Thursday January 13, 2000
In the Medicare Catastrophic Coverage Act of 1988 (MCCA í88), Congress made Medicaid transfer of assets restrictions longer, stronger and mandatory. Almost in the same breath, however, they eliminated the restrictions on transferring assets to qualify for Supplemental Security Income. (SSI is the federal welfare program for the aged, blind and disabled.)
From that point on, anyone could qualify for SSI overnight just by giving away everything he or she owned. This disastrous public policy was an open invitation to financial abuse of the elderly by greedy relatives, grasping charities and their collaborating lawyers: "Donít worry, Mother, weíll take care of you and you can get back some of the money you paid to the government in taxes all those years."
One gambit was to persuade elders to sign over all of their assets to an heir or charity thereby immediately establishing SSI eligibility AND Medicaid acute-care eligibility. SSI would then start paying a monthly cash stipend and the seniors would qualify immediately for Medicaid services not covered by Medicare, often including home and community-based care. Of course, three years later, if the elders came to need nursing home care, they would qualify immediately for Medicaid without any difficulty, because the transfer of assets look-back period would have already run its course.
Thankfully, the door is closing on this abuse of the public welfare system. Congress and President Clinton have reinstated transfer of assets restrictions on eligibility for the Supplemental Security Income program.
The new rules, implemented in the Foster Care Independence Act of 1999 (H.R. 3443), which the President signed on December 14, 1999, place restrictions on asset transfers used to qualify for SSI that are very similar to the rules governing qualification for Medicaid, i.e. an eligibility penalty based on the amount of assets transferred within a three-year look-back period. Furthermore, the new law tightens up controls on the use of trusts to qualify for SSI. The trust restrictions are also very similar to those that apply to qualification for Medicaid nursing home benefits.
The transfer penalty will be codified at 42 U.S.C. 1382b(c) and is effective for transfers occurring on or after December 14, 1999. The trust rules will be codified at 42 U.S.C. 1382b(e) and will apply to trusts established on or after January 1, 2000.
Thus, the incentive for financial shamans to impoverish infirm elders with the wave of a magic legal wand has been at least slightly diminished. Unfortunately, the job is not finished. Medicaid estate planning attorneys will use the same techniques to evade the new SSI rules as they have used so successfully to circumvent Medicaid transfer of assets restrictions.
Thatís why it is so important to encourage Congress, the President, state legislatures and Governors to target public assistance programs more effectively to the genuinely needy. Only with sensible public policies that refuse to reward irresponsibility and legalized financial abuse will the public understand the critical need to save and insure adequately for retirement and long-term care security.