(1)(F) pertaining to the State's position as remainder beneficiary." [boldface in original]

• If the state is not named as a remainder beneficiary, the purchase of the annuity will be considered a transfer for less than fair market value. CMS interprets the statute to mean that the full purchase value of the annuity will be considered the amount transferred.

• Any transaction that changes the course of payments to be made by the annuity or the treatment of the income or principal of the annuity (including additions of principal, elective withdrawals, requests to change the distribution of the annuity, elections to annuitize the contract and similar actions) taken on or after February 8, 2006, will cause all transfer provisions of the DRA to apply to the annuity.

The guidelines also cover the following topics:

• The application of the income first rule under spousal impoverishment.

• Disqualification for long-term care coverage for individuals with more than $500,000 in equity in their house.

• The treatment of continuing care retirement community entrance fees.

• The expansion of state long-term care insurance partnerships.

The full text of the documents is available from the National Senior Citizens Law Center:

Read the CMS Documents:

• Press Release: CMS TAKES STEPS TO IMPROVE COVERAGE AND SUSTAINABILITYOF CARE FOR DUAL-ELIGIBLE BENEFICIARIES, 06/27/06 (PDF, 69 KB)
• State Medicaid Director Letter, SMDL #06-019, 06/27/06 (PDF, 118 KB)
• CMS Enclosure: Qualified Long-Term Care Partnerships Under the Deficit Reduction Act of 2005 (PDF, 38 KB)
• State Medicaid Director Letter, SMDL #06-018, 06/27/06 (PDF, 121 KB)
• CMS Enclosure: Sections 6011 and 6016 New Medicaid Transfer of Asset Rules Under the Deficit Reduction Act of 2005 (PDF, 138 KB)