Commonwealth of Massachusetts Executive Office of Health and Human Services Office of Medicaid 600 Washington Street Boston, MA 02111 www.mass.gov/masshealth Eligibility Operations Memo 06-13 November 15, 2006 TO: MassHealth Eligibility Operations Staff FROM: Russ Kulp, Director, MassHealth Operations RE: Deficit Reduction Act of 2005: Long-Term-Care Eligibility Changes Introduction The federal Deficit Reduction Act (DRA) of 2005 required changes to the MassHealth regulations for applicants who are applying for long-term- care services. The federal Deficit Reduction Act of 2005 was signed into law on February 8, 2006. This memo outlines the mandated changes and the operational requirements for the changes in long-term-care eligibility required by the DRA. Look-Back Period and Start Date Effective for transfers occurring on or after February 8, 2006, the look-back period for a transfer of resources for less than fair-market value changed from 36 months to 60 months. This change will be phased in over the 24-month period from February 2006 to February 2008, at which time the 60-month look-back period will be fully implemented. All transfers for less than fair-market value made by the individual or the individual’s spouse on or after the look-back will now cumulate and be treated as one transfer. Penalty Period For transfers occurring on or after February 8, 2006, the period of ineligibility begins on the first day of the month in which resources were transferred for less than fair-market value or the date on which the individual is otherwise eligible for MassHealth payment of long-term-care services, whichever is later. Hardship Provision Individuals and nursing facilities on behalf of individuals (with the individual’s permission) may apply for a waiver of the penalty period. The guidelines for the hardship process are described at 130 CMR 520.019(K). Examples of penalty period calculations are attached to this memo. Equity Interest in Real Estate Effective for applications filed on or after January 1, 2006, the applicant will be denied payment of nursing facility and other long-term-care benefits if the applicant’s or member’s equity interest in the individual’s home exceeds $750,000. This figure will be increased each year, beginning in the year 2011, based on the Consumer Price Index. MassHealth must redetermine the eligibility of any individual who has filed an application on or after January 1, 2006, with regard to the value of the home. Exemptions This regulation will not apply if the spouse or minor child or child who is either blind or totally and permanently disabled is living in the home. Hardship Provisions Individuals may apply for a review of denial of payment for long-term-care benefits by contacting a MassHealth Enrollment Center (MEC). The guidelines for the hardship process are described at 130 CMR 520.007(G)(13). Annuities The existing rules about the countability of annuities have not changed. New rules have been added about the treatment of annuities as disqualifying transfers. All applicants and members (upon eligibility review) must provide MassHealth with verification of any interest the individual or the individual’s spouse has in an annuity, whether or not the annuity or similar instrument is irrevocable or treated as an asset. This verification must include a statement identifying MassHealth as remainder beneficiary in the first position up to the total amount of medical assistance paid on behalf of the individual annuitant. If there is a community spouse or a minor child or a disabled child or children, the purchase of an annuity will be considered a disqualifying transfer if MassHealth is not named after the spouse or any minor or disabled child or children, or if MassHealth is not named in the first position if the spouse or representative of the child or children disposed of any remainder at less than fair-market value. For members affected by the new rules, MEC staff will send a request to the company issuing such annuity, directing the issuer to identify the Commonwealth of Massachusetts as remainder beneficiary in the appropriate position. The MEC eligibility worker will send a copy of the Notice of Preferred Remainder Beneficiary (ANN-2 (09/06)) to the Lifetime Lien Unit. The MEC eligibility worker will direct the annuity issuer to send proof that the Commonwealth of Massachusetts has been identified as the remainder beneficiary to the Lifetime Lien Unit. Failure to provide documentation of the Commonwealth of Massachusetts being named as such remainder beneficiary will result in the entire amount paid for the annuity being treated as a transfer of assets for less than fair-market value. The purchase of an annuity will also be treated as a disqualifying transfer unless: * the terms of the annuity provide for equal payments with no deferral and no balloon payments made and the annuity is irrevocable and nonassignable and is