Transfer Of Assets
The Deficit Reduction Act of 2005, Pub. Law 109-171 (“DRA”) made several significant changes in the federal law governing Medicaid, with major changes in the transfer penalty rules. Indiana was very slow in implementing the DRA, making all DRA provisions effective November 1, 2009. The following is a brief synopsis of how the law impacts older adults and persons with disabilities as they plan for Medicaid:
The Medicaid rules require states to penalize individuals who transfer assets for less than fair market value in order to become eligible for Medicaid. The penalty is simply a time in which Medicaid will not pay for certain services such as nursing home care and home health care under what is called a Medicaid waiver
Medicaid has a “lookback” period of five years to determine if a penalizable transfer had been made. Generally speaking, the penalty period begins at the time the individual is eligible for Medicaid and could receive certain long term care services (such as nursing home care) except for the application of the penalty period. There are exceptions to this rule, though.
Indiana calculates the penalty period by taking the amount of the gift and dividing it by the Indiana-set monthly average nursing home cost, which is currently $6,873.00 (2021). This figure typically changes once a year in July. There is no “rounding” of the result which means that an individual can have a penalty period which includes a fraction of a month.
Mary gives $20,000 to her daughter in January of 2021 because Mary has health problems and fears she may need nursing home care one day. Mary becomes ill in June of 2021 and goes into a nursing home. She applies for Medicaid to be effective June of 2021. There is a penalty of 3 months and 12 days assessed for the transfer. Her penalty period ends on September 12, 2021. Mary can be eligible for Medicaid in June of 2021 but she will be in a “penalty period” of 3 months and 12 days during which she must pay for the per diem cost of her nursing home care.