In 2005, the Federal Government passed the Deficit Reduction Act (DRA), which included changes to the MassHealth eligibility rules that greatly affect the way Massachusetts seniors can handle their finances and still qualify for MassHealth benefits.
The MassHealth Look-back & Disqualification Period
Under the previous rules, people applying for MassHealth benefits needed to disclose transfers of liquid assets or real estate made within a “look-back period” prior to application that went back 60 months for transfers to irrevocable trusts and 36 months for transfers to individuals.
Under the DRA, the MassHealth look-back period for all asset transfers is now 60 months (five years). If assets are given away for less than fair market value during this look-back period, then MassHealth will assess a penalty of one month of MassHealth ineligibility for every month’s worth of assets given away, based on the monthly nursing home cost.
Under the old law, the MassHealth disqualification period for assets transferred during the look-back period started from the date of transfer. For example, if your mother gave you $80,000 today, and her nursing home costs $10,000 per month, she would have been disqualified from MassHealth for the next eight months. After eight months however, as long as the disqualification period was over and she was otherwise qualified, MassHealth would have been approved.
The DRA changed this rule significantly. Now, the disqualification period runs from the date when the individual enters a nursing home and is “otherwise eligible” for MassHealth coverage. In other words, the penalty period does not even begin until the nursing home resident is out of funds and has applied for MassHealth.
As an example, let’s assume that Aunt Edna gives away $80,000 on January 1, 2011. Under the old rules, she would have been eligible for MassHealth ten months later, or November 1, 2011. The new rules, however, work very differently. Let’s say Aunt Edna is perfectly healthy when she makes her $80,000 gift on January 1, 2011. Unfortunately, she suffers a stroke four and one-half years later, and enters the nursing home on June 1, 2015. Let’s assume that she has under $2,000 in assets at that time, so she is otherwise eligible for MassHealth. The disqualification as a result of the $80,000 gift that she made four and one-half years ago first starts to run when she applies for MassHealth on June 1, 2015. The disqualification period will run for 10 months from that time, and will end on March 31, 2016. Who will pay for the nursing home during those ten months? Aunt Edna can’t pay, because she is out of money. Unfortunately, this burden may have to be shifted to her relatives and loved ones.
Under the new rules, people such as Aunt Edna will be penalized for any gifts they have made during the five years preceding a MassHealth application, regardless of the purpose of the gift. Seniors have to pay extra attention to how they structure their finances and thought should be given to qualifying for MassHealth well before benefits are actually needed. A Massachusetts elder law attorney can help you effectively prepare for MassHealth qualification.