For many Pennsylvania families qualification for Medicaid long-term care benefits is critical to meeting the cost of care for a frail family member. But, an applicant for this government assistance may be made ineligible for benefits if he or she has disposed of assets for less than fair market value during a five year look-back period.
Imposition of a transfer penalty denies benefits for individuals who otherwise need and qualify for Medicaid long term care benefits. A denial can also effectively make an individual’s children liable for the costs of the needed care. See: Law Can Require Children to Pay Support for Aging Parents.
The transfer penalty applies when a transfer was made by the individual applying for Medicaid long-term care benefits, or their spouse, or someone else acting on their behalf.
Unless the transfer is for some reason exempt, if an asset was transferred for less than fair consideration within the look-back period, then a period of ineligibility is imposed based on the uncompensated value of that transfer.
New Penalty Divisor for 2017
The length of the penalty period is calculated by taking the uncompensated value of the asset transfer and dividing it by the average private patient cost of nursing facility care in Pennsylvania at the time of application for benefits. The average cost to a private patient of nursing facility care is often referred to as the “private pay rate” or the “penalty divisor.”
The penalty divisor is revised each year as nursing facility care costs increase. As of January 1, 2017, the penalty divisor is set at $321.95 per day. This means that the PA Department of Human Services has calculated that the average monthly nursing facility private pay rate in Pennsylvania is $9,792.65 a month. [The penalty divisor is different in states other than Pennsylvania].
Uncompensated transfers made during the look-back period will be calculated at one day of ineligibility for every $321.95 transferred away. In Pennsylvania, a transfer penalty will be imposed when the value of transfers made in a month exceeds $500.
The rules are complicated. Seniors considering making gifts or other transfers of assets are well advised to consult with an experienced elder law attorney before completing the transaction.