 |
Facts about the new law that will significantly affect how a nursing home gets paid.
On February 8, 2006 President Bush signed the Deficit Reduction Act which made significant changes to the law that controls how a nursing home gets paid when a resident runs out of assets. The Commonwealth of Pennsylvania implemented the new law on March 3, 2007. The position of the commonwealth of Pennsylvania is that some provisions of the new law will be retroactive to the date the Deficit Reduction Act was signed on February 8, 2006. For more information about when and how the new law will affect you click here.
If you want to be kept informed about new developments in the law you can sign up for our monthly newsletter.
 |
FACT:LOOK-BACK EXTENDED TO FIVE YEARS FOR ALL TRANSACTIONS
The look back period has been extended from three to five years. This means that the government has the right to examine all financial transactions a person has made within the past five years. For transfers of assets to individuals the look-back period had been three years and the new law extends the look-back for transfers to individuals. The look-back for transfers to a trust was already five years under the old rules and remains unchanged at five years under the new law.
|
 |
FACT:GIFTING PENALTY PERIOD STARTS LATER UNDER NEW LAW
For transfers, or as many would call it, gifts, the law requires that any gifts within the look-back be reviewed to see if any transfer was for less than fair market value. Essentially this means has there been any gifts made within the look-back. If a parent "sells" a house worth $100,000.00 to their son or daughter for $50,000.00 then the law will consider this a transfer for less than fair market value. Essentially this "sale" will be considered a $50,000.00 gift to the child since they paid $50,000.00 less for the house than the fair market value of the house. The classic one-dollar deed is considered a gift. Cash gifts under the $12,000.00 annual exclusion limit for federal estate and gift tax purposes are not exempt when it comes to the law regarding nursing homes. For any gift, the law applies a penalty period during which the government will not pay for nursing home care. Under the new law the penalty period will not start until a person is in a skilled nursing facility AND has exhausted their resources below the allowable limit.
|
 |
FACT:HOME EQUITY LIMITED TO $500,000.00
Generally, a person who resides in a nursing home in Pennsylvania can exempt their residence from having to be used to pay for nursing home care while they are living. Under the new law the amount of equity in a residence will be evaluated and any amount of equity in a residence that exceeds $500,000.00 will be considered available to pay for nursing home care.
|
 |
FACT:EACH SPOUSE'S RESOURCES ARE AVAILABLE FOR THE OTHER'S CARE
For married couples, a principle called "deeming of resources" is applied. "Deeming of resources"
means that married couples are treated as a unit. Assets titled to each spouse individually, as well as jointly titled assets, are considered as a resource of the marriage and therefore available to pay for nursing home care regardless of who is
in the nursing home. A spouse remaining at home is permitted to keep a limited amount of the couple's assets and with competent legal advice a couple can shelter the maximum allowed by law.
|
 |
FACT:THE STATE MUST BE NAMED AS BENEFICIARY OF CERTAIN ANNUITIES
If a person owns an annutity, under the new law you may be required to name the Commonwealth of Pennsylvania or the State of New Jersey as the contingent beneficiary.
An immediate or annuitized annuity may also be considered an available asset to pay for nursing home care in Pennsylvania. The Commonwealth of Pennsylvania continues to take the position that becasue there is a secondary market for streams of income like annuities, then the stream of income is treated as if it is money in the bank and is therefore available to pay for nursing home care.
|
 |
FACT:MOST NURSING HOMES ACCEPT GOVERNMENT PAYMENT FOR LONG TERM CARE
 There are two types of nursing homes. Those that accept government payment for long term care in the form of Medicaid, and those that do not. The vast majority of skilled nursing facilities, including most of the "best," accept Medicaid, and those facilities cannot discriminate against applicants on the basis of ability to pay. Many clients get into the best nursing homes and never pay privately, even for one day.
Some facilities are owned and operated by the different counties. Contrary to the stereotype, county run homes often are reported to be among the best. Regardless of who owns the facility, all facilities that accept Medicaid must follow the same rules.
|
 |
FACT:MEDICARE DOES NOT ALWAYS PAY FOR THE FIRST 100 DAYS OF NURSING HOME CARE
Medicare will pay up to the initial 100 days of nursing home care if certain conditions are met. How many skilled nursing days Medicare will pay for in a facility is a medical decision usually related to how well the individual is responding to therapy. Often, Medicare payment ceases long before 100 days are up. Once Medicare ceases paying, the facility will look for private payment from the individual receiving the care. Competent legal counsel is required to identify any issues which might prevent a smooth transition from any period of private pay to Medicaid.
|
 |
FACT:THERE IS NO ANNUAL EXCLUSION FOR GIFTING
Any gifting done within five years before nursing home admission must be reported, and there is no $10,000 per person gifting exemption when it comes to paying for nursing home care. Starting in 2006 the IRS allows an annual $12,000 exclusion for Federal Estate and Gift Tax purposes, the law which governs payment of long term nursing home care gives no such exclusion.
|
|
