Deficit Reduction Act of 2005

This legislation will effect all Americans for generations.

The Deficit Reduction Act (DRA) of 2005 enacted Feb. 8, 2006, creates major changes in the Medicaid Transfer of Asset rules: (1) create a five year look back; (2) calculate a penalty or waiting period from when a person is receiving institutional care and would be otherwise eligible; (3) create limits on home equity; and (4) require the state be a beneficiary on annuities.

When a person transfers assets and then receives or applies for Medicaid-covered nursing facility services, the local Department of Social Services ''looks back'' at financial transactions made within a certain period of time from the first date on which the person was institutionalized and applied for Medicaid coverage that includes nursing facility services.

The look back period for transfers prior to Feb. 8, 2006, is 36 months and 60 months for transfers to or from a trust. However, under DRA '05, the look back would be 60 months for any disposal of assets made on or after the date of enactment (Feb. 8, 2006). A transfer by either the Medicaid applicant or the spouse of the Medicaid applicant will affect the eligibility of the one applying for Medicaid for nursing home services, and some "nursing home-like" services in a hospital, and some special home health care programs.

Once someone goes on Medicaid (Medi-Cal) they are in effect borrowing against any assets they may have such as real property. After the death of the Medicaid (Medi-Cal) recipient the state will take action to recover the cost of care by going after the estate. In 2005 the repayment amount was $140 a day. So just 2 years of Medicaid (Medi-Cal) care would cost a family (estate) approximately $102,200 (730 days X $140).

It is unimaginable that taking more money from the elderly and their children is going to do much about the national debt. This is shameful legislation.

The fact that almost half of all Americans are going to be requiring long term care and that the majority of those will not have the finances to pay for care will put an even heavier burden on local and state resources.

Others will spend their "nest egg" on long term care and others will go on state aid and later their estate (children) will have to repay for care provided leaving much less inheritance - decreasing the transfer of wealth from one generation to another for all but the wealthy.

Where will you receive your long term care, at home or in a state facility? What can you do to make sure you get the care you want and also protect your assets and your children's inheritance? Invest in long term care insurance.

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