Bureau of Enrollment Management Division of Health Care Access & Accountability Wisconsin Department of Health Services Wisconsin Medicaid Divestment Policy Changes

Agenda Background & Implementation Background & Implementation Specific information about changes in the following divestment and asset policies: Specific information about changes in the following divestment and asset policies: The “look-back” period The “look-back” period Penalty period begin date Penalty period begin date Multiple transfers Multiple transfers Intent Intent Life Estates Life Estates Promissory notes, loans and mortgages Promissory notes, loans and mortgages Annuities Annuities Partial month penalties Partial month penalties Recalculation of penalty period Recalculation of penalty period Undue hardship waivers Undue hardship waivers CCRC or LCC entrance fees CCRC or LCC entrance fees Home Equity Home Equity References References

Background The asset transfer provisions of the federal Deficit Reduction Act of 2005 (DRA) apply primarily to divestments that occur on or after February 8, The asset transfer provisions of the federal Deficit Reduction Act of 2005 (DRA) apply primarily to divestments that occur on or after February 8, Changes to state law were required for implementation and were included in 2007 Wisconsin Act 20, with an effective date of February 1, Changes to state law were required for implementation and were included in 2007 Wisconsin Act 20, with an effective date of February 1, A workgroup with representation from the nursing home industry and elder law attorneys provided recommendations to DHS about how to implement the policy changes in Wisconsin. A workgroup with representation from the nursing home industry and elder law attorneys provided recommendations to DHS about how to implement the policy changes in Wisconsin.

Implementation Generally… Generally… New DRA policy is applicable to divestments that occur on or after January 1, New DRA policy is applicable to divestments that occur on or after January 1, Divestments that occurred prior to January 1, 2009 are subject to previous asset transfer policies. Divestments that occurred prior to January 1, 2009 are subject to previous asset transfer policies. Communication Communication Operations Memo issued for local agencies on January 7, 2009 Operations Memo issued for local agencies on January 7, 2009 Question & Answer session in early February Question & Answer session in early February Changes will be incorporated into the Medicaid Eligibility Handbook in an upcoming release Changes will be incorporated into the Medicaid Eligibility Handbook in an upcoming release Reminders Reminders Card services Card services Asset transfer policy is applicable only to applicants and recipients of LTC Medicaid Asset transfer policy is applicable only to applicants and recipients of LTC Medicaid

Long Term Care Medicaid Institutional Medicaid Institutional Medicaid Home and Community Based Waivers* Home and Community Based Waivers* Community Options Program Community Options Program IRIS (Include, Respect, I Self-Direct) IRIS (Include, Respect, I Self-Direct) Managed Long Term Care Programs* Managed Long Term Care Programs* Family Care Family Care Pace (Program of All-Inclusive Care for the Elderly) Pace (Program of All-Inclusive Care for the Elderly) Wisconsin Partnership Wisconsin Partnership * Considered institutionalized for purposes of divestment policy

The “look back” period The look back period begins when an individual is both institutionalized and has applied for long term care Medicaid. The look back period begins when an individual is both institutionalized and has applied for long term care Medicaid. Trusts Trusts Remains 60 months Remains 60 months Non-trust transfers Non-trust transfers Pre-DRA- 36 month look back period Pre-DRA- 36 month look back period DRA requires 60 month look back period DRA requires 60 month look back period Phased in approach Phased in approach 36 months until 1/1/12 36 months until 1/1/ months between 1/1/12- 12/31/ months between 1/1/12- 12/31/13 Effective 1/1/14, 60 months Effective 1/1/14, 60 months

Penalty Period Begin Date Applicants Applicants Date on which the person is institutionalized, has applied for LTC Medicaid and is otherwise eligible except for imposition of the penalty period. Date on which the person is institutionalized, has applied for LTC Medicaid and is otherwise eligible except for imposition of the penalty period. Applicants for HCBW in counties without available funding can begin a divestment penalty period if otherwise eligible for Medicaid. Applicants for HCBW in counties without available funding can begin a divestment penalty period if otherwise eligible for Medicaid.

