Let's start with a quick review:
When an individual enters a nursing home and applies for Medicaid benefits they will scrutinize your financial records for the previous 60 months, known as a look back period. If any unqualified or uncompensated transfers or gifts were made for what is considered “less than fair market value” or for “less than fair consideration” they will impose a penalty. Meaning if you sell an asset such as your house for less than its actual value or give money to a friend or relative and do not receive anything of equal value in return, they will impose a penalty.
Let’s say that two years ago your mom gave you $70,000. You used $40,000 to make down payment on a home, and put the other $30,000 in a bank account. Now, your Mom enters a nursing home and you need to apply for Medicaid benefits and the County Assistance Office (CAO) tells you that Mom won’t qualify for because of the money she gave you within the last five years. The penalty means that the applicant is denied eligibility for Medicaid long-term care benefits for a period of time. The length of the penalty period is based upon the value of the uncompensated transfer and the state that you live in. Today we’ll be using New Jersey as an example.
The way the penalty is calculated is the following;
The value of the transfer is divided by the average daily cost of care in your state [also known as the penalty divisor rate]. In New Jersey that amount is $332.59 [as of April 01, 2015].
So, Mom’s gift of $70,000 makes her ineligible for benefits for 211 days (70,000/332.59 = 211).
Now, since you still have $30,000 of the original amount she gave you shouldn’t you be allowed to return that amount and have the penalty reduced? This question is very troubling to State Medicaid Agencies. It makes logical sense and is a great incentive to people to return as much as possible and most State Agencies follow this logic. But, for some State Medicaid Agencies it just doesn’t seem right that you don’t have to repay the other $40,000 that Mom gave you. So they have struggled to come up some way to force you to pay back the remaining $40,000, whether you still have the money or not. The federal government has given some in formal guidance on this issue stating that a partial return should reduce the penalty, providing the money is given directly to the nursing home and is used to pay for the individuals care. [placing in the bank account of the Medicaid recipient will then cause them to be disqualified due to being “over-resourced” or having too much money].
Several states (either unaware of or ignoring the governments guidance) have held that partial refunds of gifted funds change the start date for the imposition of the penalty period. New Jersey and a few other State Medicaid Agencies want to treat returned resources as if they were still available to the nursing home resident during the time they were gone. Treating returned funds as “available" would mean the resident/applicant was over the resource limit for Medicaid and would thus delay the running of the penalty start date. Is this legal? The answer is No according to representatives of the Federal Government’s Agency that oversees Medicaid. But some states are continuing to use this constructive availability theory treatment anyway.
New Jersey and other states are at odds with the view of federal regulators who hold the trump card in interpreting how States can implement the Medicaid rules.
In a recent case New Jersey has held that a Medicaid applicant's penalty period cannot be modified unless ALL of the assets transferred during the look-back period are returned.
C.C. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-4291-13T4, May 29, 2015).
A case recap states that the individual named in the case as C.C., had sold her house in Ocean County New Jersey and gave half of the proceeds [$99,233.75] to her nephews. When she entered a nursing home and applied for Medicaid benefits she was imposed a penalty of 387 days of ineligibility. During that time, one of her nephews returned $17,000 of the amount he was given. The $17,000 was used for her care at the nursing home and they petitioned the County Assistance Office at a “fair hearing” and were denied, they appealed to the New Jersey Superior Court, Appellate Division, who agreed with the state that the penalty period should not be changed. The court holds that "both federal and state law require the return of all assets transferred during the look-back period in order to modify the penalty."
To see a transcript of the full case go to: https://www.judiciary.state.nj.us/opinions/a4291-13.pdf
So, whether anyone should return any of the money or transfers that were given to them by a parent to help satisfy a penalty period depends on the state that you live in and apply for Medicaid benefits in. Some states are an “all are nothing” state while others will allow a partial return.
Medicaid rules are very complex, consult the guidance of an expert. If you or a loved one is in or about to enter a nursing home, contact us today to learn how we can help you.
