It seems that the major benefit programs go through significant changes periodically. The big Medicaid “adjust” happened in 2006. The big VA change happened October 18, 2018. We as VA accredited attorneys had been told a change was coming for nearly two years but they finally did it with only 30 days notice.
I personally have mixed feelings about the changes. One a positive note, the rule changes gave us a counselors of the law some very good guidelines with which to work. Until the rule changed, we dealt with “ranges” of income and assets which made it very difficult to advise clients on whether or not they actually qualified. We advised people to stay well under the range which made the benefit tougher to get with any certainty. Having specific numbers is good. And those numbers allowing for qualification are higher than what they were before the rule changes. That is a positive.
The medical qualification changes are slightly different. The most important change is that a diagnosis of dementia will most likely result in medical qualification. The applicant will still have to meet the requirement for 2 Activities of Daily Living if there is no dementia diagnosis.
The one bad thing that will hurt some people is the imposition of a look back for certain transactions that will prevent people from immediately qualifying for the benefit. Until the rule change, the system allowed us to arrange assets or purchase certain products that would result in immediate qualification. Many of those loopholes have now been closed.
Specifically, the new VA rules allow a person or couple applying for Medicaid to have countable assets and an annual income (only counting the Veteran’s income) of $123,600. This number does not include the home and 2 acres of land attached to the home. If the home has more than 2 acres, special steps will be needed to possibly exempt the home and the extra acreage. One specific exemption is if the property owner’s covenant requires more than 2 acres in order to build a home. Many subdivision have a 5 acre minimum so therefore a home in this subdivision would not be disqualified. However, this is a devastating rule for people who live in rural areas and have some land, especially farmers.
Other non-countable assets are the vehicle, household furnishings and prepaid burial plans. These assets can be kept pretty much regardless of value. Everything else gets counted and goes toward that $123,000 limit of assets and income.
The VA has changed somewhat how it views income. The new rule includes income based on the annual amount of the Veteran, and counts it toward the $123,600 total. However, as before, the cost of care paid out of pocket will reduce the income amount. Therefore, if someone has $123,600 in countable assets and income of $24,000, that would obviously disqualify them since these together total $144,000. However, if the Veteran moves into assisted living or hires a home care agency to come provide care, costing more than $2,000 per month ($24,000 annually) that eliminates the income and gets them back below the limit allowing them to qualify for the full VA benefit. Having very specific numbers is a great development.
One of the tools that has been eliminated is the ability to gift assets with no issue. There is now a 3 year lookback on any transfers for less than fair market value and for certain financial products. The lookback for VA is very similar to the lookback for Medicaid. If a veteran or their spouse gives away assets, the VA will “penalize” i.e. not provide benefits for the length of time that the gift would have provided the monthly benefit. For example, if the applicant gave away $50,000 the VA could impose a penalty of about 24 months.
However, one interesting twist on this is that the $123,600 limit comes into play with gifting. A Veteran CAN makes gifts without penalty if they have less than the asset limit. Only gifts made that are above the $123,600 will be penalized. For example, a veteran with only $120,000 in assets and makes a $50,000 gift, getting them down to $70,000, will NOT be penalized since they gave away money they could have kept. A person with $150,000 in total assets and makes a $50,000 gift will be penalized but only for the amount to get them back down to the asset limit of $123,600, or $26,400.
In summary, the rules are very different. They give practitioners much more bright line rules to follow and to advise clients. The bottom line is that it is much more important now to takes steps and plan for the future rather than wait until the need arises.