Wisconsin’s 2013-2015 Budget passed as Wisconsin Act 20 on June 30, 2013 and was published on July 1, 2013.  The new law contains sweeping changes to certain aspects of the Medicaid program for individuals who need long-term care.  Many questions have been raised, not only about the content of the new law and its effect on individuals who will become eligible for Medicaid benefits in the future, but also about the effective date of the changes, and whether the new law will affect those individuals who are already receiving benefits or who have already used planning techniques that were allowed under the old law.  Part of the confusion stems from a delay in the actual implementation of the changes.

Procedural Issues/Effective Date of Implementation
A delay in effective date was written into the law that required Wisconsin’s Joint Committee on Finance (JCF) to approve an implementation plan that would be submitted by the Department of Health Services (DHS). In other words, the law was expected to become effective only after guidelines were in place for its implementation.  In the meantime, the Elder Law Section of the State Bar and Wisconsin’s Chapter of the National Academy of Elder Law Attorneys advocated for a repeal or partial repeal of the new law which appears to violate several provisions of federal law.

Instead, on September 4, 2013, the DHS wrote a letter to the JCF requesting complete and immediate implementation of the new law, without developing a plan to address concerns and procedural issues.  A hearing was held on the DHS’s motion for immediate implementation on September 18, 2013.  The JCF granted the motion and gave the DHS permission to proceed immediately to implement the new law.  The begin date for the implementation of the new law was October 1, 2013.

Limitations on Implementation
However, the permission to move forward was limited in certain areas of the new law. While the limitation prevents the DHS from acting on certain portions of the new law, those sections are not repealed. So while the law has still been changed, the DHS cannot enforce certain provisions.  Nothing prevents the DHS from requesting implementation of these provisions in the future. The provisions that the DHS currently cannot enforce are:

1.   Prohibition Against Transfer of Exempt Resources. Under the old law, certain assets were considered “exempt” in determining whether or not a person could become eligible for Medicaid.  These exempt assets, such as vehicles, personal property, and certain business assets, could be transferred without imposing a divestment penalty against the individual who transferred them. The new law prevents the transfer of such exempt resources.  As an example of the confusion that results from the lack of repeal, in this case, the new law provides that the transfer of exempt assets is a divestment, but the DHS cannot impose a penalty period, because this portion of the law was not allowed to be implemented.

2.  Provisions Relating to Voiding Real Estate Transfers and Notices Related to Real Estate. The new law allows the DHS to record a “Request for Notice of Transfer or Encumbrance and Notice of Potential Claim” on any real property in which a recipient of Medicaid has a current ownership interest, including a marital property interest, as well as any interest owned within five (5) years before the individual applied for Medicaid. Again, these provisions remain law, but cannot yet be enforced.

3.  Provisions Regarding Trusts. The new law requires trustees of certain trusts to give notice to the DHS of the death of the Settlor (for Living Trusts) or the beneficiary (for Special Needs Trusts).  Again, the DHS is not allowed to enforce this portion of the law; however, the law regarding the notice provisions still stands, raising serious questions for Trustees of these types of Trusts.

4.  Promissory Notes. The new law provides that it is a divestment to enter into a promissory note/loan agreement with a “presumptive heir” such as a child.  This provision, while it remains law, cannot be enforced.  If enforced in the future, and coupled with the potential enforcement of the new law preventing transfer of exempt assets, the transfer of family farms and businesses may be seriously impacted since many family farms and businesses are transferred to a child or other relative through gifts and promissory notes, or a combination of the two.

All other aspects of the new law relating to recovering funds from a Medicaid recipient’s spouse have been authorized and will be enforced.  A brief summary of each of these provisions follows.

Estate Recovery in the Estate of the Surviving Spouse.  Under the new law, once an individual qualifies for Medicaid, estate recovery has been expanded to reach into the estate of the surviving spouse to recover benefits paid on behalf of the spouse who received benefits.  The new law presumes that all real and personal property in which the surviving spouse had an ownership interest at the recipient spouse’s death, including a marital property interest in property the surviving spouse had at any time within five years before the recipient applied for public assistance, is recoverable property.

Restrictions on Gifts by Spouse of Medicaid Recipient.  Further, under the old law, once an individual qualified for Medicaid, the spouse was free to gift assets that were assigned to him or her as part of the Community Spouse Resource Allowance.  These types of transfers would not impact the spouse receiving Medicaid.  Under the new law, anything the spouse gives away within five years after the institutionalized spouse qualifies for Medicaid will be a divestment that will cause the institutionalized spouse to lose Medicaid.

Change in Start Date of Ineligibility Period.  The new law delays the start date for periods of ineligibility.  The period of ineligibility now begins the first day of the month following the month in which the individual receives advanced notice of that period of ineligibility.

Partial Cures Abolished.  Another expansive change under the new law is the removal of the ability to partially cure a divestment ineligibility period by returning a portion of the transferred or “divested assets.”  Under the new law, all assets, or cash equal to the value of the assets that were transferred, must be returned in order to cure a divestment penalty period.

Spousal Refusal Abolished.  Spouses may no longer refuse to cooperate in a Medicaid application.  Under the old law, if a spouse refused to disclose assets, the applicant was treated as a single person and the spouse could not be forced to provide support to the Medicaid recipient.  The new law requires the spouse to provide the total value of assets and information on income and resource transfers.  Marital Property Agreements continue to be disregarded for Medicaid eligibility purposes.

Minimum Monthly Income Calculations.  The new law provides that if the spouse of an applicant asks to increase the minimum monthly maintenance needs allowance above the currently allowed amount, the DHS must evaluate the potential earnings of any retained assets as if they are invested in a single premium lifetime annuity.

Real Property/Life Estate Changes.  The new law also seriously impacts life estates and jointly held property.