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Status of DRA/Medi-Cal Implementation in California

It will be at least a few more weeks until we know the details of the DHS proposals regarding implementation of the Medicaid provisions of the Deficit Reduction Act of 2005 (DRA). We do know that significant discussions are currently underway and that the Department is anxious to complete legislation on these important policy issues.

The Department has begun implementation of the proof of citizenship provisions with the release of ACWDL 07–12, and counties have received detailed instructions on this misguided federal law. (See Medi–Cal Update in this issue for details of the proof of citizenship implementation.)

No Retroactive Penalties

As for the new 60–month look back, transfer of assets, income first, home equity limits and other onerous DRA provisions, California health officials are expected to take a sensible approach to the changes, including not applying transfer penalties to transfers made before the regulations are effective. In other words, any new transfer penalties will not be retroactive and will only apply to those transfers made on or after the new regulations are filed with the Secretary of State. This is in keeping with the Department’s past practices, and advocates have been repeatedly assured that this will be the case with any new transfer of asset provisions.

Income First Rule

Under the DRA "income first" rule, states are required to allocate any available income from the nursing home spouse first, before any additional assets will be allocated. It is important to note that the DRA did not modify or change sections 42 USC 1396r–5(d)(5) or (f)(3) pertaining to court–ordered increases in the community spouse monthly allocation or transfers under court orders. Although ACWDL 06–12 implements the "income first" rule for CSRA increases pursuant to Fair Hearing requests, these instructions apply only to Administrative Law Judges for Fair Hearing purposes. They do not impact 3100 petition court–ordered increases in the CSRA or the spousal allocation, which will still be honored. There is no indication that the law on this will be changed, since there is no federal statutory basis for such a change.

Home Equity Rules

The Department is also expected to support an increase in the $500,000 DRA equity limit to the $750,000 maximum allowed under federal law. Meanwhile, Senator Sheila Kuehl has authored SB 483, which would raise the home equity cap to $750,000. The bill has sailed through the Senate and is now assigned to the Assembly Health Committee. Although the Kuehl bill does not define how "equity" will be determined and, at this point, does no more than increase the equity cap, it could be a vehicle for more substantial changes.

Implementation Date

Even if the Department’s legislation is introduced and signed this session, regulations will need to be promulgated and filed. Any major changes will not become effective until at least 2008, maybe later, given the snail’s pace of the regulatory process. If you have questions about Medi–Cal and/or DRA changes, see CANHR’s web site "Medi–Cal for Long Term Care" page.