PH: 855.471.6771 Email: lorrahmymedicaidplus.com
When an individual enters a nursing home and applies for Medicaid benefits they will scrutinize your financial records for the previous 60 months, known as a look back period. If any unqualified or uncompensated transfers or gifts were made for what is considered “less than fair market value” or for “less than fair consideration” they will impose a penalty. Meaning if you sell an asset such as your house for less than its actual value or give money to a friend or relative and do not receive anything of equal value in return, they will impose a penalty.
Let’s say that two years ago your mom gave you $70,000. You used $40,000 to make down payment on a home, and put the other $30,000 in a bank account. Now, your Mom enters a nursing home and you need to apply for Medicaid benefits and the County Assistance Office (CAO) tells you that Mom won’t qualify for because of the money she gave you within the last five years. The penalty means that the applicant is denied eligibility for Medicaid long-term care benefits for a period of time. The length of the penalty period is based upon the value of the uncompensated transfer and the state that you live in. Today we’ll be using New Jersey as an example.
The way the penalty is calculated is the following;
The value of the transfer is divided by the average daily cost of care in your state [also known as the penalty divisor rate]. In New Jersey that amount is $332.59 [as of April 01, 2015].
So, Mom’s gift of $70,000 makes her ineligible for benefits for 211 days (70,000/332.59 = 211).
Now, since you still have $30,000 of the original amount she gave you shouldn’t you be allowed to return that amount and have the penalty reduced? This question is very troubling to State Medicaid Agencies. It makes logical sense and is a great incentive to people to return as much as possible and most State Agencies follow this logic. But, for some State Medicaid Agencies it just doesn’t seem right that you don’t have to repay the other $40,000 that Mom gave you. So they have struggled to come up some way to force you to pay back the remaining $40,000, whether you still have the money or not. The federal government has given some in formal guidance on this issue stating that a partial return should reduce the penalty, providing the money is given directly to the nursing home and is used to pay for the individuals care. [placing in the bank account of the Medicaid recipient will then cause them to be disqualified due to being “over-resourced” or having too much money].
Several states (either unaware of or ignoring the governments guidance) have held that partial refunds of gifted funds change the start date for the imposition of the penalty period. New Jersey and a few other State Medicaid Agencies want to treat returned resources as if they were still available to the nursing home resident during the time they were gone. Treating returned funds as “available" would mean the resident/applicant was over the resource limit for Medicaid and would thus delay the running of the penalty start date. Is this legal? The answer is No according to representatives of the Federal Government’s Agency that oversees Medicaid. But some states are continuing to use this constructive availability theory treatment anyway.
New Jersey and other states are at odds with the view of federal regulators who hold the trump card in interpreting how States can implement the Medicaid rules.
In a recent case New Jersey has held that a Medicaid applicant's penalty period cannot be modified unless ALL of the assets transferred during the look-back period are returned.
C.C. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-4291-13T4, May 29, 2015).
A case recap states that the individual named in the case as C.C., had sold her house in Ocean County New Jersey and gave half of the proceeds [$99,233.75] to her nephews. When she entered a nursing home and applied for Medicaid benefits she was imposed a penalty of 387 days of ineligibility. During that time, one of her nephews returned $17,000 of the amount he was given. The $17,000 was used for her care at the nursing home and they petitioned the County Assistance Office at a “fair hearing” and were denied, they appealed to the New Jersey Superior Court, Appellate Division, who agreed with the state that the penalty period should not be changed. The court holds that "both federal and state law require the return of all assets transferred during the look-back period in order to modify the penalty."
To see a transcript of the full case go to: https://www.judiciary.state.nj.us/opinions/a4291-13.pdf
So, whether anyone should return any of the money or transfers that were given to them by a parent to help satisfy a penalty period depends on the state that you live in and apply for Medicaid benefits in. Some states are an “all are nothing” state while others will allow a partial return.
Medicaid rules are very complex, consult the guidance of an expert. If you or a loved one is in or about to enter a nursing home, contact us today to learn how we can help you.
PH: 855.471.6771 Email: lorrahmymedicaidplus.com
