Deficit Reduction Act (DRA)
What Does 'Deficit Reduction Act (DRA)' Mean?
This is a law signed into law by President Bush in 2005 that significantly tightens the eligibility for Medicaid payment of long-term care services. The law changed the look-back period for asset transfers from 3 years to 5 years.
More Information
The Deficit Reduction Act (DRA) made some changes to Medicaid and long-term care insurance programs in the United States. President Bush signed this into law in 2005, and since then, it has had a profound impact on Medicaid and LTC Insurance.
The DRA increased Medicaid's look-back period from three years to five years. This made it harder to qualify for Medicaid benefits and encouraged long-term care planning.
It also provided extra protection from estate recovery through Qualified State Long Term Care Partnerships. These partnerships allow states with approved State Plan Amendments (SPAs) to help individuals with LTC Insurance.
It basically allows an individual with a qualified LTC Insurance partnership policy to protect a portion of their assets from estate recovery if they ever used all their Long-Term Care Insurance benefits and needed to cover care costs with Medicaid.
The way it works is however much the individual's LTC Insurance policy paid in benefits will be disregarded from their total remaining amount of income or assets when they go to apply for Medicaid benefits.
The goal of the law was to reduce or eliminate the use of asset transfers as a way to become eligible for Medicaid. It was also intended to encourage Long-Term Care Insurance planning instead of Medicaid to pay for long-term care services and support.
To learn more about the Deficit Reduction Act, you can read our article on Long-Term Care Insurance regulations.