CMS Provides Guidance on Application of Medicaid’s Estate Recovery and Asset Transfer Rules to Medicaid Recipients Eligible Under The Affordable Care Act

The Centers for Medicare and Medicaid Services (CMS) has released a letter (CMS Letter SMD-14-001) to States with guidance on how to apply Medicaid’s estate recovery and transfer of asset rules to individuals newly eligible for Medicaid under the Affordable Care Act (ACA). In general, most of the long-term care rules that apply to traditional Medicaid recipients continue to apply.

The ACA creates a new category of Medicaid recipients by giving the states the option of expanding Medicaid eligibility to individuals and families with incomes up to 133 percent of the poverty line. Eligibility for this category is calculated on the applicant’s modified adjusted gross income (MAGI). Unlike traditional Medicaid, there is no asset limit for those Medicaid-eligible under the ACA.

Opponents of the ACA have been spreading the word that the government will recover from the estates of those who sign up for ACA-Medicaid when they die.  The realization that their homes might be subject to estate recovery was giving some individuals with low incomes second thoughts about signing up for Medicaid. The CMS letter attempts to address these concerns.

The CMS letter explains to State Medicaid directors that most of the estate recovery rules applicable to those traditional Medicaid recipients who receive long-term care services apply to MAGI-eligible individuals who receive long-term care services. However, CMS intends to take steps to avoid applying estate-recovery rules to MAGI-eligible individuals who do not receive long-term care services to keep this from becoming a barrier to Medicaid expansion eligibility.

Likewise, while there is no asset limit for ACA-Medicaid, the asset transfer rules apply to MAGI-eligible individuals who receive long-term care services, but are not applicable to those who don’t receive such services. For example, transfer of asset rules under traditional Medicaid applicable to annuities, life-estates, promissory notes, and trusts also apply to MAGI-eligible individuals who receive long-term care services.

To read the CMS letter, click here: CMS Letter SMD-14-001

(Adapted from information provided by the Academy of Special Needs Planners)

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