Penalty Period Begin Date Recipients Recipients Penalty period begins on the first of the month when divestment occurred. Penalty period begins on the first of the month when divestment occurred. Adequate and timely notice must be provided before benefits can be terminated. Adequate and timely notice must be provided before benefits can be terminated. Benefits received between penalty period begin date and date LTC coverage was terminated are recoverable if divestment is not reported timely (10 calendar days). Benefits received between penalty period begin date and date LTC coverage was terminated are recoverable if divestment is not reported timely (10 calendar days).

Multiple Transfers Multiple Transfers During Look-Back Multiple Transfers During Look-Back Pre-DRA- add together divestments that: Pre-DRA- add together divestments that: Were made in sequential months, or Were made in sequential months, or Had penalty periods that overlap, or Had penalty periods that overlap, or Had a penalty period that extended into a month immediately preceding a month in which there was another transfer. Had a penalty period that extended into a month immediately preceding a month in which there was another transfer.

Multiple Transfers (cont) DRA- count all transfers during the look-back period as one divestment DRA- count all transfers during the look-back period as one divestment Establish penalty period based on that total Establish penalty period based on that total Applicable to divestments on or after 1/1/09 Applicable to divestments on or after 1/1/09 If penalty period from divestment that occurred prior to 1/1/09 extends into 2009, any penalty period imposed for transfers made in 2009 can not begin until previous penalty period ends. If penalty period from divestment that occurred prior to 1/1/09 extends into 2009, any penalty period imposed for transfers made in 2009 can not begin until previous penalty period ends.

Intent A transfer is not a divestment if individual can demonstrate that it wasn’t made with the intent of becoming eligible for Medicaid. A transfer is not a divestment if individual can demonstrate that it wasn’t made with the intent of becoming eligible for Medicaid. DRA did not change any aspect of policy related to intent, but DHS provided additional guidance to local agencies about exceptions. DRA did not change any aspect of policy related to intent, but DHS provided additional guidance to local agencies about exceptions. List of exceptions is not intended to be all- inclusive List of exceptions is not intended to be all- inclusive

Intent - Exceptions Individual had made arrangements to provide for LTC needs by having sufficient financial resources and/or LTC insurance for 5 years of care at time of transfer. Individual had made arrangements to provide for LTC needs by having sufficient financial resources and/or LTC insurance for 5 years of care at time of transfer. Given health and age at time of transfer, there was no expectation of LTC needs within 5 years of transfer. Given health and age at time of transfer, there was no expectation of LTC needs within 5 years of transfer. Pattern of charitable giving, or gifting to family members- as long as total annual gifts did not exceed 15% of gross annual income. Pattern of charitable giving, or gifting to family members- as long as total annual gifts did not exceed 15% of gross annual income. Resources spent on current support of dependent relatives living with the individual. Resources spent on current support of dependent relatives living with the individual.

Life Estates The purchase of a life estate on or after 1/1/09 is considered a divestment, unless purchaser: The purchase of a life estate on or after 1/1/09 is considered a divestment, unless purchaser: Resides in the home for at least 12 consecutive months after date of purchase; and Resides in the home for at least 12 consecutive months after date of purchase; and Received fair market value for the purchase. Received fair market value for the purchase. Absences from the home for less than 30 days do not affect the 12 month clock. Absences from the home for less than 30 days do not affect the 12 month clock.

Promissory Notes, Loans and Mortgages Promissory notes, loans or mortgages purchased on or after 1/1/09 are divestments unless the repayment terms are: Promissory notes, loans or mortgages purchased on or after 1/1/09 are divestments unless the repayment terms are: Actuarially sound, Actuarially sound, Provide for payments to be made in equal amounts during the term of the loan and with no deferral or balloon payments, and Provide for payments to be made in equal amounts during the term of the loan and with no deferral or balloon payments, and Prohibit the cancellation of the balance upon the death of the lender. Prohibit the cancellation of the balance upon the death of the lender. If above criteria are not met, the divested amount is the outstanding balance due on the note, loan, or mortgage as of the date of application for Medicaid LTC coverage. If above criteria are not met, the divested amount is the outstanding balance due on the note, loan, or mortgage as of the date of application for Medicaid LTC coverage.

