What is the Medicaid Transfer Penalty?

When you need long-term care at home or in a facility the costs can be staggering. That is why qualifying for government benefits through Medicaid is crucial to the financial, physical and emotional health of so many seniors and their families.

Unfortunately, qualifying for Medicaid long-term care benefits can be very difficult. One of the obstacles is the so-called “transfer penalty.” A period of ineligibility for benefits (transfer penalty) is imposed if an applicant 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 would qualify for Medicaid long term-care coverage. 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 2020

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, 2020, the penalty divisor is set at $352.86 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 $10,732.83 a month. [Please note that 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 $352.86 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.  If you live in Pennsylvania you can contact the elder law attorneys at Marshall, Parker and Weber for more information.

Medicare Part B Premium and Deductible to Rise in 2020

Medicare is the vital healthcare program that covers most older Americans. It’s a complicated program. This article will take a look at one of its components – Medicare Part B and Part B’s premiums.   

Medicare Overview

Medicare is the federal health insurance program that covers people 65 and older and some younger adults with permanent disabilities and certain medical conditions. When Medicare was established in 1965 about half of American seniors had no health insurance. Today, virtually all Americans over age 65 have at least some health coverage through Medicare.

Medicare does not cover all health care services. For example, Medicare generally does not pay for long-term care services, regular eye exams and eyeglasses, hearing aids, or routine dental care.

Medicare coverage is divided into four parts – Part A, Part B, Part C (Medicare Advantage), and Part D.

Part A (Hospital Insurance) covers inpatient hospital care, some limited skilled nursing facility stays, home health care, and hospice care.

Part B covers physician services, outpatient hospital care, and some home health visits. It also covers laboratory and diagnostic tests, such as X-rays and blood work; durable medical equipment, such as wheelchairs and walkers; certain preventive services and screening tests, such as mammograms and prostate cancer screenings; outpatient physical, speech and occupational therapy; outpatient mental health care; and ambulance services.

Part D is prescription drug coverage.  

Part C (Medicare Advantage) allows beneficiaries to choose to receive their Part A, B, and D services through a private managed care insurance plan rather than original Medicare.  

Medicare Part B Premiums and Deductible

Over 90% of eligible Medicare beneficiaries enroll in Part B and over 70% use Part B services during a year. Part B generally pays 80% of the approved amount for covered services in excess of the annual deductible ($185 in 2019 and $198 in 2020). The beneficiary is liable for the remaining 20%. Many beneficiaries purchase a Medicare Supplement (Medigap) policy to cover that exposed 20%.

Part B coverage is not free. You pay a premium each month for your Part B coverage. If you get Social Security, Railroad Retirement Board, or Office of Personnel Management benefits, your Part B premium is deducted from your benefit payment. If you don’t get these benefit payments, you’ll get a bill. 

The Centers for Medicare and Medicaid Services (CMS) has recently announced that the standard monthly Part B premium for 2020 will be $144.60. This is an increase of $9.10 over the 2019 amount. Some beneficiaries will pay substantially more while those with low incomes and limited resources can get help paying the premiums through several Medicare Savings Programs.

Your monthly Part B premium will be increased if you are subject to penalty for late enrollment or reenrollment. Premiums are also increased for individuals with higher incomes. This is referred to as your Income Related Monthly Adjustment Amount (IRMAA). The Government uses the taxpayer’s recent (2018) federal income tax return to determine if they are subject to an IRMAA premium adjustment. The calculation is based on your adjusted gross income plus tax-exempt interest income. This is referred to as your modified adjusted gross income (MAGI)Here are the IRMAA adjusted Part B monthly premium amounts for 2020:

If your MAGI income in 2018 was (you will pay in 2020)			You pay each month (in 2020)
File as Single on tax return	File joint tax return	File married separate tax return
$87,000 or less	$174,000 or less	$87,000 or less	$144.60
above $87,000 up to $109,000	above $174,000 up to $218,000	Not applicable	$202.40
above $109,000 up to $136,000	above $218,000 up to $272,000	Not applicable	$289.20
above $136,000 up to $163,000	above $272,000 up to $326,000	Not applicable	$376.00
above $163,000 up to	above $326,000 up to	above $87,000 up to	$462.70

$499.999.99                $799,999.99                         $412,999.99

$500,000 and above              $750,000 and above             $413,000 and above                             $491.60                           

Filing Single rates also apply to Head of Household and Qualifying Widow filings.

Special rules may apply to lower your IRMAA premium is some situations where your income has come down due to changed circumstances.   Click here for more information.

Note: If you have joined a Medicare Advantage Part C Plan, you still have Medicare. You'll get your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance), and perhaps Medicare Part D (Drug) coverage from the Medicare Advantage Plan and not Original Medicare. Medicare Advantage Plans have different rules and charge different out-of-pocket costs. Those rules and costs change each year.

Related Links:

CMS Fact Sheet - 2020 Medicare Parts A & B Premiums and Deductibles

Medicare and You Handbook - 2020