Transfers and the DRA Judie Hughes DHS Health Care Training MFWCAA – October 2007

Terminology Changes  Uncompensated transfers  Transfers resulting in a transfer penalty  Transfer penalty  Transfer penalty period

Deficit Reduction Act (DRA) of 2005  Signed into law on February 8,  Expected to reduce federal entitlement spending by $39 billion between and $99 billion between

DRA Changes  Documenting U.S. Citizenship and identity.  Updating uncompensated transfer policy.  Implementing the home equity limit.  Implementing the Continuing Care Retirement Community (CCRC) policies.  Implementing new rules relating to the disclosure and treatment of annuities

DRA Changes to Transfer Policy  Expansion of lookback period  Eliminates the $200 uncompensated transfer exemption  Convincing evidence to show the purpose of the transfer was not exclusively to obtain or maintain MA for the client  Purchases as transfers  Penalty period begin date  Overlapping transfers

Lookback Period Expansion  Expanded to 60 months for transfers made on or after February 8,  Phased in over 24 months.  Phase-in begins February 2009.

Elimination of $200 Exemption The $200 uncompensated transfer exemption is not available if:  Person requests MA payment of LTC services on or after September 12, 2006  The transfer was made on or after February 8, 2006.

Elimination of $200 Exemption - Example Gorette applies for MA LTC on September 24, She reports two uncompensated transfers: $150 in January 2006 $175 in March 2006 Are either of the transfers exempt? Yes - January

Convincing Evidence  Evaluate on a case-by-case basis.  Need supporting documentation.  HCPM

Types of Convincing Evidence  Assets would be below limit if transferred asset retained  Transfer was beyond client control  LTC not anticipated at time of transfer

More Types of Convincing Evidence  Unexpected loss of assets/income  Well established history of regular contributions to a religious organization in which client belongs  Proof of intending to receive fair market value

Convincing Evidence Example 1 Walter resides in an LTCF and has been receiving MA payment for LTC services since February In August 2007, Walter has countable assets of $2400. He gives his grandson $25 for a birthday gift the same month. Does Walter have convincing evidence? Yes

Convincing Evidence Example 2 Marjorie resides in a LTCF. At the time of her August 2007 annual renewal, her assets totaled $3200. She gives her daughter $200 to reduce her assets to within the limit. Does Marjorie have convincing evidence? No

Convincing Evidence Example 3 Ge, age 44, applies for MA LTC in August He transferred $20,000 to his daughter in May 2007 to help her pay for her wedding. A doctor statement indicating Ge was in good health at the time of the transfer was made. Does Ge have convincing evidence? Yes

Purposes That Are Always a Transfer  Preserve the estate for heirs  Avoid probate  Reduce taxes

Purchases as Transfers Purchase on or after July 1, 2006 (within the lookback period or while MA LTC is pending or active): Promissory note Contract for deed Loan Mortgage Life Estate Interest in another person’s home

Purchases as Transfers – Not Uncompensated If all of the following are met: Equal payments throughout term of purchased agreement No deferral of payments No balloon payments Prohibits the cancellation of the balance upon the death of the lender Is actuarially sound

Purchases as Transfers – Actuarial Soundness Promissory Notes, Loans, and Mortgages Compare the term of the purchased agreement to the life expectancy of the purchaser. The difference is the uncompensated amount.

Purchases as Transfers – Life Estate Uncompensated Amount The entire purchase price is an uncompensated transfer. Exception: The purchaser lives in the home for 12 consecutive months or more following the purchase of the life estate interest. Consider the amount of the purchase price which is greater than the life estate interest to be the uncompensated value.

Penalty Period Begin Date - Applicants Apply penalty period for first month in which the client is requesting and is otherwise eligible for MA LTC, but for the transfer penalty if: Transfer made on or after February 8, 2006 Request for MA LTC on or after July 1, 2006

Penalty Period Begin Date Example 1 Juan resides in an LTCF and requests MA LTC on July 15, He reported a transfer of $10,000 made on March 15, The penalty period is 2.25 months. When does the transfer penalty begin? July 2007

Penalty Period Begin Date Example 2 Rita entered an LTCF in October She applies for MA LTC on December 15, 2006, requesting retro back to September. Rita reported a transfer of $10,000 made on February 10, The penalty period is 2.25 months. When does the transfer penalty begin? October 2006

Penalty Period Begin Date Example 3 Tony applies for MA LTC on August 1, He is requesting retroactive coverage back to June 1, the month he entered an LTCF. He made a transfer in March 2006 resulting in a transfer penalty of 3 months. When does the transfer penalty begin? June 2006

Penalty Period Begin Date – MA LTC Enrollees Apply penalty period for first month for which 10-day notice can be given if: Transfer made on or after February 8, 2006 Was reported or discovered on or after July 1, 2006

Penalty Period Begin Date – MA LTC Enrollees Must apply transfer penalty no later than 3 full calendar months from the date the transfer was reported/discovered. If impose after 3 months, send 10- day notice and impose any remaining months of the transfer penalty period.

