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While many politicians proclaim that family farms are the backbone of our country and culture, thousands of family farms will be put at risk by the new legislation passed by Congress and signed into law by President Bush in February 2006.  This so-called reform law will cause many family farms to struggle to survive.

Life Care Planning, Estate Protection, Disability,
VA & Medicaid Assistance Lawyers

Family Farms Threatened by Medicaid Reforms

Family Farms Threatened by Medicaid Reforms

 

            While many politicians proclaim that family farms are the backbone of our country and culture, thousands of family farms will be put at risk by the new legislation passed by Congress and signed into law by President Bush in February 2006.  This so-called reform law will cause many family farms to struggle to survive.

 

            The Medicaid reform legislation not only increases the look-back period from three years to five years for those who transfer assets, but the period of disqualification to receive benefits now starts from the date of application for Medicaid, instead of the date of asset transfer. These changes will have a significant impact upon small farms.

 

            The average age of today's farmer is nearing retirement. The 2002 Census of Agriculture from the USDA National Agricultural Statistics Service determined that, in the U.S., the average principal farm operator is 55.3 years old. Further, only 6 percent of all farmers are under the age of 35, more than half of today's farmers are between the ages of 45 and 64 and a quarter of the farmers in this age group plan to retire by 2005.

 

            Family farms often have little to no income from farm operations. Latest predictions from the U.S. Department of Agriculture predict that 98 percent of total farm operator income will come from off-farm sources. At last count, only seven percent of all farm families reported 100 percent "on-farm" income.

 

            Family farms are already disappearing at an alarming rate. According to February 2002 data from the National Agricultural Statistics Service, 330 farmers leave their land every week. As a result, there are now nearly five million fewer farms in the U.S. than there were in the 1930s.

 

            The dwindling number of family farm operations, combined with the financial struggles and the aging workplace of its family operators, will lead to tougher times as it is.  In an environment that is already tough for the small farm, healthcare costs resulting from this legislation could cause many family-run operations to pull up stakes and close down.

 

            For Example: Consider a small corn and soy bean farmer in southern Illinois.  We'll call him Mr. Granger. He has 150 acres, 125 of which are tillable. At age 68 Mr. Granger elects to "retire" from the family farm and allow his son to carry on the operations. However, he waits 6 years to actually transfer ownership of the farm. In March of 2006 Mr. Granger believes his son has proven he can successfully operate the farm so he signs a deed transferring most of the land (excluding his residence) to his son.  His son takes possession and title to all of the land and equipment. Three years later, at age 77, Mr. Granger suffers a stroke and is no longer able to care for himself. Since his wife had died a year earlier, Mr. Granger moves to a nursing home. His home, worth $70,000, is sold to help pay for his care.  This $70,000 combined with his other assets only covers the first two years of his nursing home care.

 

            Under the new Medicaid "reforms," Mr. Granger will not be able to apply for Medicaid assistance for another three years. If he applies before the expiration of the five year look-back period, he will be disqualified for a much longer period of time than five years - potentially an unlimited period of time.

 

            At an annual cost of $42,000 for nursing home care, his son's choices will be to ignore his father's plight or sell the farm in order to pay for his father's care. The son's only other alternative would be to attempt to pay his father's nursing home out of the earnings of the farm or mortgage the farm. However, based upon recent crop prices, the son will most likely be unable to obtain the necessary credit or afford the mortgage payments and still maintain the operation.

 

            Mr. Granger's farm is likely worth no more than $250,000. This small farmer was never threatened by the federal estate tax (some call it the "death tax").  On the other hand, because his health deteriorated, Mr. Granger and his family will pay a 100 percent health care tax as a result of the recent Medicaid "reforms."

 

            The Medicaid reform law demands that small family farmers and business owners plan now - without delay.  Indeed, all who do not die young must now plan early to protect themselves and their loved ones.

 

            One final word to those who believe the new law makes it impossible for them to take any steps to protect themselves or their loved one: the good news is that only part of the old law was changed and that, with proper planning, the devastating impact of the new law on families can be minimized in some cases.

 

            Richard Habiger is an elder law attorney.  You may contact him at 618-549-4529 or Richard@HabigerElderLaw.com.