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Indiana Long Term Care Insurance Program

Indiana Long Term Care Partnership Program

ILTCP > Medicaid > Closing Medicaid Loop Holes Closing Medicaid Loop Holes

During 2002, Indiana Medicaid adopted regulations to close some of the common eligibility loopholes used to shelter assets.  Deficit Reduction Act of 2005 further impacted Medicaid provisions.

Annuities (405 IAC 2-3-1.2)

The purchase of an annuity within the 3 year look back period will result in a transfer penalty unless the annuity is:

• Actuarially sound (repays purchase price within life expectancy)
• Issued by a commercial entity or a nonprofit organization
• Structured to have substantially equal monthly payments (vary by 5% or less per year)

The intent of this regulation was to stop the practice of purchasing an annuity with a minimal monthly payout with a large lump sum final payment. This regulation applies to annuities purchased or annuitized on or after June 1, 2002.

Transfer of Income (405 IAC 2-3-1.1)

This regulation applies to transfers taking place, or leases entered into or renewed, on or after June 1, 2002.  Transfers between spouses are allowed.

  • A penalty will be imposed for renting property for less than fair market value.
  • A penalty will be imposed for transferring income streams, including income-producing property if the transferor doesn’t retain the income.  
  • Partnership policy protected assets may be transferred, once protected, without penalty.

Transfer Penalty for Inaction (405 IAC 2-3-1.1)

Failing to take action to receive assets to which an individual is entitled is considered a transfer.  Example:  failing to elect to take the spousal share of an estate.  No penalty will be imposed if:

  • the individual is unaware of his/her right to receive assets, 
  • the individual is not competent and has no guardian to act on his/her behalf, 
  • taking action is not cost-effective, 
  • if the deceased spouse made other equivalent arrangements to provide for the surviving spouse.

U.S. Savings Bonds (405 IAC 2-3-23)

Effective November 2002, savings bonds are considered to be available and thus countable resources for Medicaid purposes beginning on the date of purchase.

Liens (IC 12-15-8.5)

Effective July 1, 2003, Indiana Medicaid has authority to place a lien on the real property of a Medicaid recipient who is in a nursing facility or other institution and is not expected to return home. The lien is enforced if the property is sold or upon the death of the Medicaid recipient. No lien is permitted if any of the following people reside on the property:

  • Recipient’s spouse
  • Recipient’s child who is under age 21
  • Recipient’s disabled child
  • Recipient’s sibling who has lived in the home for 12 months and has an ownership interest
  • Recipient’s parent

A lien may not be enforced while the recipient is survived by a spouse, a minor or disabled child, or a parent, even if those individuals do not live on the property.