MAJOR CHANGES IN MEDICAID LAW DURING 2005 INDIANA GENERAL ASSEMBLY

I am sorry to report that citizens, once again, have not been given a voice in the Indiana legislative process. The Indiana General Assembly made sweeping changes to Medicaid law affecting Indiana's senior citizens, particularly those requiring nursing home care. The changes which include expanded estate recovery from the Medicaid recipient's and his or her spouse's estates raise serious legal and administrative issues and have consequences for seniors that were undoubtedly unintended. Since the amendments were inserted into the massive, 211 page budget bill in the final days of the General Assembly, they received no public comment or debate.

The provisions that were passed may have severe consequences for the citizens of Indiana, particularly its older adult population as the examples below illustrate. It is imperative that Indiana 's citizens be encouraged to seek legal counsel in estate planning, particularly if they anticipate a need for long-term care in their futures.

WHAT YOU SHOULD KNOW ABOUT THE NEW LAW:

• The law is retroactive in nature.
• The law is devastating to Indiana farm families.
• The law will seriously affect the estate plans of Indiana homeowners and farmers.
• The law will result in substantial litigation between the State and survivors of nursing home residents.
• The law conflicts with federal law in allowing Indiana to seek recovery against the non-recipient spouse's estate.
• The law encourages divorce of nursing home residents.
• The law encourages older adults to live with their partners, foregoing the benefits of a second marriage.
• The law encourages widows and widowers of Medicaid recipients to flee from Indiana to avoid the harsh consequences of this new law.
• The law will be extremely difficult to administer adding to the inconsistency in enforcement that is already a problem for Medicaid estate recovery.
• The law violates well-established principles of probate, family, and contract law.
• The law may impact charitable gifting through use of annuities.

ESTATE RECOVERY AGAINST SPOUSES

Current law: Allows Medicaid to seek estate recovery from the estate of a Medicaid recipient.

New law: Allows Medicaid to seek estate recovery from the estate of a Medicaid recipient and the estate of the recipient's spouse. Because the change is not prospective, recovery can be made against the estate of a non-recipient spouse even if the Medicaid-recipient spouse died years ago.

Example #1:
Farmer John's wife lived three years in a nursing home receiving Medicaid benefits. She died in 1995. The new law says that when Farmer John dies, the State can file a claim against the family farm John works with his three sons to satisfy its $90,000 "preferred claim." Under the current law, John's farm is protected as it is in his estate, not the estate of the now deceased Medicaid recipient spouse.

Example #2:
Widow Mary moves in with her daughter, Sue, after the death of her husband in the early 1990s. Sue provides home care for her mother, a victim of Alzheimer's disease, in Sue's home, keeping her mother there till she dies in 2006. Mary never receives Medicaid. Mary had $25,000 in a small savings account, and she added her daughter to the account in 1998 as a joint owner. This small token of Mary's appreciation for her daughter doesn't even compare to the cost savings to the State as a result of Sue's home care for her mother. But because Mary's deceased husband received Medicaid for a nursing home stay in the 1990's, the State claims all the funds in Mary's joint account when Mary dies.

Example #3:
Widower Thomas who has $100,000 in assets remarries. Some of those assets were acquired after the death of his first wife. His second wife, Thelma, brings no assets into the marriage. Thomas changes his will to provide for Thelma upon his death. Thomas and Thelma are married for fifteen years when Thomas becomes terribly ill. For the next five years, Thelma struggles to care for her husband, a stroke victim, at home until his death. He never received Medicaid, but because his first wife received Medicaid for years in a nursing home, the State makes a claim against his estate when he dies, leaving Thelma penniless.

Many older adults will consider moving out of state to avoid Medicaid's estate recovery. Since federal law currently does not allow recovery from the estate of the deceased non-recipient spouse's estate, the Indiana provision is in conflict with federal law, and it is likely to be challenged in court. However, until this issue is resolved, if your spouse is receiving or in the past received Medicaid, then your estate is at risk if you die.

ANNUITIES

The message here is plain and simple.Do not purchase annuities without getting counseling from an elder law attorney if there is a chance that you or your spouse may ever need Medicaid!