Penalty Period Begin Date – Enrollee Example 1 Burke is receiving MA payment of LTC services. On October 5, 2007, he reports he refused an inheritance on June 15, The transfer penalty is months. When does the transfer penalty begin? November 1 with notice

Penalty Period Begin Date – Enrollee Example 2 Matsui receives MA LTC. All information needed to calculate the penalty was received on November 17, 2007, but it was not acted on until March 10, The penalty period is 5.80 months When does the transfer penalty begin? March 2008, but first month can apply ineligibilitywith ten day notice is April March is month one of the transfer penalty period.

Overlapping Transfers Transfer penalties cannot be interrupted or suspended. A penalty period runs consecutively even if the client is no longer MA eligible, or eligible for MA payment of LTC services.

Overlapping Transfers  All Transfers made before February 8, 2006: Add the uncompensated value of each overlapping transfer penalty and calculate a new transfer penalty.  All Transfers made on or after February 8, 2006: Total the uncompensated value and calculate transfer penalty.

Overlapping Transfers  Add the transfer penalties together when a transfer made on or after February 8, 2006, overlaps with a transfer made before February 8, Calculate a new transfer penalty.

Overlapping Transfers – Example 1 Joy requests MA LTC in August She reports 2 uncompensated transfers with the following transfer penalties: January 2005 $ months (Feb-Mar) February 2005 $12, months (Mar-May) What do we do with the overlapping transfer penalty periods? Add uncompensated value and determine new transfer penalty period (Feb-June)

Overlapping Transfers – Example 2 Melanie requests MA LTC in August She reports 2 uncompensated transfers with the following transfer penalties: March 2006 $10, months April 2006 $1,000 partial penalty What is the next step? Add uncompensated values together and calculate tranfer penalty period. (Aug-Oct.)

Overlapping Transfers – Example 3 Pierre requests MA LTC in July He reports 2 uncompensated transfers with the following transfer penalties: January 2006 $25, months March 2006 $10, months What is the next step? Add the transfer penalties together and calculate new tranfer penalty period. (Feb-Sept)

DRA Changes to Transfer Policy  Expansion of lookback period  Eliminates the $200 uncompensated transfer exemption  Convincing evidence to show the purpose of the transfer was not exclusively to obtain or maintain MA for the client  Purchases as transfers  Penalty period begin date  Overlapping transfers

Clarified Transfer Policy  Use of SAPSNF  Returned Assets

Statewide Average Payment for a Skilled Nursing Facility (SAPSNF) The average amount paid for a person in an LTCF on a monthly basis. Use SAPSNF in effect on the date of the most recent request for initial or continued MA payment of LTC services Must be otherwise eligible for MA payment of LTC services, except for having a transfer penalty

SAPSNF Example 1 Molly requests MA LTC in August She entered a LTCF on June 1, 2007 and is requesting retro coverage. Molly reports an uncompensated transfer. What month’s SAPSNF figure do we use? June 2007

SAPSNF Example 2 Becky requests MA LTC in August She is private pay for August and is requesting coverage for September. Becky reports an uncompensated transfer. What month’s SAPSNF figure do we use? September 2007

SAPSNF Example 3 Essie is an MA enrollee. She requests MA LTC in August 2007 with a DHS She entered a LTCF the same month. Essie reports an uncompensated transfer. What month’s SAPSNF figure do we use? August 2007

SAPSNF Example 3 Continues Essie is an MA enrollee. She requests MA LTC in August 2007 with a DHS She entered a LTCF the same month. Essie reports an uncompensated transfer. What month’s SAPSNF figure do we use if Essie reported the transfer on an September 2007 renewal received in August 2007? September 2006

Returned Assets  Verify the return of the assets  The person who received the transferred asset can: Return the transferred amount to the client, or Pay the money directly to the facility with verification  Recalculate the transfer penalty

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