Medicaid Planning in Advance of Changes to the Healthcare System
By: Salvatore M. Di Costanzo, Esq.
With Congress about to break for a two week Spring recess, the repeal of Obamacare appears to have stalled and remains uncertain. Notwithstanding, we must pay attention to the various proposals that have been put forth by the current administration and the effect they may have on our clients.
One of the underlying themes of the failed American Healthcare Act, also known as Trumpcare, is to shift the burden of health care costs, largely Medicaid costs, from the federal government to the States.
Currently, the federal government shares the cost of Medicaid with the States. New York already pays almost fifty percent of the Medicaid cost associated with its residents. The current administration has proposed to achieve this burden shift through a block grant system or per capita spending.
How is Medicaid affected by a Block Grant system?
Under a block grant system, each State will receive a fixed dollar amount from the federal government regardless of the number of enrollees in the program. In theory, a block grant system is supposed to make the States more disciplined as to how they administer their social welfare programs.
Opponents of the block grant system argue that there is no way to determine the amount of funds to be blocked for each State and that block grants do not keep up with rising costs or more importantly, population growth.
How is Medicaid affected by a Per Capita system?
Under a per capita system, federal funding is provided to the States based on the number of enrollees in the system. Spending per enrollee is capped at a certain amount. Proponents of a per capita spending system argue that it allows for population growth while also implementing a limit (cap) on spending per enrollee. New York currently spends a significant amount per enrollee.
If Obamacare is replaced and repealed with either a block grant system or per capita system, it is likely that changes to the Medicaid program are forthcoming in some capacity.
If the States receive less funding from the federal government, they will in some way need to make up the difference. In doing so, it is conceivable that there could be significant changes in the Medicaid program such as changes to the Medicaid eligibility rules. For example, if the State increases the current five-year look-back period, the effect would be to exclude a certain number of people from Medicaid coverage, thereby allowing the State to bridge the gap in funding.
Although we have no current knowledge of changes described above, it would behoove you to take advantage of current elder law planning opportunities before there are changes. One such technique is the irrevocable Medicaid trust which has proved to be one of the most viable planning techniques for clients who want to preserve their assets if long-term care is required.
As many of you know, if you create the Medicaid trust and do not need nursing home care for five years (the current look-back period), the assets of a properly drafted trust cannot be considered available resources by Medicaid.
If there are changes on the horizon, such as changes to the look-back period, the technique remains viable, but with a longer waiting period. If you are someone who has been procrastinating on meeting with an elder law attorney to discuss your planning, including the benefits of a Medicaid trust – now is the time!
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