actuarially sound in accordance with the current Social Security Administration (SSA) tables. These tables are available on the SSA Web site at ssa.gov/OACT/STATS/table4c6.html; or * the annuity is an account or annuity described in the Internal Revenue Code at section 408(b) or (q); or * the annuity is purchased with proceeds from an account or trust described in the Internal Revenue Code at section 408(a), (c), or (p), from a simplified employee pension (SEP) plan, or from a Roth IRA described at 408A of the Internal Revenue Code. A 408A annuity should be identified on the annuity document. An Internal Revenue Form 5305-R must be filed with the Internal Revenue Service when an individual has a 408A annuity. This document is available on the Internal Revenue Service Web site at www.irs.gov/pub/irs-pdf/f5305r.pdf. In all cases, the annuity must name the Commonwealth of Massachusetts as the remainder beneficiary as described earlier in this memo. If you have any questions about any annuity document, send the document to Central Office for a Request of Legal Opinion. Annuities and Estate Recovery Information about all annuities purchased by the applicant or spouse must be sent to: Lifetime Lien Unit P.O. Box 15205 Worcester, MA 01615-0205 1-800-754-1864 Please send a copy of the entire annuity contract with a completed Annuity Tracking Form (ANN-1 (09/06)). Promissory Note, Loan, or Mortgage Effective April 1, 2006, the entire value of any promissory note, loan, or mortgage will be considered a disqualifying transfer of assets unless all of the following conditions are met: * the repayment terms are actuarially sound, based on actuarial tables on the Social Security Administration Web site at ssa.gov/OACT/STATS/table4c6.html; * the promissory note, loan, or mortgage provides for equal payments during the life of the loan, with no deferral or balloon payments; and * the promissory note, loan, or mortgage prohibit cancellation upon the death of the lender. Life Estates Effective February 8, 2006, a purchase of a life estate interest in another’s home is considered a disqualifying transfer, unless the purchaser resided in the home for at least one year after the date of purchase. Treatment of Deposits and Entrance Fees for Continuing Care Any deposit or entrance fee paid to a continuing care retirement community (CCRC) or life-care community (LCC) is considered a countable asset if the individual can use the fee to or the contract provides that the fee can be used pay for care when other income and assets are insufficient, and if the individual is eligible for a refund at death or on leaving the CCRC or LCC, so long as the fee does not confer any ownership interest in the CCRC or LCC. Questions If you have any questions about this memo, please contact the MassHealth Policy Hotline through your MEC designee. Examples of transfers and calculation of penalty periods Example 1: Mr. Butterworth Mr. Butterworth is a resident in the Happy Trails Nursing Facility. He applied for MassHealth on July 5, 2006, and asked for a start date of July 1, 2006. On his application he indicated that he gave some of his money to his nephews. His documentation reveals the “gifts” were $5,000 on March 10, 2006, $5,000 on April 30, 2006, and $5,000 on May 20, 2006. If not for the transfers, Mr. Butterworth would have been eligible for MassHealth payment for long-term-care (LTC) services on the requested start date of July 1, 2006. When will Mr. Butterworth be eligible for MassHealth? Calculate full amount of transfers (all transfers after 02/08/06). 03/10/06 $ 5,000 04/30/06 5,000 05/20/06 5,000 Total $15,000 Divide the total amount by the average daily nursing home cost ($246/day — 02/06). $15,000 ÷ $246 = 60.97 days = 60 days (single period of ineligibility) Period of ineligibility Begins on 07/01/06 (date the individual is otherwise eligible for MassHealth payment for LTC services). Date is later than the first day of the month the first transfer (on or after 02/08/06) was made (03/01/06). Add 60 days to later date (07/01/06). MassHealth start date = 08/30/06 Example 2: Mrs. Murphy Mrs. Murphy was admitted to the Failing Health Nursing Facility on June 1, 2006, and applied for MassHealth on July 15, 2006. She requested MassHealth coverage to start on her admission date. She indicated on the application there had been some transfers of resources and provided the necessary verifications. Her transfers were $30,000 on April 20, 2004, $50,000 on September 4, 2004, $75,000 on April 17, 2005, $30,000 on April 15, 2006, and $5,000 on May 28, 2006. When will Mrs. Murphy be eligible for MassHealth? Transfers before 02/08/06 Determine any overlapping periods of ineligibility. Divide each transfer by average daily nursing home cost ($246/day — 02/06). 