In the U.S. approximately half the persons reaching age sixty-five will reside in a nursing home at some point in their lives. In the ideal scenario, these persons would receive the care they need and would have insurance to pay for those services.
The Deficit Reduction Act (DRA) was passed by the Bush Administration in 2006. The DRA's stated goal was to reduce the federal Medicaid budget by $5 billion over a ten-year period. Supporters of the law intended to close loopholes in the entitlement system and further determined to reduce Medicaid expenses. The bill was signed into law by the closest of margins. In the Senate, Vice President Cheney's vote was needed to break the 50-50 stalemate, and in the House, the Bill passed by a slim 216-214 vote.
Opponents feel the law is unjust because it places a burden on elderly Americans at a difficult time of life. Not only does DRA make Medicaid hard to receive for many elderly Americans but it burdens the elderly with the substantial cost of nursing home care.
Medicaid is a government program designed to ensure the delivery of fundamental healthcare services to elders, individuals with disabilities and others who might be deprived of necessary care. Medicaid is the only federal program that can pay for all or a portion of the cost of long-term nursing home care.
Medicaid has always been a needs-based program. Various states have different Medicaid qualification standards. Not only is it important to understand the federal Medicaid requirements, but it is imperative to understand the state's requirements for Medicaid.
Many elderly Americans have the misconception that Medicaid pays for the ongoing costs of a nursing home. Without proper planning and in the absence of proper private insurance, elders can find that they must use their own assets to pay for this care.
The Omnibus Reconciliation Act of 1993 (OBRA) set the original rules to determine Medicaid eligibility, and restrictions regarding asset transfers as they related to the qualifying process. The DRA effectively changed many of those qualifying criteria.
The term asset protection is often misunderstood. The objective of effective asset management is to change the creditor's economic analysis. Proper asset management plans for Medicaid allow the individual or couple to reveal the nature and structure of the plan and to still comply with the Act's requirements for eligibility.
Although the qualifying terms have changed, the key to Medicaid eligibility remains in proper planning. Developing an effective asset management program is best considered well in advance. While not always a popular consideration, the most effective Medicaid asset management plans are in place before the need for nursing care or extended care is necessary.
The annual care of long-term care can be prohibitive. In the absence of a well-structured asset management protection plan, the recipient may be required to use available assets or to liquidate available assets to pay for this care. A lifetime of savings can be spent in a very short time with extended care programs.
There are many acceptable asset protection structures. Designing the most effective plan begins with:
- establishing the plan's goals
- identifying the types of assets to be protected
- establishing a time frame to enact the plan
- properly evaluating the risk adversity
- setting the plan in motion
When it comes to planning for future health needs, many Americans fail to plan ahead. The best time to plan for asset protection is when there is not a need. However, it is never too late. The theory is that the longer one waits, the less protection there will be.
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