November 5, 2014
The Medicaid gifting rules in Washington State are being affected by major changes.
These changes will have an important impact on Elder Law practices whenever a client seeks to obtain assistance in paying for long-term care, and gifting to help set aside resources (assets) seems to be a desirable consideration.
Since 2006, the penalty period assessed when a client (or spouse) has made gifts to qualify for Medicaid has involved adding together all gifts made over the previous five years and dividing by the average cost of nursing home care to obtain the penalty period in months.
After making a gift (for example, from a parent to a child), an applicant would then be under resource limits and could apply for Medicaid.
If the program found the applicant eligible but for the gift, a penalty period would be assessed.
After the penalty period, the applicant could reapply and begin to receive assistance.
In many cases, this would only be an option if the recipient of the gift (the child) used some of the gifted funds to help pay for the care received by the maker of the gift (the parent) during the penalty period.
This would often not work out for institutional care, since the payments for care would likely exhaust the gifted funds before eligibility could start.
But it could sometimes work for alternative care, and some gifted funds might be left over to pay for the parent’s needs in the future.
However, these rules have been changed for 2013-2014. By emergency rule on September 30, 2013, the Health Care Authority (HCA) revised the Washington Administrative Code (WAC) to state that if gifted funds were used to help pay for an applicant’s care during a penalty period, a “constructive trust” had been established and no gift had been made.
This change was based on the results of two Fair Hearings that established this principle.
It was then decided by the HCA that more detail was required for the rule changes. The changes were deleted by further rule change on March 14, 2014.
New materials are now being prepared under a notice of rule-making dated May 15, 2014, to expand on the explanation of these changes.
At present, the “constructive trust” rule revisions are pending.
However, the HCA has taken the position that the change is adequately supported by other WAC sections, and remains in effect.
Related federal requirements also appear in the State Medicaid Manual prepared by the Center for Medicare and Medicaid Services (CMS).
Under the new rule interpretation, gifts can only be made—to set aside some funds—if the cost of care of the applicant (the parent) is less than the income of the parent, so none of the gifted funds are used to help pay for care.
In some alternative care situations, this may be the case. Otherwise, the new rules largely prevent the use of gifting as part of the application process.
There have been some further suggestions by HCA that all gifting might be considered exploitation of a vulnerable adult, which would likely end all types of gifting transfers.
More on Elder Law in Washington may be found in the “Elder Law” volumes of Washington Practice by Cheryl and Ferd Mitchell: Washington Elder Law and Practice (Vol. 26), the associated Elder Law Handbook (Vol. 26A), and the Washington Probate volume (Vol. 26B). These materials are available at www.legalsolutions.thomsonreuters.com under the tag Mitchell and Mitchell elder law. Additional updates may also be found on this blog under the tag Washington Elder Law Practice Reports.