Illinois shifts course on long-term care Medicaid rules again

We were all set to deliver part II of our series on the January 1, 2012 Illinois Medicaid rules changes for nursing homes.  But the Illinois legislature apparently wasn’t done overhauling the Medicaid system.  Last week, Governor Quinn signed Senate bill 2840, which became Public Act 97-0689. It’s been given a friendly name:  the Save Medicaid Access and Resources Together (SMART) Act.  But its impact is anything but friendly to Illinois seniors.

Unlike the January 1st rules changes, which were driven by federal laws, these new rules changes are almost entirely due to the well-known Illinois budget problems.  The new law cuts $1.6 billion from the Medicaid budget, primarily by modifying eligibility requirements and benefits.

The biggest change made by SMART is the elimination of Pooled Payback trusts (also called OBRA d(4)(c) special needs trusts) in Medicaid planning for those over the age of 65 (in other words, almost everyone who needs it).

Previously, a senior could place their assets into a pooled payback trust and qualify for Medicaid immediately.  In exchange, when the senior passed away, their trust would be required to reimburse the State of Illinois for whatever Medicaid had spent on the senior (the “payback” part of the trust name).

One significant benefit of the pooled payback trusts to seniors was that payback happened at the Medicaid rates (what the State of Illinois pays nursing homes), which usually offered a substantial discount over the nursing home’s private pay rates.

While we still have many tools in the Medicaid planning toolbox, the loss of the pooled payback trust is a major blow to Illinois seniors.

The law pinches the finances of seniors in other ways too:

  • Retroactive Eligibility.  A Medicaid application can request long term care coverage for the three months prior to the month of application. For example, an application file in June can request coverage for expenses in March, April, and May.  Previously, an applicant could get coverage for the entire month simply by meeting eligibility requirements at any time during the month (usually the last day of the month).  Under those rules, Medicaid would cover all expenses in March as long as the requirements were met by March 31st.  Under the new rules, the applicant will have to meet eligibility requirements at the time of receiving services.  This change makes it even more critical to consult with an elder law attorney as soon as you believe that a nursing home stay is likely.
  • Community Spouse Resource Allowance (CSRA).  The amount of a couple’s assets that the community spouse (the spouse not in the nursing home) can keep is reduced from $113,640 to $109,560.  The CSRA had risen automatically this year, but SMART rolled it back and fixed it permanently at the 2011 level.  Please note that certain assets are exempt and not included in the $109,560 limit.
  • Monthly Maintenance Allowance (MMA).  The amount of a couple’s income that the community spouse can keep is reduced from $2,841 to $2,739 per month (although that figure is subject to federal approval of the change).  If a couple earns more than $2,739 per month, most (or in many cases all) of the excess must be paid toward the nursing home spouse’s care.
  • Homestead in Trust.  The primary residence of a couple is normally an exempt asset, meaning the value of the home doesn’t count against the $109,560 CSRA limit.  SMART eliminates that exemption for homes owned in a trust (either a revocable living trust or a bank land trust). Traditionally, the State of Illinois has placed a lien on homes owned by a Medicaid recipient.  But having the house in trust complicates that. While this change does make planning the estate of a community spouse a little more complicated, it’s more of an administrative change than one that directly hurts Illinois seniors.
  • Spousal Refusal.  The law means that spouses will have to pool their resources to pay for one spouse’s care, regardless of whether they have been keeping their finances separate previously.

We’re still digesting the full impact of the SMART Act.  It weighs in at 450 pages (you can read it on the Illinois General Assembly website if you’re interested) and revamps the requirements for many of the Medicaid programs.

One thing SMART doesn’t change is that planning for possible long term care needs to be done early to be the most effective.  So if you, or someone you love, are concerned about the possibility of long term care (even if many years in the future), it is crucial to get educated and begin planning.

Many asset protection options take years to mature.  And it is essential to learn how to avoid the common mistakes in handling the finances of a spouse, sibling, or parent — mistakes that could cost them thousands of dollars in Medicaid penalties and countless sleepless nights.

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One Response to Illinois shifts course on long-term care Medicaid rules again

  1. chris August 27, 2013 at 7:12 pm #

    Dear Sir/Madam,

    I heard that if you are a US veteran that Medicaid rules such as “look back periods” do not apply. Is this true?

    Please advice

    Chris D

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