By Ret Boney
The federal budget bill that passed the U.S. Senate and is now before the House contains a provision that could discourage seniors from making charitable contributions, a policy watchdog group says.
The Center for Budget and Policy Priorities in Washington, D.C., says the provision expands the penalty imposed on people who donate or give away assets before applying for long-term care coverage by Medicaid.
The current law, designed to discourage people from giving away assets to qualify for long-term care coverage, imposes a penalty on people who donate assets within three years before requesting coverage under Medicaid.
The penalty for such donations, a denial of long-term care benefits, lasts as long as funds used for the donation would have covered long-term care, says Judith Solomon of the center.
Current law also provides for the penalty period to begin at the time the donation is made, a period that often is complete by the time an individual needs care coverage.
The new provision would extend to five years from three the period of time during which charitable donations would count against long-term care eligibility.
And under the new provision, the penalty phase would begin when long-term care is requested rather than when the donation is made, a change that Solomon says would prevent many seniors from qualifying for the long-term care coverage they need.
Under the new provision, for example, if a person today sustained an injury that required long-term care, but had donated money to charity within the past five years, coverage would be denied for as long as that donation would have paid for care.
The new provision also would deter some seniors from making charitable contributions as they near an age at which they may require long-term care, Solomon says.
And while there are exemptions for people who can demonstrate “hardship” or prove they did not give away assets simply to qualify for Medicaid, Solomon says such exemptions are difficult and time-consuming to obtain.
“Once this is understood, it is likely that financial advisers and other trusted individuals will advise many seniors – especially those nearing an age where their health could begin to deteriorate – to refrain from making significant charitable contributions,” she says.
The Congressional Budget Office cited two cost savings resulting from the new provision, Solomon says.
The first would result from seniors covering the long-term care costs denied by Medicaid during the penalty phase.
The second would come from seniors deterred by the new provision from making donations, leaving those individuals more money to cover their own long-term care costs for a longer period of time.
The House is expected to vote on the bill in early February.