Annuities- Disclosure Disclosure is required at application and review for any annuities purchased on or after 1/1/09 in which the applicant/member or his/her community spouse has an interest, whether irrevocable or counted as an asset Disclosure is required at application and review for any annuities purchased on or after 1/1/09 in which the applicant/member or his/her community spouse has an interest, whether irrevocable or counted as an asset Failure to disclose the required information results in ineligibility for Medicaid (LTC and card services) Failure to disclose the required information results in ineligibility for Medicaid (LTC and card services)

Annuities- Disclosure (cont) Requirement also applies to annuities purchased prior to 1/1/09 if an action is taken to change the course of payment or treatment of income or principal, including: Requirement also applies to annuities purchased prior to 1/1/09 if an action is taken to change the course of payment or treatment of income or principal, including: Additions of principal Additions of principal Elective withdrawals Elective withdrawals Request to change the distribution Request to change the distribution Election to annuitize the contract Election to annuitize the contract Change in ownership Change in ownership Any other non-routine action Any other non-routine action

Annuities- Remainder Beneficiary Designation Annuities are considered a divestment unless: Annuities are considered a divestment unless: The State is named the remainder beneficiary in first position for at least the total MA paid, or The State is named the remainder beneficiary in first position for at least the total MA paid, or State is remainder beneficiary in second position after community spouse or minor/disabled child and is named in first position if spouse or child disposes of such remainder for less than fair market value. State is remainder beneficiary in second position after community spouse or minor/disabled child and is named in first position if spouse or child disposes of such remainder for less than fair market value.

Annuities- Remainder Beneficiary Designation (cont) Applies to annuities purchased on or after 1/1/09 by LTC applicant/spouse and certain transactions on or after 1/1/09. Applies to annuities purchased on or after 1/1/09 by LTC applicant/spouse and certain transactions on or after 1/1/09. Local agencies will notify annuity issuers of the assignment (up to the amount of benefits paid under Medicaid). Local agencies will notify annuity issuers of the assignment (up to the amount of benefits paid under Medicaid). Issuers are required to report any changes in the amount of income or principal being withdrawn from an annuity. Issuers are required to report any changes in the amount of income or principal being withdrawn from an annuity.

Annuities- Additional Criteria Annuities that are considered “unavailable” and purchased on or after 1/1/09 (or prior to 1/1/09 for which certain transactions were made on after 1/1/09) are considered a divestment unless: Annuities that are considered “unavailable” and purchased on or after 1/1/09 (or prior to 1/1/09 for which certain transactions were made on after 1/1/09) are considered a divestment unless: The annuity is created from among several types of IRAs, or The annuity is created from among several types of IRAs, or For irrevocable and non-assignable annuities, they pay out within the annuitant's lifetime and with regular payments For irrevocable and non-assignable annuities, they pay out within the annuitant's lifetime and with regular payments

Annuities- Additional criteria Not applicable to annuities that are considered available resources. Not applicable to annuities that are considered available resources. Applicable only to annuities purchased by or on behalf of an annuitant who is the applicant/recipient of Medicaid LTC coverage. Does not apply to annuities for which the community spouse is the annuitant. Applicable only to annuities purchased by or on behalf of an annuitant who is the applicant/recipient of Medicaid LTC coverage. Does not apply to annuities for which the community spouse is the annuitant.

Partial month penalties Pre-DRA, penalties were rounded down and calculated in whole months. Pre-DRA, penalties were rounded down and calculated in whole months. For divestments that occur on or after 1/1/09, the penalty period is calculated as the number of days of ineligibility for Medicaid LTC coverage. For divestments that occur on or after 1/1/09, the penalty period is calculated as the number of days of ineligibility for Medicaid LTC coverage. Penalty period will be calculated in days using the average daily nursing home rate for a private pay patient (currently $205.77). Penalty period will be calculated in days using the average daily nursing home rate for a private pay patient (currently $205.77).

Recalculation of penalty periods Full refund- the entire penalty period is nullified. Full refund- the entire penalty period is nullified. Partial refund- penalty period is recalculated only if the returned resource is used to pay for medical and/or remedial expenses incurred during the divestment penalty period. Partial refund- penalty period is recalculated only if the returned resource is used to pay for medical and/or remedial expenses incurred during the divestment penalty period.

