As you may know, the state imposes a period of ineligibility for Medicaid benefits when an applicant has made a gift – that is, transferred assets for less than fair market value – unless the transfer is exempt, such as a gift to a spouse or disabled child. The period of ineligibility is based upon the amount of the gift, divided by the average monthly statewide cost of a nursing facility (currently $6,757.67 in Pennsylvania).
For years, the rule has been that the ineligibility period begins in the month when the gift was made. For example, a gift of $50,000 made November 1, 2005 would have produced an ineligibility period of 7.4 months ($50,000 ÷ $6,757.67 = 7.4). The period would have run from November 2005 until about mid-May 2006, and then expired. An applicant who had spent down other assets and applied a year after the gift, on November 1, 2006, would immediately be eligible for Medicaid.
Under the new rule, expected to affect applications filed on or after January 1, 2007, the ineligibility period would begin when the applicant would otherwise be eligible for benefits if not for the gift. That means that if the same $50,000 gift were made March 1, 2006, and the person who made it had spent down other assets and then became eligible for benefits a year after, on March 1, 2007, the person’s application would be denied.
The applicant would find that the ineligibility period, rather than having expired, was just now beginning.
What happens then? That question will have to be answered when the new law goes into effect.
In the worst case, the applicant faces potential discharge from the nursing facility with no alternative means of care.
But there are other alternatives that may be available to those applying for benefits in 2007 who have made gifts:
Gifting back. The recipient of the gift can simply gift it back (if they still have it), which eliminates the ineligibility period. The applicant would then have to spend assets down, of course.
Made before February 8, 2006. The new rule applies only to gifts made on or after February 8, 2006, the effective date of the Act. As for gifts made before that date, the ineligibility period began the month when made, and may have expired.
Other purpose. If the applicant can show that the asset was transferred for a purpose other than to qualify for Medicaid, it’s possible no ineligibility period will be imposed.
To date, there have been few cases to test the meaning of this exemption. Perhaps an applicant who gave money to help an unemployed son, and then had an unexpected decline in health, could succeed in claiming it. Those claiming this exemption may need to go to a “fair hearing” under Medicaid rules.
No gift intended. The law provides another exemption when it can be shown that the transferor intended to dispose of the asset at fair market value or for other valuable consideration. As with the previous exemption, many of these claims may have to be decided by means of a hearing.
Undue hardship. The state will not impose a period of ineligibility if it determines that denial of eligibility would cause “undue hardship.” According to the regulations, undue hardship exists when denial of benefits “would deprive the individual of medical care and endanger the individual’s health or life” or “when the individual or a financially dependent family member would be deprived of food, clothing, shelter or other necessities of life.”
The new Act permits nursing facilities to assert undue hardship claims on behalf of their residents, in addition to the applicants themselves.