The previous blog post looked at what transfers trigger Medicaid eligibility penalties. In short, any uncompensated or below-market transfer made in the five years prior to applying for Medicaid will cause an applicant to be penalized for future Medicaid eligibility. This blog post will examine how that penalty works.
The length of the penalty has nothing to do with when in the past five years transfers were made, but the total amount transferred within those past five years. A $100,000 transfer made four years and eleven months ago counts the same as a $100,000 transfer made one month ago. In terms of practical advice, if significant transfers were made close to five years ago, an applicant may be best advised to delay their Medicaid application until those transfers are a full five, or more, years in the past, if at all possible.
To determine the length of the penalty, the total amount of transfers made over the past five years is divided by something called the Divestment Penalty Divisor. The Divestment Penalty Divisor is the average private care price per month of a care facility in a state. Since facilities have different costs across the country, the Divestment Penalty Divisor is different in each state. As a result, applicants who made the same total amount of transfers in the past five years may face different eligibility penalties because of the difference in facility costs. In Missouri, the current Divestment Penalty Divisor is $4,889 per month. If a Missouri Medicaid applicant made $100,000 in transfers during the past five years, the $100,000 is divided by $4889 to get approximately 20.5. The applicant’s penalty period is 20.5 months. The applicant would then receive Medicaid benefits only after 20.5 months have passed.
In practical terms, what happens during that penalty period? During that time a Medicaid applicant will have to pay for their assisted care facility using their own resources. As this could be a prohibitive barrier for many Medicaid applicants, proper planning is essential to ensure that an individual will not have to face the burden having to pay unnecessary, out-of-pocket expenses because of having made transfers within the five years before applying for Medicaid. Please consult with a local elder law attorney to help avoid any possible Medicaid penalties.