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The Federal Deficit Reduction Act of 2005 (DRA), if enacted, will dramatically change the legal landscape of Medicaid. The DRA seems to be headed for enactment in early February 2006 by an extremely narrow margin in both the Senate and the House, unless industry groups and constituents are able to persuade a few representatives to change their votes.

The main features of the DRA are designed to tighten Medicaid eligibility rules. First, the look back period on transfers of assets that must be considered on an application for Medicaid will be increased to 60 months for all transfers. Under current law, the look back period on outright transfers is 36 months, and on certain trusts is 60 months.

Second, the penalty period (for transfers of assets) during which an applicant is ineligible for Medicaid would commence only when he or she is in a nursing home (or receiving an institutional level of care), and when his or her application for Medicaid would have been approved but for the penalty period.

Third, if a Medicaid applicant has equity in her home in excess of $500,000 (or $750,000 at the state’s option), such excess must be counted on her application for Medicaid. (This rule will not apply when the spouse or minor, blind, or disabled child lives in the home.)

The net result of these and other changes in the DRA is that planning and paying for long-term care will become even more difficult. In addition, the quality of care at nursing homes may deteriorate with declining revenues as a consequence of the DRA.

A New York Elder Law attorney at Lamson & Cutner can assist you to navigate this complicated minefield of rules and regulations. Our Harrison, NY office gives you access to Westchester Elder Law attorneys as well.

If you are worried about paying for long-term care, a Medicaid Asset Protection Trust, or a different strategy, may be right for you. Click on Find Your Situation to learn more about what can be done in your specific situation.

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