Current law provides rules, based on federal law, concerning divestment, which refers to the transferring of one's assets for less than fair market value for the purpose of reducing one's income and resources to become eligible for MA for long-term care services. If a person divests assets on or after the person's look-back date (generally, the date that is three years before the person applies for MA for long-term care services), the person may be ineligible for MA for a specific time period (penalty period). The federal Deficit Reduction Act, which became effective on February 8, 2006, made a number of changes in the divestment rules. To conform Wisconsin law to the federal law, this bill makes a number of changes with respect to divestment, including, among other things:
1. Changes the look-back date to five years for transfers that occur on or after February 8, 2006.
2. Changes the beginning date for the penalty period from the date on which assets were transferred to the later of the date on which assets were transferred or the date on which the person applies and is eligible for MA for long-term care services.
3. Provides that the purchase of a loan, promissory note, mortgage, or life estate after February 8, 2006, is a divestment and specifies the requirements for when such a purchase is not to be considered a divestment.
4. Provides that as a condition of receiving MA for long-term care services an applicant (when applying) or recipient (when being recertified) must disclose any interest he or she or his or her spouse has in an annuity that was purchased on or after February 8, 2006, or with respect to which a transaction occurred on or after February 8, 2006. A transaction is defined as any action that changes the course of payments to be made or the treatment of income or principal.
5. Specifies the conditions under which the purchase of an annuity on or after February 8, 2006, is not to be considered a divestment, including designating DHFS as a remainder beneficiary under the annuity in the first position.
6. Requires DHFS to establish a hardship waiver process, with certain criteria, under which the divestment rules would not apply to a person because it would result in undue hardship for the person and allows DHFS to pay the full nursing facility payment rate for up to 30 days to hold a bed in the facility for a person involved in a pending undue hardship determination.
7. Provides, generally, that a person is ineligible for MA for long-term care services if the equity in their home exceeds $750,000 unless their spouse or minor or disabled child is living in the home. Under current law, a person's home, regardless of the value, is not counted when the person's income and resources for MA eligibility are determined.
For further information see the state fiscal estimate, which will be printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:
SECTION 1. 49.45 (6m) (m) of the statutes is created to read:
49.45 (6m) (m) To hold a bed in a facility, the department may pay the full payment rate under this subsection for up to 30 days for services provided to a person during the pendency of an undue hardship determination, as provided in s. 49.453 (8) (b) 3.
SECTION 2. 49.453 (1) (a) of the statutes is amended to read:
49.453 (1) (a) "Assets" has the meaning given in 42 USC 1396p (e) (h) (1).
SECTION 3. 49.453 (1) (ar) of the statutes is created to read:
49.453 (1) (ar) "Community spouse" means the spouse of either the institutionalized person or the noninstitutionalized person.
SECTION 4. 49.453 (1) (d) of the statutes is amended to read:
49.453 (1) (d) "Income" has the meaning given in 42 USC 1396p (e) (h) (2).
SECTION 5. 49.453 (1) (e) of the statutes is amended to read:
49.453 (1) (e) "Institutionalized individual" has the meaning given in 42 USC 1396p (e) (h) (3).
SECTION 6. 49.453 (1) (f) (intro.) of the statutes is amended to read:
49.453 (1) (f) (intro.) "Look-back date" means for a covered individual, either of the following:
1m. For transfers made before February 8, 2006, the date that is 36 months before, or with respect to payments from a trust or portions of a trust that are treated as assets transferred by the covered individual under s. 49.454 (2) (c) or (3) (b) the date that is 60 months before:
SECTION 7. 49.453 (1) (f) 1. of the statutes is renumbered 49.453 (1) (f) 1m. a.
SECTION 8. 49.453 (1) (f) 2. of the statutes is renumbered 49.453 (1) (f) 1m. b.
SECTION 9. 49.453 (1) (f) 2m. of the statutes is created to read:
49.453 (1) (f) 2m. For all transfers made on or after February 8, 2006, the date that is 60 months before the dates specified in subd. 1m. a. and b.
SECTION 10. 49.453 (1) (fm) of the statutes is amended to read:
49.453 (1) (fm) "Noninstitutionalized individual" has the meaning given in 42 USC 1396p (e) (h) (4).
SECTION 11. 49.453 (1) (i) of the statutes is amended to read:
49.453 (1) (i) "Resources" has the meaning given in 42 USC 1396p (e) (h) (5).
SECTION 12. 49.453 (3) (a) of the statutes is renumbered 49.453 (3) (a) (intro.) and amended to read:
49.453 (3) (a) (intro.) The period of ineligibility under this subsection begins on either of the following:
1. In the case of a transfer of assets made before February 8, 2006, the first day of the first month beginning on or after the look-back date during or after which assets have been transferred for less than fair market value and that does not occur in any other periods of ineligibility under this subsection.
SECTION 13. 49.453 (3) (a) 2. of the statutes is created to read:
49.453 (3) (a) 2. In the case of a transfer of assets made on or after February 8, 2006, the first day of a month beginning on or after the look-back date during or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance and would otherwise be receiving institutional level care described in sub. (2) (a) 1. to 3. based on an approved application for the care but for the application of the penalty period, whichever is later, and that does not occur during any other period of ineligibility under this subsection.
SECTION 14. 49.453 (3) (b) (intro.) of the statutes is amended to read:
49.453 (3) (b) (intro.) The Subject to par. (bc), the department shall determine the number of months of ineligibility as follows:
SECTION 15. 49.453 (3) (bc) of the statutes is created to read:
49.453 (3) (bc) In determining the number of months of ineligibility under par. (b), with respect to asset transfers that occur after February 8, 2006, the department may not round down the quotient, or otherwise disregard any fraction of a month, obtained in the division under par. (b) 3.
