Deficit Reduction Act DRA Asset Transfer Provisions

1. Deficit Reduction Act (DRA) Asset Transfer Provisions  Vicki Jessup Wisconsin�s Department of Health and Family Services Division of Health Care Access & Accountability Bureau of Enrollment Management

2. Effective Date The Deficit Reduction Act divestment policies apply to all transfers made on or after February 8, 2006.

3. DRA Changes Look-Back Period Penalty Period begin date Penalty Period calculation Annuities Purchase of Life Estate Purchase of promissory notes, loans or mortgages Multiple Transfers Undue Hardship

4. Look Back Period Current Policy: 60 months prior to the date of application or date of entry into an institution for transfers made to certain non-exempt trusts; and 36 months for transfers of all other non-exempt assets or income DRA Policy: For all transfers� 60 months prior to the date that an individual is both institutionalized and has applied for Medicaid 60 months prior to the date that a non-institutionalized individual applies for Medicaid, or if later the date on which the individual transfers assets for less than fair market value.

5. Penalty Period Begin Date Current policy: Penalty period begins on the first day of the month in which the transfer occurred. DRA policy: Penalty period begins on the later of: The date the individual is institutionalized, has applied for Medicaid and is otherwise eligible for Medicaid but for the application of the penalty period; or The first of the month during or after which the transfer occurred.

6. Penalty Period Calculation Current policy: Penalty period is rounded down to whole months of ineligibility. DRA policy: Penalty periods cannot be rounded down. Penalty periods will include fractional or partial months of ineligibility.

7. Annuities Current Policy Annuity must be paid within the annuitant�s life expectancy. Payments must be fixed, period and cannot have a balloon payment. DRA Policy Current policy with additional requirement that the State of WI be named as the remainder beneficiary in the first position for at least the total amount of Medicaid paid on behalf of the annuitant; or The state is named as such beneficiary in the second position after the community spouse or minor or disabled child.

8. Life Estates Current Policy No prohibition DRA Policy Purchase of a life estate interest in another person�s home is prohibited, unless the purchaser resides in the home for at least one year after the date of purchase.

9. Promissory Notes, Loans and Mortgages Current Policy: Note, loan or mortgage must not have a provision that forgives a portion of the principal, or provides only for payment of interest. Cannot have any balloon payments or an inadequate interest rate relative to the market rate at the time the note or loan was signed. DRA Policy Note, loan or mortgage repayment term must be actuarially sound. Payments must be in equal amounts, with no deferral or balloon payments, and the loan balance cannot be cancelled upon the death of the lender.

10. Multiple Transfers Current Policy Add all transfers that occurred during look back period if they were in the same month, consecutive months, or if separate transfers result in separate penalty periods that overlap. DRA Policy Add all transfers that occurred during the look back period and use that total as the divested amount for the purpose of establishing the penalty period.

11. Undue Hardship Current Policy Penalty is waived if the agency determines that a denial of eligibility would create an undue hardship for the institutionalized individual. Undue hardship is defined as a serious impairment to the institutionalized individual�s health. DRA Policy Defines undue hardship as deprivation of medical care such that individual�s health or life would be endangered, or would deprive the person of food, clothing or other necessities of life. Undue hardship claim can be filed by either the institutionalized individual, their representative, or the facility in which the individual resides (with consent from individual or his/her representative)

12. Questions?