To qualify for Medicaid assistance paying nursing home bills, you can not simply transfer your assets and move into a nursing home. Congress rightfully does not want a person with assets to move into a nursing home on Friday, give their assets away over the weekend and qualify for Medicaid the next week. The government has a legitimate reason for delaying benefit payments when a person has assets and gives them away: state and federal budgets simply can’t afford it.
Medicaid gifting rules penalize applicants for certain asset transfers when the amount received for the asset is less than the asset is worth. During the penalty period, the person needing care will be ineligible for Medicaid benefits. Each state determines an amount called a divisor to determine the length of the gifting penalty.
What is the divisor and how is it used?
The divisor rate is designed to approximate what a family would pay privately for semi-private care in Texas. The application for Mediciad nursing home benefits asks a simple “yes/no” question about asset transfers during the 60 months immediately preceding the application date. This time frame is referred to as the Medicaid Look Back Period. You are required to list each asset transferred, the market value, the amount received and who received the property.
To calculate the number of delays of ineligibility, the Texas Department of Human Services uses an amount that represents the average cost of care in the state. Each state establishes their own divisor based on the average costs of care in that state. For Texas the amount for 2013 is $142.92 per day. In other words, for every $142.92 transferred Medicaid delays the onset of benefits by one day. A quick estimate is to use the equivalent monthly amount of $4332. If the amount transferred is $45,000, the Medicaid penalty calculation looks like this:
Divide $45,000 by $4332. The result is roughly 10 months of delay before Medicaid provides funding. During that time period, Medicaid will not contribute to care. The patient and his or her family are responsible for payment.
When does the penalty start?
Under the The Deficit Reduction Act, this 10 month example penalty would not start until four conditions have been met:
- the person making the transfer resides in a nursing home
- income and assets are within Medicaid’s established limits
- a Medicaid application has been properly submitted
- the application has been approved but for the asset transfer
According to MetLife’s 2012 Survey of Long Term Care Costs where you live in Texas determines if this is a good deal for you or not. The average semi-private rate in non-metropolitan areas runs a family $131/day ($47,815 annually) but in cities like Houston, the average semi-private stay costs $145/day or $52,925 each year. You may end up spending more paying privately for nursing home care in the Houston area than the offset allowed by the divisor.
Can the penalty be reduced?
Texas residents can reduce the delay of benefits by taking advantage of an important special provision into the law by Congress. If all or a part of the gifted assets can be returned to the patient, the penalty can be “cured”. The Medicaid gifting penalty calculation are complicated. Transfers can result in unintended consequences. As with most matters regarding Medicaid planning strategies in Texas, get sound, competent advice.