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VA Look Back & Penalty Period Proposed to Congress

VA Look Back & Penalty Period Proposed to Congress

by Nicole R. Plottel

On Wednesday, June 6, 2012, the Government Accountability Office (GAO) released its investigative report and recommendation to Congress that the Department of Veterans Affairs (VA) implement a “look back” and “penalty period” for the VA’s improved pension program.

The VA pension program, which has been in existence since the 1920s and largely unchanged since 1978, has gained heightened popularity in the last few years with the growing number of elderly veterans.  This non-service connected pension provides tax free income to qualifying wartime veterans or their surviving spouses who are elderly or disabled.  The pension amount increases if the claimant is in need of the regular aid and attendance of another person (this is where the popularized term “Aid and Attendance Benefits” comes from).  Currently, an eligible veteran receiving the pension with aid & attendance can receive extra income of up to $20,448.00 per year, an eligible couple up to $24,240.00 per year, and an eligible surviving spouse up to $13,128.00 per year.

In order to qualify for this program, the claimant must meet certain eligibility requirements which include a demonstration of limited income and resources.  Unlike other means-based programs like Medicaid (Medi-Cal in California), the VA does not currently have mechanisms in place to prohibit or penalize claimants from transferring their assets in order to qualify.  As a result, certain financial products unsuitable for the elderly are sold to claimants under the mistaken belief that such purchases are necessary in order to qualify.  The purchase of such financial products and/or the transfers of assets may have severe tax implications and withdrawal penalties, and can cause the claimant to become ineligible for Medicaid.

In an effort to combat this type of misuse, the GAO recommended implementing a “look back” and “penalty period” similar to those already employed in the federal Medicaid Long Term Care System.  Unlike the more favorable thirty (30) month look back period currently used by California’s Medi-Cal program, the federal Medicaid system utilizes a five (5) year or sixty (60) month look back period.  Although there is no indication as to when these recommendations may come into effect, it is almost certain that qualifying for the VA pension will become more difficult in the foreseeable future.  Further, if Congress follows the federal Medicaid guidelines, planning for the VA pension may be even more restrictive than planning for Medi-Cal under current law.  We will keep you apprised of any important developments as they unfold.

For more information on eligibility requirements please visit: https://harrisandplottel.com/services/va-aid-attendance/
For the full GAO report please visit: http://www.gao.gov/assets/600/590848.pdf