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Medicaid: Deficit Reduction Act of 2005

The Deficit Reduction Act of 2005, Pub. L. No. 109-171 (Effective date February 8, 2006). The Deficit Reduction Act of 2005 (DRA) changed the Medicaid eligibility rules significantly. Most of the changes are (or will be) codified at 42 U.S.C. § 1396p. DRA lengthened the look-back from 36 to 60 months; changed the start date for imposition of a Medicaid penalty following uncompensated transfers from the date of the gift to the date on which the applicant would otherwise be eligible but for the gift; prohibited States from rounding penalties down or disregarding fractional periods of ineligibility; and at the State’s option, aggregating multiple transfers over a period of more than one month to treat them as a single transfer. DRA also changed how States apply the transfer rules to annuities, promissory notes and life estates, limited the exemption of the home place to $500,000 in equity, and changed the rules concerning proof of citizenship. Other changes to the eligibility rules were made, however the changes described above are the most significant. Each State either has adopted or is in the process of adopting rules implementing DRA and it is expected that the rules will be applied differently in various jurisdictions. The National Academy of Elder Law Attorneys published a White Paper outlining DRA’s changes which is available in a special edition of Volume 2 of the NAELA Journal.

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