03 Oct New Medicaid Transfer Penalty Divisor Announced
Effective September 1, 2023, the “transfer of assets divisor” in Texas for long-term care Medicaid has increased from $237.93 to $242.13 (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, 2023. 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 marked value. The state looks back at the sixty (60) months prior to the long-term care Medicaid application. If any uncompensated transfers occurred (other than certain exceptions such as transfers between spouses, transfers to a disabled child, etc. within 60 months prior to the month of application), then the State totals all non-exempt transfers within such sixty (60) month period prior to the month of application and divides the result by the current divisor amount 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 prior to the month of application and received $10 for such asset in return, then this would be considered an uncompensated transfer (presumptively not exempt) in the amount of $100,000 which results in a transfer penalty (requiring private pay) from the first day of the month the application applies and is otherwise eligible for Medicaid. 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, 2023 and is otherwise eligible for long-term care Medicaid, it is projected that the applicant would have to private pay 413 days ($100,000 ¸ $242.13) from the first day of the month of application. Each state, and sometimes region of a state, has its own 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 by the donee 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. If an uncompensated transfer is made within sixty (60) months prior to the month of application for long-term care Medicaid, it does not necessarily mean there is ineligibility for sixty (60) months. In fact, 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 is not applicable to other Medicaid programs (some have no penalty and the Star + Medicaid program has a 5-year penalty even if only $500 was given).
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