Deficit Reduction Act (DRA)

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. It also provided for Qualified State Long Term Care Partnerships, which permit States with approved State Plan Amendments (SPA) to exclude from estate recovery the amount of long-term care benefits paid under a qualified Long-Term Care Insurance policy.

For States that elect this option, the State plan must provide that, in determining eligibility for Medicaid, an amount equal to the benefits paid under a qualified Long-Term Care policy is disregarded. The State must also allow, in the determination of the amount to be recovered from a beneficiary's estate, for the same amount to be disregarded.

The intent of the law was to eliminate or greatly reduce the use of asset transfers such as gifts to children, as a way to become eligible for Medicaid benefits, and to encourage the use of private Long-Term Care Insurance instead of Medicaid to pay for long-term care services and supports.