Deficit Reduction Act (DRA)

In February of 2006 then President Bush signed into law the Deficit Reduction Act (“DRA”). The DRA drastically changed the eligibility rules for those who make transfers for Medicaid planning purposes. Particularly the “look-back” period – the period for which Medicaid can inquire into someone’s financial records, has been increased from 36 months to 60 months for transfers occurring after February 8, 2006. In addition, the DRA changed the time when the period of ineligibility caused by transfers (commonly referred to as the “penalty period”) commences.

Under prior law, the “penalty period” began when a transfer of assets was made. Under the DRA, the “penalty period” does not begin until all of a person’s funds are exhausted and that person is clinically eligible for Medicaid benefits. This change in the rules made it much more difficult to protect assets once a person is close to the time of needing nursing home care.

In light of the changes in the law instituted by the DRA, transfers should be made carefully — with a complete understanding of all the legal and financial consequences. For example, those who make transfers must be careful not to apply for Medicaid before the 60 month “look-back” period has expired without first consulting with an experienced elder law attorney.

Our firm assists clients with Medicaid planning and submitting an organized complete Medicaid application with the applicable County Board of Social Services if the need arises.