You asked (1) if the Department of Social Services (DSS) is instituting a new policy to increase from 36 to 60 months the Medicaid transfer of asset "look-back" period for home property transfers, (2) how and when this policy change came about, (3) whether such a change can go forward without explicit legislative authority, and (4) whether any research has been done about how such a change might affect elderly people who apply for Medicaid in nursing homes or other long-term care settings or the staff in these settings who provide help with these applications.

The Office of Legislative Research is not authorized to render legal opinions and this report should not be considered one.

This is the first of two reports about the waiver application. The next report, due out shortly, will concentrate on the waiver's transfer of asset "start-date" changes.

SUMMARY

As part of a larger request to waive certain Medicaid transfer of asset rules, DSS is seeking federal approval to increase the look-back period for real property (e. g. , homes) transfers from 36 to 60 months. The 2001 General Assembly directed the department to seek federal approval to change the start-up period for penalties imposed for improper transfers made within the current 36-month look-back. DSS apparently believes that it has the authority to incorporate increasing the property look-back into this request.

DSS asserts that tightening the transfer of asset rules will make it harder for people who can afford to pay for their long-term care needs to shift this burden to the Medicaid program. Instead, they will keep these resources and pay for their care until such time they cannot afford to do so.

DSS does not have explicit statutory authority to make such a change. But state law allows the legislature to approve such waivers before they are sent to the federal government. Hence, if the legislature approves the entire waiver, it will be giving DSS this authority retroactively.

It appears that Connecticut will be the first state to embark on such a policy change so there is probably scant research available on how it might affect nursing homes and elderly Medicaid applicants. But DSS, in its proposal, has asked that thresholds be established to disregard certain smaller transfers made during the look-back period, thus relieving homes and residents of having to account for these transactions. So while certain seniors may be forced to spend their savings on long-term care, they may also be able to transfer smaller amounts without DSS scrutiny and possible penalties.

INCREASING THE LOOKBACK FOR PROPERTY TRANSFERS

"Look-Back"---Going from 36 to 60 Months for Real Property Transfers

In general, DSS presumes that someone who transfers an asset for less than fair market value within 36 months of applying for long-term care Medicaid has done so to qualify for benefits. Thus, it scrutinizes such transfers and applicants must show that the transfer was made for some other purpose, or that fair market value was in fact received. When DSS determines that an improper transfer has occurred, it makes the applicant ineligible for a period of time based on the uncompensated value of the asset in question.

The Medicaid 1115 waiver proposal includes a request to increase the look-back period, for real property transfers only, from 36 months to five years. This means that DSS, when reviewing a Medicaid application, will look back five years to see if someone transferred real property during that time.

Under current law, certain real property transfers made within the look-back period are exempt from penalties, such as transfers to spouses and children under the age of 21. These exemptions would remain under the proposed waiver.

Reason for the Change

In the waiver introduction, DSS states the waiver is meant to discourage people who can pay for some or all of their long-term care needs from intentionally shifting this responsibility to the Medicaid program. Elsewhere in the proposal, DSS writes of how the policy changes will save the state millions in Medicaid expenditures, as people will be encouraged not to hire estate planners to protect their assets by diverting them to third parties. Such a change, it suggests may (1) encourage more people to purchase long-term care insurance, thus delaying outlays of Medicaid funds for this type of care, or (2) encourage people to use these funds to pay directly for long-term care (self-pay), again delaying the need for Medicaid. Again, this rationale applies to the whole waiver, not just the look-back increase.

For the real property transfers specifically, DSS contends that unlike other assets, these types of transfers are much easier to trace and are generally significant in terms of value.

Does DSS Have the Authority to Do This?

DSS does not have explicit statutory authority to make this change. Section 4 of PA 00-2, June Special Session directed DSS to seek a waiver to change the start-up of the penalty period, which, under current rules, often renders such penalties useless as the penalty period often expires before an elderly person applies for Medicaid. The act says nothing about increasing the look-back period.

In fact, such a change would seem to run contrary to current state law. CGS § 17b-261(a) generally requires that DSS treat the disposition of assets in accordance with federal Medicaid law. The federal law, which DSS is attempting to waive in its proposal, requires DSS to use a look-back period of 36 months. If the legislature approved the waiver, DSS would be making a policy change contrary to what state law requires.

But another DSS statute, CGS § 17b-8, may mitigate this concern. It requires DSS to submit any federal waiver applications to the Appropriations and Human Services committees before submitting them to the federal government. These committees may approve, deny, or modify the waiver request, provided they do so within 30 days of receiving it. It is unclear whether DSS would have to comply with any such action. However, DSS points to this provision as the department's general authority to seek waivers, with the understanding that the legislature must give its approval before it can actually implement the resulting changes. By approving the waiver, the legislature would, in effect, authorize the policy, albeit implicitly.

The law is silent on what happens if the committees fail to act on the application or if they disagree on how to act. But the law's legislative history provides that the DSS commissioner can proceed with a waiver request, regardless of what the committees do.

We are unaware of any major policy-changing waivers that DSS has received that were not first authorized legislatively.

Will The Policy Change Create a Greater Administrative Burden for Homes or Applicants?

There are clearly going to be people who will be affected by this change. As stated above, DSS assumes that the policy shift will affect people's behavior, either by encouraging them to purchase long-term care insurance or making out-of-pocket payments for their long-term care. Some people will not change their behaviors and will be penalized.

Although DSS will be looking back farther at home transfers, the proposal suggests that these types of transfers are "easier to trace by supporting documentation. " One could interpret this to mean that the Medicaid applicant or nursing home staff would have a relatively easy time of documenting these types of transactions, as it would appear that DSS would be able to trace them at an administrative level.

Moreover, the waiver proposes the establishment of "thresholds" for uncompensated transfers, which, DSS asserts, will reduce the burden of documenting uncompensated transfers. Currently, DSS looks at all of these transfers, adds them up, and assesses a penalty based on the total. With the waiver, any uncompensated transfers with a value below these thresholds would not be subject to scrutiny or a penalty period, even if their total exceeds the threshold amounts.

For example, if someone made four separate withdrawals from a bank of $ 500 each 18 months before applying for Medicaid, DSS would not ask the applicant to show whether they were uncompensated transactions. Likewise, no penalty period would be assessed because DSS would not assess a penalty until the combined transactions had a value of $ 2,500 or more. However, if someone withdrew $ 1,000 six months before applying, the full amount would be subject to a penalty since any transfers made within a year of application would be subject to a penalty assessment. The threshold levels are presented in Table 1.

Table 1. Thresholds for Uncompensated Asset Transfers

¹The five year look-back would presumably apply only to real property transfers.

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