Medicaid Changes in the Deficit Reduction Act of 2005

Brooklyn Medicaid Planning Attorneys

Based in New York City (NYC), with offices in Brooklyn, the Medicaid planning attorneys at Polizzotto & Polizzotto, LLC, represent clients throughout New York and New Jersey who want to do Medicaid planning and protect their assets.

In February 2006, the Deficit Reduction Act of 2005 was signed into law by President Bush. The DRA affects your ability to obtain Medicaid benefits and protect your assets. Now, more than ever, prudent planning is a necessity to preserve the greatest amount of your estate for your family and provide the nursing home care you may require n the future.

Lengthening the Look-back Period

The new Deficit Reduction Act lengthens the look-back period to five years from three years. The longer look-back will be gradually phased in as the change will only affect transfers after the date of enactment.

Change in Beginning Date of Period of Ineligibility

Previously, a penalty period for institutional (nursing home) care begins the month after a transfer is made. DRA changed this so the penalty does not begin to run until a person is institutionalized and otherwise eligible for Medicaid (in other words, has exhausted other funds). This means any transfer in the past five years would disqualify for a period of time for nursing home care -- no more waiting out a penalty period at home or while private pay in a nursing home. This affects all transfers on or after the date of enactment.

There are still transfer exemptions and hardship provisions.


Annuities in order to not be counted as a resource must be irrevocable and non-assignable; be actuarially sound; and have equal payments with no deferral or balloon payments. The state would have to be named as a remainder beneficiary, although it could be secondary after a spouse or a minor or disabled child.

Home Equity

Equity in a home would count as a resource if it was over $500,000 or $750,000 at the state's option. An individual could take a reverse mortgage or home equity loan to reduce the total equity.


In order for a loan or mortgage not to be treated as a transfer of assets, the repayment must be actuarially sound and it cannot be canceled upon death of the lender.

For information on how the new laws affect your ability to obtain Medicaid, or information on how our New York City Medicaid planning lawyers can assist you with your Medicaid planning, contact Polizzotto & Polizzotto to schedule a confidential consultation.