On Wednesday, February 8, 2006 President George W. Bush signed into law the Deficit Reduction Act of 2005. What does this mean to elder caregivers who may have to deal with Medicaid and nursing homes from this day forward? The rules have changed and it will make a great deal of difference.

  Change in the Medicaid Lookback Period

The "Lookback period" has changed from three years to five years. Under the previous rules applicants for Medicaid were required to account for their resources for the three years prior to the date of their application. If any funds or resources were transferred to someone else during these three prior years there was a penalty period applied from the date of the transfer before the applicant would be eligible for Medicaid. That lookback period is now extended to five (5) years.

  Change in the Start of the Medicaid Penalty Period

The "penalty period" is the amount of time an applicant is disqualified from receiving Medicaid benefits because of a transfer of assets. Under the old rules, the penalty period began on the day the assets were transferred. This meant that an applicant could transfer assets and wait out the penalty period before applying for Medicaid.

Under the new rules, if a full five years have not passed since the transfer, the penalty period does not begin until the applicant is in a nursing home and applies for Medicaid. The time spent in a nursing home as a private-pay patient does not count.

What this means is, if an elder transferred assets three years ago and has been paying privately in a nursing home during those three years (the old penalty period) with the expectation of being out of funds and applying for Medicaid next month, that person will now not be eligible for Medicaid for possibly several more years. The lookback period will begin on the date of the Medicaid application, which is still to come.

Just how this is going to impact seniors who no longer have assets that can or will be returned to them to pay for their care is a good question. Nursing homes are certainly going to be reluctant to admit some/many of them.

  Change in the Medicaid Homestead Exemption

Under the previous law the applicant's home was not included when an applicant's assets were counted to determine Medicaid eligibility. Under the new law, the applicant may not have more than $500,000 equity in a home. Note - this is equity, not the total value of the home. This change should not affect too many applicants.

There are several other changes to the law that will make it much more difficult to qualify for Medicaid. Exactly how and when these changes will be implemented is still unknown. Every State will design its own timetable. Some will use the February 8 date. Some may set implementation around the next time their legislature meets. We don't know those details yet. But if you have been thinking about consulting with an elder law attorney, the time is NOW.

Unless a senior has less than $2,000 in assets and already qualifies financially for Medicaid, please do not undertake to do anything about getting him or her qualified for Medicaid in a nursing home without seeking immediate legal advice. Whatever it costs to consult with an attorney before you do something in error is less than the penalties you could face.

If you don't know one, you can locate an experienced elder law attorney at the National Association of Elder Law attorneys website