Recalculation of Penalty Periods (cont) Partial Refunds Partial Refunds Care was provided in a nursing home or other medical institution, CBRF or other assisted living facility Care was provided in a nursing home or other medical institution, CBRF or other assisted living facility Payment for care provided by family members is allowed only if there was a written and notarized contract in existence at time service was provided and costs do not exceed reasonable compensation amount. Payment for care provided by family members is allowed only if there was a written and notarized contract in existence at time service was provided and costs do not exceed reasonable compensation amount. Exception for partial refunds made with non-cash item (e.g. land, stocks, bonds) Exception for partial refunds made with non-cash item (e.g. land, stocks, bonds)

Undue Hardship Waivers Penalty period is waived if imposition would deprive the individual of: Penalty period is waived if imposition would deprive the individual of: medical care endangering health or life; or medical care endangering health or life; or food, clothing, shelter or other necessities food, clothing, shelter or other necessities LTC facility may file on person's behalf LTC facility may file on person's behalf State will pay up to a 30-day bed hold while waiver decision was pending for State will pay up to a 30-day bed hold while waiver decision was pending for divestments on or after 1/1/09

Undue Hardship Waiver Process Effective date Effective date If request is received within 20 days after notification and is approved, effective date of waiver is initial date of penalty period If request is received within 20 days after notification and is approved, effective date of waiver is initial date of penalty period If request is received after 20 days of notification and is approved, effective date cannot be earlier than date of request. If request is received after 20 days of notification and is approved, effective date cannot be earlier than date of request.

Undue Hardship Waiver Process Required documentation Required documentation Signed statement about whether assets are recoverable and attempts made to recover the divested assets Signed statement about whether assets are recoverable and attempts made to recover the divested assets Proof that an undue hardship would exist if penalty period is applied. Examples: Proof that an undue hardship would exist if penalty period is applied. Examples: Institutionalized – copy of notification from LTC facility with date of discharge and alternative placement location Institutionalized – copy of notification from LTC facility with date of discharge and alternative placement location Waivers/Family Care- cost estimate of LTC, shelter, food and other necessities which is then compared to resources Waivers/Family Care- cost estimate of LTC, shelter, food and other necessities which is then compared to resources

CCRC or LCC Entrance Fees Continuing Care Retirement Community (CCRC) or Life Care Community (LCC) Continuing Care Retirement Community (CCRC) or Life Care Community (LCC) Effective January 1, 2009, CCRC or LCC entrance fees are considered an available asset when all of the following conditions apply: Effective January 1, 2009, CCRC or LCC entrance fees are considered an available asset when all of the following conditions apply: Ability to use the fee, even in part, to pay for care if other resources are insufficient Ability to use the fee, even in part, to pay for care if other resources are insufficient Eligible for refund of any remaining entrance fee amount upon death or termination of the contract Eligible for refund of any remaining entrance fee amount upon death or termination of the contract Contract does not confer ownership interest Contract does not confer ownership interest Policy applies to all Medicaid, not just LTC Policy applies to all Medicaid, not just LTC

Home Equity LTC Disqualification Based on Home Equity LTC Disqualification Based on Home Equity Persons with home equity greater than $750,000 are not eligible for Medicaid LTC coverage. Persons with home equity greater than $750,000 are not eligible for Medicaid LTC coverage. Not applicable if spouse, minor or disabled child resides in home Not applicable if spouse, minor or disabled child resides in home Effective for applications on or after January 1, Current recipients are exempt unless they becomes ineligible for 30 or more days and need to reapply for LTC Medicaid. Effective for applications on or after January 1, Current recipients are exempt unless they becomes ineligible for 30 or more days and need to reapply for LTC Medicaid.

References BEM/DFS Operations Memo (issued 1/7/09) Medicaid Enrollment Handbook, Ch Wisconsin Statutes, sections and Deficit Reduction Act of 2005, PL , Sections 6011, et. seq. Social Security Act Sec (c), et. seq.