Penalty Periods and the 5-Year Lookback: Some Good News

On April 17, the acting director of the Centers for Medicare and Medicaid Services issued a policy clarification to all state Medicaid Directors regarding the imposition of penalty periods for individuals requesting Home and Community Based Services.  This clarification may be beneficial to many hoping to receive services in their home.

Individuals requesting Medicaid assistance with the payment of their nursing care expenses must meet certain eligibility criteria, both financial and non-financial, before Medicaid will begin assistance.  The non-financial criteria includes US Citizenship or lawful permanent resident status, state residency, and a demonstrated need for a certain level of care.  The financial criteria includes meeting certain income requirements and having minimal countable assets (there is no limit on non-countable assets).  In addition, if an applicant or their spouse has made any uncompensated transfers, then Medicaid will impose a penalty based on the asset transfer.

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Asset transfers including gifting cash or property, paying bills or expenses for other individuals, or selling real or personal property for less than fair market value.  For example, selling real property for less than the tax assessed value, even if it was a third party sale, is considered an uncompensated transfer.  Paying for a grandchild’s wedding or college tuition is considered an uncompensated transfer.   If a Medicaid applicant has made uncompensated transfers, then the total value of the transfers will be added together and the amount divided by a penalty divisor (set by each state).  The resulting number is a period of months in which Medicaid will not pay for the applicant’s care.

Prior to the Deficit Reduction Act of 2005, the penalty for an uncompensated transfer began in the month of transfer.  Therefore, for many applicant’s gifts made prior to any spell of illness never affected them.  The Deficit Reduction Act of 2005 altered the Medicaid policy on uncompensated transfers by stating that any uncompensated transfer made within the sixty months prior to application had to be disclosed and the resulting penalty would not run until the applicant was otherwise eligible for Medicaid services and receiving institutional level of care services.  It is important to note here that the sixty month lookback only applies to uncompensated transfers (not transfers for value) and that an uncompensated transfer does not automatically render a person ineligible for benefits for sixty months.

For individuals in a nursing facility, the “otherwise eligible for Medicaid services” standard is obvious.  It includes meeting the financial eligibility requirements as well as the non-financial eligibility requirements, including residence in a nursing facility.  For individuals hoping to receive Medicaid services in their homes however, the interpretation of receiving institutional level of care services meant that the penalty period would not begin unless they moved into a nursing facility.  For many remaining in their homes, this put them in limbo because their penalty never began.

The clarification issued on April 17 states that the policy shall now be interpreted to read that the penalty will begin when the applicant meets the financial and non-financial criteria for Medicaid and would otherwise be receiving Medicaid services but for the penalty.  This new policy will allow a penalty period to begin without the need to move into a nursing home.

The reasons for penalty periods and uncompensated transfers are varied and may be part of a broader asset protection plan or may simply be the result of a life action taken with no thought of the need for nursing services.  For whatever the reason, this development will likely be useful for those wishing to receive services in the home.

Kit Kat

Ask Kit Kat – Corolla Herd

Hook Law Center: Kit Kat, what can you tell us about how the wild horse herd is doing in Corolla, NC?

Kit Kat:

Well, the wild horses in Corolla have suffered a bit of decline, so some action is being taken to improve their situation. Enter Gus, a male, wild stallion that has come from another herd on the Shackleford Banks, NC. It is hoped that introducing another genetic line will help improve the health of the Corolla herd, which has become inbred. The Corolla herd is based on a single, maternal line. Over the years, since their introduction by the Spanish in the 1600s, the herd has displayed such defects as locked patellas, parrot mouth, and decreased stature. Gus is descended from the Shackleford Banks herd which has three maternal lines.

Poor Gus! A lot of hope is being placed in him. He’s almost seven, which means he’s reaching his reproductive maturity. Thus far, after being in Corolla for three years, he has not yet fathered any offspring, as far as can be determined. Interestingly, Gus is named after an equine expert from Texas A & M University named Gus Cothran. Cothran is the one who recommended expanding the Corolla herd to 150. Presently, the herd size hovers around 60, due to previous grazing restrictions and birth control measures given to females, like darting them with a birth control chemical.  Next month, a compromise agreement is to be signed by the Corolla Wild Horse Fund, which will allow the herd to increase to between 110-130 horses. The Corolla Wild Horse Fund will also begin monitoring the herd every two months instead of  one time per year to gather information on the herd’s movements and grazing patterns. The goal is, according to Jo Langone, chief operating officer of the Fund, to have healthy horses, while maintaining the integrity and health of the land on which they graze—the Currituck National Wildlife Refuge and the North Carolina Estuarine Research Reserve. (Jeff Hampton, “The new stud on the range: Gus offers the promise of a greater genetic mix to the Corolla wild herd,” The Virginian-Pilot, April 16, 2018 p. 1 & 9)

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