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Monday, April 20, 2020

How Did the Deficit Reduction Act of 2005 (DRA) Affect Medicaid?

Medicaid seems to always be in the news as it is often at the center of politics. There are many discussions on changes in Medicaid. Those in office or running for office frequently say that they will introduce legislation relating to Medicaid. Changes in Medicaid legislation can have a big impact on how can access Medicaid benefits. Take the Deficit Reduction Act of 2005 (DRA), for instance. The DRA was not directly Medicaid legislation as it was really an act of the United States Congress regarding the federal budget. President Bush signed the DRA into effect in February of 2006 in the hopes of saving an estimated $40 billion over the span of five years. While a matter of the federal budget, the DRA had a significant impact on Medicaid and other mandatory spending programs.

How Did the Deficit Reduction Act of 2005 (DRA) Affect Medicaid?

One of the biggest changes the DRA had on Medicaid pertains to the Medicaid “lookback” period. The lookback period relates to asset transfers and Medicaid eligibility. As you may know, there are specific income requirements a person must meet in order to qualify for Medicaid benefits. If a person makes above a certain income, then he or she will be ineligible for benefits. There have always been concerns that, in an attempt to game the Medicaid system, a person may transfer assets in order to qualify for Medicaid long term care benefits. That is why the lookback period was created.

 

Before the DRA, any assets transferred for less than fair market value within a three-year period would result in a penalty period. The penalty period was a waiting period the individual would need to observe before being considered eligible for Medicaid coverage. The DRA extended the lookback period from three years to five years. Any assets transferred for less than fair market value within five years would result in a penalty period. Previously, when the three year lookback period was in place, the time frame began when the last asset transfer occurred. The DRA changed that. The five-year look back period would begin when the individual applied for Medicaid coverage. All of these changes were made with the intention of reducing Medicaid fraud perpetrated by transferring assets for the sole purpose of qualifying for Medicaid. Additionally, the changes were made with the intent of encouraging individuals to purchase private long-term care insurance which would end up reducing the costs associated with Medicaid.

Another big change to Medicaid related to the State’s authority regarding premiums and cost-sharing as well as the design of Medicaid benefit packages. The DRA enabled states to impose premiums and cost-sharing measures without being required to apply for a federal waiver. This state plan amendment was intended to reduce Medicaid spending. With states given more flexibility regarding Medicaid care packages, states would be able to design Medicaid benefit packages best suited to the different needs of various groups.

Medicaid Planning Attorney

Medicaid provides critical long term care benefits to people across the U.S. Long term care costs continue to rise. The time to start thinking about how you are going to pay for long term care is now. Do not wait until you think you might need Medicaid benefits to start planning for this. At Monk Law, we can help you with Medicaid and long term care planning. Contact Monk Law Firm today.


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