19 Oct NEW MEDICAID TRANSFER PENALTY DIVISOR ANNOUNCED
Effective September 1, 2021, the “transfer of assets divisor” in Texas for long-term care Medicaid has increased from $213.71 to $237.93 (which represents the average daily cost of long-term care in Texas). The increased figure applies to Medicaid applications in Texas submitted on or after September 1, 2021. When an individual needs long-term care (such as nursing home care) and applies for Medicaid to pay some of the costs of care, then the State examines certain eligibility requirements (i.e., resources, income, etc.) during its eligibility determination process. There could be ineligibility if there is a transfer of funds or disposal of assets for less than fair market value. The state looks back at the sixty (60) months before the long-term care Medicaid application. If any transfers occurred that are not exempt (i.e., transfers between spouses, transfers to a disabled child, etc. are exceptions to the transfer penalty rules), then the State totals all non-exempt transfers within such sixty (60) month period before the month of application and divides the result by the current divisor amount ($237.93) stated above.
The penalty begins the first day of the month of the application if the applicant is otherwise eligible for Medicaid benefits. The result is the number of penalty days during which the individual would be ineligible for Medicaid coverage and would have to pay for institutional care out of pocket. So, for example, if an applicant gave an asset worth $100,010 within 60 months before the month of application and received $10 for such asset in return, then this would be considered an uncompensated transfer (presumptively not exempt) for $100,000. If the applicant then applied for long-term care nursing home Medicaid in Texas (there are over 109 Medicaid programs in Texas, each with its own rules) on or after September 1, 2021, and is otherwise eligible for long-term care Medicaid, it is projected that the applicant would have to private pay 420 days ($100,000 ¸ $237.93) from the first day of the month of application. Each state, and sometimes region of a state, has its transfer penalty divisor since the cost of care varies around the country. The penalty can be eliminated if the gifted funds are returned in full or if the donee pays the bills of the donor (applicant) of an equivalent amount. Often the penalty can be reduced by various strategies. Texas (unlike some states) allows partial cures. Thus, if an uncompensated transfer is made within sixty (60) months before the month of application for long-term care Medicaid, it does not necessarily mean there is ineligibility for sixty (60) months. Sometimes gifts are purposefully made as part of the planning for Medicaid eligibility and preservation of resources. It should be noted the transfer penalty divisor does not apply to other Medicaid programs (some have no penalty and the Star + Medicaid program has a 5-year penalty even if only $500 was given).
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming virtual Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.