04/20/04 $30,000 ÷ $246 = 121 days (eligible on 06/01/04) 09/04/04 $50,000 ÷ $246 = 203 days (eligible on 03/23/05) 04/17/05 $75,000 ÷ $246 = 304 days (eligible on 01/30/06) No overlapping periods, plus all periods of ineligibility have expired. Transfers on or after 02/08/06 04/15/06 $30,000 05/28/06 5,000 Total $35,000 Divide the total amount by the average daily nursing home cost ($246/day — 02/06). $35,000 ÷ $246 = 142.27 days = 142 days (single period of ineligibility) Period of ineligibility Begins on 06/01/06 (date the individual is otherwise eligible for MassHealth payment for LTC services). Date is later than the first day of the month the first transfer (on or after 02/08/06) was made (04/15/06). Add 142 days to later date (06/01/06). MassHealth start date = 10/21/06 Example 3: Mr. Abernathy Mr. Abernathy is a resident at the We Care Nursing Facility. He has been there for a couple of years and has been paying privately. He feels his assets are within the allowable limit and applied for MassHealth on July 21, 2006, and asked for a start date of July 1, 2006. He provided the necessary verifications. His records indicate he transferred $55,000 on April 16, 2005, $175,000 on July 1, 2005, $55,000 on January 17, 2006, $45,000 on April 25, 2006, and $25,000 on May 15, 2006. When will Mr. Abernathy be eligible for MassHealth? Transfers before 02/08/06 Determine any overlapping periods of ineligibility. Divide each transfer by average daily nursing home cost ($246/day — 02/06) 04/16/05 $ 55,000 ÷ 246 = 223 days (overlaps) 07/01/05 175,000 ÷ 246 = 711 days (overlaps) 01/15/06 55,000 ÷ 246 = 223 days Total $285,000 Periods of ineligibility overlap. $285,000 ÷ $246 = 1,158.53 days = 1,158 days MassHealth eligibility start date = 06/02/08 (includes leap year 2008) Period of eligibility has not expired. Transfers on or after 02/08/06: 04/25/06 $45,000 05/28/06 25,000 Total $70,000 Divide the total amount by the average daily nursing home cost ($246/day — 02/06). $70,000 ÷ $246 = 284.5 days = 284 days (one single period of ineligibility) Period of ineligibility: Begins on 06/02/08 (date the individual is otherwise eligible for MassHealth payment for LTC services). Date is later than the first day of the month the first transfer (on or after 02/08/06) was made (04/25/06). Add 284 days to later date (06/02/08). MassHealth start date = 03/09/09 Commonwealth of Massachusetts Executive Office of Health and Human Services www.mass.gov/masshealth MassHealth Enrollment Center Address: City/Town/Zip: Date: Annuity Tracking Form Member Information Name of the member Social security number Date of birth Date of death MassHealth eligibility dates LTC eligibility dates Worker (direct line) telephone number Issuing Company Information Name of issuing company Company telephone number Contact person/Claims examiner Policy number Reference number (if applicable) Junior Beneficiary Information Name/Telephone number Address Name/Telephone number Address Name/Telephone number Address Please attach this completed form along with a copy of the above-referenced annuity that is subject to recovery to: Lifetime Lien Unit P.O. Box 15205 Worcester, MA 01615-0205 1-800-754-1864 ANN-1 (11/06) Commonwealth of Massachusetts Executive Office of Health and Human Services www.mass.gov/masshealth MassHealth Enrollment Center Address: City/Town/Zip: Date: Notice of Preferred Remainder Beneficiary Name of issuing company Address City/Town/Zip The Commonwealth of Massachusetts Executive Office of Health and Human Services has determined that, pursuant to regulations at 130 CMR 520.007(J) and federal law at 42 USC §1396p(e), the Commonwealth of Massachusetts must be named a remainder beneficiary upon the death of the MassHealth applicant or MassHealth member, or spouse of the applicant or member, named below. If the Commonwealth of Massachusetts is not named as a beneficiary as explained below, the applicant’s or member’s eligibility for MassHealth benefits will be delayed or denied. Name of purchaser Account number Issuer name/Telephone number The Commonwealth of Massachusetts must be named a remainder beneficiary for the total amount of medical assistance paid on behalf of the annuitant in the first position (if there is no community spouse or minor or disabled child), or second position (following the community spouse or minor or disabled child) that will change to the first position if the community spouse or the representative of any minor or disabled child disposes of any remainder for less than fair-market value. The issuer of the annuity described here must also notify the MassHealth Enrollment Center named above if there is a change in the amount of income or principal being withdrawn. Upon adding the Commonwealth of Massachusetts as a remainder beneficiary, the issuer must furnish documentation to: Lifetime Lien Unit P.O. Box 15205 Worcester, MA 01615-0205 1-800-754-1864 Eligibility worker Telephone number Signature of Applicant or Authorized Representative Signature of Applicant Date Signature of Authorized Representative Date ANN-2 (11/06)