SECTION 16. 49.453 (4) (a) of the statutes is renumbered 49.453 (4) (ag).
SECTION 17. 49.453 (4) (ac) of the statutes is created to read:
49.453 (4) (ac) In this subsection, "transaction" means any action taken by an individual that changes the course of payments to be made under an annuity or the treatment of the income or principal of an annuity, including all of the following:
1. An addition of principal.
2. An elective withdrawal.
3. A request to change the distribution of the annuity.
4. An election to annuitize the contract.
5. A change in ownership.
SECTION 18. 49.453 (4) (am) of the statutes is amended to read:
49.453 (4) (am) Paragraph (a) (ag) 1. does not apply to a variable annuity that is tied to a mutual fund that is registered with the federal securities and exchange commission.
SECTION 19. 49.453 (4) (b) of the statutes is amended to read:
49.453 (4) (b) The amount of assets that is transferred for less than fair market value under par. (a) (ag) is the amount by which the transferred amount exceeds the expected value of the benefit.
SECTION 20. 49.453 (4) (c) of the statutes is amended to read:
49.453 (4) (c) The department shall promulgate rules specifying the method to be used in calculating the expected value of the benefit, based on 26 CFR 1.72-1 to 1.72-18, and specifying the criteria for adjusting the expected value of the benefit based on a medical condition diagnosed by a physician before the assets were transferred to the annuity, or transferred by promissory note or similar instrument. In calculating the amount of the divestment when a transfer to an annuity, or a transfer by promissory note or similar instrument, is made, payments made to the transferor in any year subsequent to the year in which the transfer was made shall be discounted to the year in which the transfer was made by the applicable federal rate specified under par. (a) (ag) on the date of the transfer.
SECTION 21. 49.453 (4) (cm) of the statutes is created to read:
49.453 (4) (cm) Paragraphs (ag) to (c) apply to annuities purchased before February 8, 2006, for which no transaction has occurred on or after February 8, 2006.
SECTION 22. 49.453 (4) (d) of the statutes is created to read:
49.453 (4) (d) For purposes of sub. (2), the purchase of an annuity by an institutionalized individual or his or her community spouse, or anyone acting on their behalf, shall be treated as a transfer of assets for less than fair market value unless any of the following applies:
1. The state is designated as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized individual.
2. The state is named as a beneficiary in the 2nd position after the community spouse or a minor or disabled child and is named in the first position if the community spouse or a representative of the minor or disabled child disposes of any remainder for less than fair market value.
3. The annuity satisfies the requirements under par. (e) 1. or 2.
SECTION 23. 49.453 (4) (e) of the statutes is created to read:
49.453 (4) (e) For purposes of sub. (2), the purchase of an annuity by or on behalf of an annuitant who has applied for medical assistance for nursing facility services or other long-term care services described in sub. (2) is a transfer of assets for less than fair market value unless either of the following applies:
1. The annuity is either an annuity described in section 408 (b) or (q) of the Internal Revenue Code of 1986 or purchased with proceeds from any of the following:
a. An account or trust described in section 408 (a), (c), or (p) of the Internal Revenue Code of 1986.
b. A simplified employee pension, within the meaning of section 408 (k) of the Internal Revenue Code of 1986.
c. A Roth IRA described in section 408A of the Internal Revenue Code of 1986.
2. All of the following apply with respect to the annuity:
a. The annuity is irrevocable and nonassignable.
b. The annuity is actuarily sound, as determined in accordance with actuarial publications of the office of the chief actuary of the social security administration.
c. The annuity provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made.
SECTION 24. 49.453 (4) (em) of the statutes is created to read:
49.453 (4) (em) Paragraphs (d) and (e) apply to all of the following:
1. Annuities purchased on or after February 8, 2006.
2. Annuities purchased before February 8, 2006, for which a transaction has occurred on or after February 8, 2006.
SECTION 25. 49.453 (4c) of the statutes is created to read:
49.453 (4c) PURCHASE OF NOTE, LOAN, OR MORTGAGE. (a) For purposes of sub. (2), the purchase by an individual or his or her spouse of a promissory note, loan, or mortgage after February 8, 2006, is a transfer of assets for less than fair market value unless all of the following apply with respect to the note, loan, or mortgage:
1. The repayment term is actuarially sound.
2. The payments are to be made in equal amounts during the term of the loan, with no deferral and no balloon payment.
3. Cancellation of the balance upon the death of the lender is prohibited.
(b) The value of a promissory note, loan, or mortgage that does not satisfy the requirements under par. (a) 1. to 3. is the outstanding balance due on the date that the individual applies for medical assistance for nursing facility services or other long-term care services described in sub. (2).
SECTION 26. 49.453 (4m) of the statutes is created to read:
49.453 (4m) PURCHASE OF LIFE ESTATE. For purposes of sub. (2), the purchase by an individual or his or her spouse of a life estate in another individual's home after February 8, 2006, is a transfer of assets for less than fair market value unless the purchaser resides in the home for at least one year after the date of the purchase.
SECTION 27. 49.453 (8) of the statutes is renumbered 49.453 (8) (a) (intro.) and amended to read:
49.453 (8) (a) (intro.) Subsections (2) and (3) do not apply to transfers of assets if the any of the following applies:
1. The assets are exempt under 42 USC 1396p (c) (2) or if the (A), (B), or (C).
2. The department determines under the process under par. (b) that application of this section would work an undue hardship. The department shall promulgate rules concerning the transfer of assets exempt under 42 USC 1396p (c) (2).
SECTION 28. 49.453 (8) (b) of the statutes is created to read:
49.453 (8) (b) The department shall establish a hardship waiver process that includes all of the following:
