Sunday, August 18, 2013

How Medicaid Transfer Penalties Are Calculated

Medicaid ("Medical Assistance") is a primary source of payment of nursing home and other long-term care costs in Pennsylvania.  But, before an individual can receive government Medicaid benefits for long term care, he or she must meet the financial need criteria of the program.  
For many individuals, this means they first have to "spend down" their personal financial resources so that they can qualify.
Medicaid rules limit an individual’s ability to give away his resources in order to spend down to the qualification level. If an individual or his or her spouse has given away resources in order to get down to the required financial qualification level, the gift may create a waiting period during which the individual will be ineligible for Medicaid.  
This waiting period, often called the "penalty period," does not begin until the individual is otherwise qualified for Medicaid and files an application.  

How is the Penalty Period Determined

The length of the penalty period is determined by dividing the fair value of the income or assets given away by a "penalty divisor" which is roughly equivalent to the average monthly cost of a private nursing home room. The current penalty divisor in Pennsylvania (as of August 2013) is $276.17 per day.
Penalty periods are imposed on individuals who are applying for or already receiving Medicaid financed care in a nursing facility as well as to those receiving home and community care under Medicaid waivers such as the Aging Waiver program. Penalties are applied if there were non-exempt transfers during the 60 months prior to the date of application for Medicaid long term care (MA LTC) benefits.
Example: An Applicant for MA LTC
For an applicant for MA LTC benefits, the begin date for a period of ineligibility due to a transfer of assets is the date the applicant would otherwise qualify for benefits based on an approved application but for the transfer of assets.

Here is an illustration of how the penalty period is calculated for an applicant for benefits.
Mr. Gordon applies for MA LTC on August 9, 2013. He requests that MA LTC benefits start immediately on August 9, 2013. Mr. Gordon’s resources are below the MA LTC limits and except for the transfer penalty rules he would be eligible for benefits.
However, Mr. Gordon gifted $5,000 to his son on February 28, 2010. This results in a penalty period during which Mr. Gordon will not be eligible for MA LTC. The penalty is calculated by dividing the amount of the transfer ($5,000) by the penalty divisor ($276.17).
5,000/276.17 = 18.10.
Mr. Gordon will be ineligible for MA LTC benefits for 18 days. He will have to use some other source of payment for his care during that period of time.  

Variation For Current Recipients of MA LTC

For a current recipient of benefits, the begin date of the penalty period due to a non-exempt transfer of assets is the first day of the month after the date on the notice the recipient receives that states that his or her eligibility for benefits is being discontinued.
Note that transfer penalties are imposed only if cumulative gift transfers in excess of $500 are made in a calendar month. See 62 P.S. §441.5.

It's So Important to Get Expert Help

Be aware that in this article I have oversimplified the transfer penalty rules somewhat in order to make them more readily understandable by consumers. There are many nuances and a number of exceptions to the transfer penalty rules. And these rules can and will change over time.  Individuals who may need Medicaid financed long term care services should consult an experienced elder law attorney in their state for further information and assistance.  
Pennsylvania residents may consult one of the lawyers with my law firm, Marshall, Parker & Weber. For over 25 years my law firm has successfully helped people qualify for MA LTC benefits.
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