Proposed Medicaid Changes Could Have Significant Impact

With a new year and a new administration, there is always uncertainty about tax reform, medicaid and medicare reform, and social security reform. I’ve written previously about proposed estate tax and corporate tax reforms – both of which are based on President-Elect Trump’s campaign plan, but not on actual proposed legislation or regulations.

Now the topic has turned to proposed changes to Medicaid and how it’s administered. Currently, the Center for Medicare and Medicaid Services administers the Medicaid program at the federal level through funding at the state level. The federal government writes the rule book and issues the check, but the states actually administer the program. However, this could change during a Trump Presidency.

In 1995, then-Speaker of the House Newt Gingrich proposed a change to the Medicaid system called “block grants”, which would still fund the program at the federal level, but would allow the states to create their own rules for how its administered – i.e, the eligibility rules and what will be covered by those benefits. This would create a inconsistencies state-by-state. Some states won’t change from the federal rules and guidelines, but some state will likely make drastic changes. So, what does that mean for planning?

Special Needs Planning could be substantially impacted depending on what North Carolina does with its Medicaid program. The state could decide to have its own rules as to First- and Third-party trusts and Medicaid enforcement, and could decide to eliminate Medicaid benefits for disabiled children leaving with their parents who have access to private insurance. We could also see a restriction in the scope of expenses that can be paid for from a Special Needs Trust (SNT) on behalf of an individual with benefits.

Medicaid Long-term Care eligibility and Medicaid enforcement rules will likely change significantly to meet the increased demand for services over the next few decades. This may eliminate the ability for families to protect a home from Medicaid enforcement after the individual has passed, or may disregard the use of irrevocable trusts for Medicaid planning and eligibility purposes.

The main point: there’s a lot of uncertainty surrounding change in Medicaid – however, both Trump and Ryan have indicated a preference for block grants moving forward. The focus will turn to the state to determine what, if anything, will change for these benefits.