New DRA rules in effect on November 1

Major changes to Indiana's Medicaid rules will go into effect on November 1, 2009. These changes are occurring pursuant to a Federal law called the Deficit Reduction Act (DRA), which went into effect in February of 2006. Indiana was rather late in getting around to implementing the new law, but the changes are finally almost here.

The rules as originally proposed by the State were very harsh, and even went beyond the letter of the DRA in some respects. Thanks to the hard work of the Indiana Chapter of the National Academy of Elder Law Attorneys, among other advocacy groups, the legislature softened the rules this past spring. Still, the changes brought about by the DRA will have a major impact on seniors and the disabled in Indiana.

So what's new? The penalties for making gifts of assets in order to qualify for Medicaid benefits for nursing home services are getting a lot stiffer. The look-back period is also increasing--from three years to five years. There are restrictive new rules for planning with annuities and promissory notes, too, among several other changes.

The bottom line is that individuals who want to do asset protection planning will need to get started much earlier now. Even under the DRA, there are still many options for people who have five or more years to work with. For those who wait until the last minute, the options will be fewer and less attractive. Moreover, anyone who is considering purchasing an annuity and who may need long-term care within the next five years should consult with an elder law attorney first.