MEDICAID ELIGIBILITY FOR NURSING HOME CARE

PENALTIES FOR TRANSFERRING ASSETS BY MEDICAID RECIPIENTS

A BASIC OVERVIEW

Most states limit the income a nursing home resident can receive before she is eligible for Medicaid benefits. This limit is usually below the costs of nursing home care. Many residents find themselves in the position of having too much income to qualify for Medicaid but not enough income to pay for the costs of care. Many residents will not have done any advance Medicaid planning and may get into trouble when they attempt to transfer income and assets to meet the eligibility requirements.

Federal law requires states to withhold payment for nursing home services from persons and their spouses who transfer assets for less than fair market value. In that case, there is a presumption that the transfer is made to preserve Medicaid eligibility or to meet Medicaid eligibility requirements. Assets include income, even money to which a person is entitled a future date such as a pension benefit or judgment.

When a person applies for Medicaid to pay for the costs of her nursing home care, the state Medicaid agency “looks back” at all transfers made within the prior 36-month period and any transfers to and from a trust made within the prior 60 months. Asset transfers within these time periods made by either the applicant or her spouse are penalized. Each state has developed guidelines for calculating the penalty period. Generally, the penalty period is calculated by dividing the value of the transferred asset by the average monthly cost of private-pay nursing home care within the state. The answer equals the number of months the applicant is penalized and unable to receive nursing home Medicaid benefit payments. Assuming an “uncompensated” transfer of $60,000 and average monthly nursing home costs of $3,000, the applicant would be ineligible to receive nursing home Medicaid benefits for a period of 20 months. In general, the penalty period begins on the date of the transfer, but this date is usually construed as the first day of the month following the transfer.

If a resident has filed for Medicaid benefits on several occasions, the most recent application date after the resident has been admitted to the nursing home marks the start of the “look-back” period. Every transfer made in the look-back period can generate a separate penalty and may be imposed consecutively with any other penalties assessed.

There are exceptions under which the penalty does not apply. Generally, these exceptions are as follows:

Transfers to a spouse or to a third party that are for the sole benefit of the spouse
Transfers by a spouse to a third party for the sole benefit of the spouse
Transfers to certain disabled persons or to trusts established to benefit those disabled persons
Transfers for a purpose other than to qualify for Medicaid
Transfers where imposing a penalty would cause undue hardship

Some exceptions also apply when the asset transferred is the applicant’s home. Generally, a penalty is not assessed if the recipient is the applicant’s spouse, minor or disabled child, a sibling who has resided in the home at least a year before the applicant entered the nursing home, or a child who has resided in the home at least a year before the applicant entered the nursing home and has provided care to the applicant.