The process is of applying for Medicaid long term care assistance can be somewhat difficult. The documentation requirements can be voluminous and the process will typically take at least 45 days. I have seen several recent cases take as long 4 months to be approved.

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An astounding thing happened during the fall of 2007. Michigan changed its Medicaid policy with respect to annuities and implemented those changes with retroactive effect.

The new policy requires annuities to have several features in order to avoid being considered a divestment. Among the requirements is a rule that the state of Michigan must be named a remainder beneficiary to the extent of Medicaid benefits received. This law applies to all annuities purchased or altered after February 8th, 2006, the day President Bush signed the Deficit Reduction Act into law.

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Under previous Medicaid policy, applicants for long term care were given the benefit of a doubt most of the time. In some cases, a demonstrated intent to complete asset conversion, which is the process of converting non-exempt assets into exempt or excluded assets and is the heart of Medicaid planning, would be enough to pass scrutiny.

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Many Elder law attorneys advise loving couples to pursue divorce as a method of asset protection. I have never found the technique necessary and, frankly, find the approach ethically questionable. Alternatives exist for both pre-planning and crisis planning that avoid the murky waters of a consensual divorce between an otherwise happily-wed pair. It is my view that you should not have to pretend to be something that you are not in order to protect assets. Everything is always disclosed in the Medicaid applications I advise clients on and the asset protection plans I create. I have helped dozens of couples protect their estates from the cost of long term care and there has never been a reason to resort to divorce.

When President Bush signed the Deficit Reduction Act of 2006, the states began to implement that law through a steady patchwork of regulations. Michigan issued revisions to Medicaid qualification rules on a quarterly basis throughout 2007 and there is no reason to think that this pace will slow down in 2008. I will be posting on a regular basis on the many recent changes that have been introduced here in Michigan, including those with retroactive effect and those pertaining to estate recovery.

This article highlights the reality that more changes in Medicaid law are forthcoming.

CMS has proposed new rules that would give states more latitude in designing their Medicaid programs. The rules, which address provisions of the Deficit Reduction Act of 2005 and the Tax Relief and Health Care Act of 2006, would give states the ability to build Medicaid programs that work more like their local private health plans. CMS also has issued proposed regs, based on DRA provisions that will allow states to change premiums and cost-sharing rules.

CMS (The Center for Medicare and Medicaid Services) is a federal agency that oversees the states’ implementation of Medicare and Medicaid. For instance, Michigan has submitted its recently passed estate recovery program to CMS for approval. Whether Michigan will be allowed to use the comparatively mild form of estate recovery will depend on the opinion of CMS.

Medicare and Medicaid are hugely expensive programs and with the average cost of care in a nursing home at about $6,500.00 month in Michigan, long term care Medicaid is a particularly expensive program. It is generally encouraging that CMS is allowing states to develop programs more tailored to their particular circumstances. This may allow some states to stretch their already strained budgets a bit further. But eligibility rules for long term care Medicaid will become ever more restrictive in the near future, and, I would suggest, that if the Deficit Reduction Act is not enough to limit access to Medicaid, that further reform will be coming. This highlights the need for both pre-planning and long term care insurance.

When a single person goes to the nursing home for long term care, there are several obstacles to overcome in order to preserve the homestead. First of all, the patient will be limited to just $2,000.00 in non-exempt assets. Secondly, the homestead will be at risk for estate recovery–a program by which the state can seek repayment of Medicaid benefits against the estate of a Medicaid recipient.

But perhaps the most dangerous aspect of this scenario is that the qualification rules will not allow any money beyond the $2,000.00 limit to be set aside for maintenance of the homestead without some fairly complex asset protection techniques. Gifting assets will result in a period of ineligibility that will not be served until the applicant is otherwise out of money and in the nursing home. Under previous law, it would have been an option to enter into a personal care contract in order to shelter some money. Personal care contracts are now reviewed by such exacting standards that few will pass muster. Current law requires at least some asset protection planning if the homestead is going to be preserved without imposing a hardship on other family members.