Congress passed legislation in February 2006 that included new Medicaid Asset Transfer rules that could prevent individuals from receiving Medicaid assistance if they have made gifts to charitable organizations within the previous five years. The Centers for Medicare and Medicaid Services has issued new guidance (PDF) on the asset transfer rules but has not addressed the charitable giving issues raised by IS and other charities. IS will continue to urge CMS to issue regulations that would minimize the impact of the new rules on Americans who make charitable donations.

On February 1, 2006, the House passed a spending reconciliation conference report (S. 1932) that includes a provision that will adversely affect charitable giving. The provision will deny needed long-term care to older Americans who have made legitimate charitable donations during the five years prior to applying for Medicaid, even though they were in perfectly good health and did not expect to need Medicaid at the time they made the donations. This change may also lead many professional and personal advisors to recommend that anyone who might one day require government assistance for long-term health care refrain from making charitable contributions.

More Information
Specifically, the spending reconciliation bill changed Medicaid transfer of assets law in a way that Independent Sector believes will discourage giving by many older Americans by penalizing those who make charitable contributions in good faith and then find themselves in need of long-term care within the next five years.

Prior to this change, the existing law penalized older Americans for transferring assets for less than fair market value up to three years before an individual applies for long-term care benefits. Benefits were denied during a "penalty period" that began at the time a donation was made and lasted as long as the donated assets would have paid for long-term care. These rules are intended to protect against individuals who make substantial asset transfers to family members or to charity specifically for the purpose of qualifying for Medicaid assistance.

The spending reconciliation bill now extends the period of time during which an individual can not safely make charitable contributions from three to five years. If an individual does make a charitable contribution during that period, the "penalty period" will now begin at the time the individual needs long-term care coverage. As individuals reach an age where their health might begin to deteriorate causing them to require long-term care, they must refrain from making charitable contributions or risk being ineligible for long-term care benefits for substantial periods of time. This is of enormous concern given the increasingly critical role that charitable nonprofits have been called on to play in responding to natural disasters and other challenges in communities across the country.

The Senate narrowly passed the spending reconciliation conference report in late December 2005, after receiving it from the House of Representatives. Because Senate members made minor changes to the legislation before passing it, the House was required to vote once again on the package.

Independent Sector sent a December 22 letter (PDF) to the Speaker of the House of Representatives, Dennis Hastert, requesting that this Medicaid change be eliminated.

Last Updated: August 1, 2006

-Top of Page-