Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.
Note: This blog was written prior to the publication of the Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits rule by the Veterans Affairs Department effective October 18, 2018. As such, any strategies outlined in this blog post may no longer be advisable. For more information, read our blog post on the subject, or read the full Federal Register document text here.
On January 23, 2015, the Federal Register released Document No. 2015-00297. This document has caused quite a stir in the elder care industry and has climbed to the top of the “hot-button issues” list. If you’re not yet familiar with the document, you’re likely wondering what could possibly cause such widespread interest. It’s an unexpected rule proposal by the Department of Veterans Affairs (“VA”) regarding net worth determinations, asset transfers, and income exclusions for Veterans pension benefit eligibility.
For those that may not have time to immediately sit down and read the 62-page document, the VA stated it was their intent to “respond to recent recommendations made by the Government Accountability Office (“GAO”), to maintain the integrity of VA’s needs-based benefit programs, and to clarify and address issues necessary for the consistent adjudication of pension and parents’ dependency and indemnity compensation claims.”
Summary of Major Provisions:
- § 3.274: Establish a clear net worth limit
- The net worth limit proposed is the standard maximum community spouse resource allowance (“CSRA”) used by Medicaid – $119,220 for 2015
- The amount of a claimant’s net worth would be determined by combining annual income with assets
- § 3.275: Describe how VA calculates assets, including the primary residence and resulting sale proceeds.
- A dwelling will only be exempt if it does not exceed two acres – exceptions exist
- § 3.276: Asset transfers and resulting penalty periods.
- Proposal for a 36-month look-back period for uncompensated transfers
- The transfer penalty would only be based on the amount transferred that would have caused the claimant to exceed the net worth limitation, not the entire transferred amount
- An annuity purchase or transfer to trust will result in a penalty if (1) it reduces net worth, and (2) it would not be in the claimant’s financial interest were it not for the claimant’s attempt to qualify for the pension
- The penalty divisor will be the maximum aid and attendance pension rate
- The maximum penalty period will be 10 years
- The penalty period will begin the date that would have been the pension payment date
- § 3.278: Define and clarify deductible medical expenses.
- § 3.279: Central location for all statutory exclusions from income and assets.
- § 3.503: Medicaid-covered nursing home care and surviving child beneficiaries.
The Proposed Rule’s Purpose
In considering the above, it is important to understand the rulemaking process. A proposed rule, such as the one in this case, announces and explains an agency’s plan to address a problem. In this case, the VA is attempting to address the problems that the GAO reported. Thus, the proposed rule was outlined in an attempt to notify the public and give them the opportunity to submit comments. These comments and the proposed rule will form the basis of the final rule.
The Comment Period
In this case, we have a 60-day comment period – March 24, 2015. Members of the public may request that the VA allow more time to submit comments, and the VA may consider late-filed comments if their decision-making schedule permits it. The VA may even extend or re-open the comment period if they find that they aren’t satisfied with the comments received. Furthermore, the VA may find that new issues were raised in the comment period that weren’t discussed in the proposed rule, which could result in a series of new proposals. In general, agencies prefer if comments are submitted electronically. It allows for easier sorting of data for more efficient use in considering it in the rulemaking process.
The agency will not base the final rule on the number of comments in support or in opposition. Rather, the agency will base its reasoning and conclusions on comments, scientific data, expert opinions, and facts. That being said, it is important not to comment simply stating you do not agree, and the impact this will have on your personal planning practice. A comment that is well thought out, shares personal stories, how veterans/surviving spouses will be negatively affected by the rule change and provides a reasonable compromise will be of much more value.
The Final Rule
To move forward, it must be concluded that the proposed solution will help accomplish the goals and solve the problems identified, while also considering whether alternate solutions would be more effective and/or cost less. If the rule-making record contains persuasive new data and policy arguments or poses difficult questions or criticisms, the entire rule could be terminated. Alternatively, more proposals could be published.
An effective date typically is not determined until the final rule is published. Although, any portions that are subject to Congressional approval may be excepted from that effective date.
So What’s Next?
At this point, the only action to take is to be considerate in planning and to take advantage of the public comment period. Many elder care groups have task forces that will be submitting well thought out comments. It’s equally important to educate agencies that would be negatively affected by the rule change – assisted living facilities, geriatric local VSOs/VFWs, American Legion, Alzheimer’s associations, women’s vet groups, etc. Many may assume that these organizations are aware of the proposed rule, when most know nothing about it and would likely submit comments as well.
We’re optimistic that through a series of professionally prepared public comments, and rule proposal revisions, the final rule will eliminate abusive planning options, and leave room for methods that are in the claimant’s best interest.
To Learn More:
- Join ElderCounsel on February 13th for an in-depth review of the proposed rules and their impact on the area of VA pension planning. Registration will include handout materials that include a comprehensive outline on the VA pension planning rules, sample language to use when notifying clients and referral sources of the potential rule changes, information on how to submit comments and suggested language to use, live Q&A and a Certificate of Completion.
- Join Lawyers with Purpose for a free webinar on February 2nd: Rushing To Beat The VA 3 Year Look Back Law Changes?
- Read the full text of the proposed VA rule.
- Read the guide to the rule-making process.