House Bill 1090, introduced by Delegate John M. O’Bannon in 2012, sought to address problems related to the sale or transfer of real property in determining Medicaid eligibility for long-term care services. Financial eligibility for Medicaid includes restrictions on income, resources, and assets (including stocks, bonds, vehicles, life-insurance, and non-exempt real property) as well as any uncompensated transfer of those financial “goods." Regarding real property, an uncompensated transfer occurs when the property is sold for less than its locality-assessed property value for tax purposes. In light of the recent and significant decrease in housing values, HB 1090 only sought to provide new exceptions for when an uncompensated transfer of real property is deemed to have occurred. For example, at this time it is not unusual for a house to be worth less than its tax assessment. However, if a Medicaid applicant sold his house for less than its tax-assessed value, a penalty period could be imposed making the applicant ineligible for Medicaid payments for a period of time.

Accurately understanding the consequences of changes in Medicaid eligibility for long-term care services is very important given the potential costs involved. As an official of the Department of Medical Assistance Services (DMAS) reported in early 2013, while 18 percent of enrollees receive long-term care services those services comprise 35 percent of all Medicaid expenditures. (Long-term care services include nursing facility care, community-based waiver programs, and end-of-life care.) Considering the fiscal impact on the State budget, the substitute version of HB 1090 was referred to the House Appropriations Committee after being reported by the House Committee on Health, Welfare and Institutions. HB 1090 was left in Appropriations and Delegate O’Bannon requested a fiscal impact review by the Joint Commission on Health Care.

The JCHC study examined the impact of the proposed changes to Medicaid guidelines contained in the HB 1090 substitute. Potential implementation issues were identified including:

• Accepting private real estate appraisals could result in wide variation allowing for sale and transfer values that are beyond the bill’s intent.

• Validating that a sale or transfer actually involved an arm’s length transaction between two independent parties with no relation to each other could prove to be difficult for DMAS and social service agencies.

• Ensuring that the reason for a sale or transfer was made for reasons other than to be eligible for Medicaid assistance, could prove to be difficult for DMAS and social service agencies.

JCHC staff concurred with the likely short-term impact that HB 1090 would expand Medicaid long-term care eligibility to 58 individuals with a projected fiscal impact of slightly less than $1 million in FY 2013 and $3 million in FY 2014 (as described in the fiscal impact statement completed by the Department of Planning and Budget). However, JCHC staff also emphasized that the long-term fiscal impact could be higher if proceeds from real property sales are used for anything other than the medical and nursing facility care that the Commonwealth would have paid for or if individuals change their handling of real property sales to preserve assets.