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SMART ACT Changes to Illinois Medicaid Eligibility for Long-Term Care
Effective Date: June 14, 2012 and Emergency Amendments to SMART Act Effective Date: July 1, 2012
 
©2012
Prepared by: Anthony B. Ferraro 
Attorney-MSTax-CPA
The Law Offices of Anthony Ferraro, LLC
The Elder Law, Estate &Trust and Asset Protection Law Firm
Columbia Centre I
5600 N. River Road, Suite 764
Rosemont, IL 60018
PH (847) 292-1220
Fax (847) 292-1221
abferraro@abferrarolaw.com

INTRODUCTION:

Effective on January 1, 2012, there were changes to the Illinois Administrative Rules, which affected Medicaid in Illinois. These rules are known as "DRA".

On June 14, 2012, a bill, known as the "SMART Act", was passed by both the Illinois House and Senate, and signed by Governor Quinn to become law. This Act became effective on June 14, 2012.

On June 29, 2012, Emergency Amendments ("Amendments") were adopted to implement the provisions included in the SMART Act. These Amendments became effective on July 1, 2012 and are scheduled to expire on June 30, 2013.

After taking into account DRA, the SMART Act, and the subsequent Amendments, following are some of the most relevant provisions in the current law:

2012 Medicaid Limitations 

Single  Income:  $30
Single Assets:  $2,000
Married Income: $2,739
Married Assets $109,560

1) Prior to the Emergency Amendments, a home held in a trust, even in an individual’s personal revocable living trust, would no longer be considered homestead property; thus, it would not be exempt for Medicaid purposes.

The Amendments, however, provide that, subject to federal approval, real property, including homestead property, held in trust is not exempt unless the Department determines that the person’s spouse, minor child or disabled child resides in the property. Thus, it appears that a community spouse is now permitted to hold his/her primary residence in a trust and it will not be a countable asset for the institutionalized spouse’s Medicaid eligibility.

2) Farmland and equipment valued at over $6,000 must produce income at least equal to 6% of the equity value or it is not an exempt resource. Farmland was excluded from the DRA rules by JCAR (Joint Committee on Administrative Rules).

3) The home equity exemption is reduced back to $525,000, rather than the $750,000 as was set forth in DRA.

4) A healthy spouse living at home will be permitted to keep a minimum resource allowance of only $109,560, instead of $113,640 as was set forth in DRA.

5) A healthy spouse living at home will be permitted to keep monthly income of only $2,739, instead of $2,841 as was set forth in DRA.

6) Spousal refusal is not abolished, but made more difficult. Spousal refusal refers to a procedure where a healthy spouse ("Community Spouse") with separate assets need not pay for the cost of care of the institutionalized spouse. However, failure by the community spouse to disclose their assets may result in the institutionalized spouse being denied eligibility and continuing to remain ineligible for long term care based on failure to cooperate.

In cases of Spousal Refusal, the Smart Act and Amendments expand the state’s right to require assignment of support by the institutionalized spouse against the Community Spouse’s income and resources. The state’s right to seek from the Community Spouse may not be limited to a table calculation based on the Community Spouse income. Rather, the state can pursue the Community Spouse’s resources and income.

7) If a person is disabled and 65 or older, any transfers to a federally created OBRA Pooled Payback Trust will be treated as a transfer of assets for less than fair market value (i.e., resulting in a penalty period) unless such person is a ward of a county public guardian or the State guardian and (a) lives in the community, or (b) a court has found that any expenditures from the trust will maintain or enhance the person’s quality of life.

Thus, in order for a disabled person age 65 or older to be able to transfer assets to an OBRA Pooled Payback Trust without triggering a penalty period, a guardianship proceeding will be required.

8) Irrevocable prepaid funeral/burial contracts will be limited to $5,874 (except for the purchase of "burial space", which is exempt regardless of value).

Revocable prepaid funeral/burial contracts will be limited to $1,500 (except for the purchase of "burial space", which is exempt regardless of value).

9) Prepaid, guaranteed price funeral/burial contracts funded by an irrevocable assignment of life insurance policy to a trust must include the State as the beneficiary. There are specific requirements as to what must be included in the contract.

10) The Amendments indicate that HFS shall consider the amount of income, resources and exemptions available to a person in each of the three months in the case of an applicant asking for retroactive eligibility for the prior three months before a Medicaid application is filed.

It is possible that some provisions of the SMART Act may still be changed by the actions of the Joint Committee on Administrative Rules ("JCAR") later this year. The implications of this new law are still unknown, but could have sweeping impact for many of our clients and their long-term care plans.