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How To Qualify For Medicaid (Transfer Of Income And/Or Assets)

The Medicaid Penalty

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The penalty that Medicaid imposes for people is to treat the person as if he or she still owns the assets. Medicaid then calculates a period of months during which it will not cover care in a nursing home. If you are subjected to a penalty, you have to use your own assets or hope that friends or family will pay until the penalty period is over.

The penalty calculation works in the following manner:

  • Medicaid determines how much of the transferred asset would have to be used before there would be Medicaid eligibility. For example, George gave his daughter Shirley his savings of $62,000 which were all of his assets. Medicaid in George's state has an asset limit of $2,000. Therefore, $60,000 ($62,000 - $2,000 = $60,000) is the amount George would have had to spend down if he hadn't given it away
  • Next Medicaid determines the average monthly cost of nursing homes in the applicant's area. For example, in George's area, Medicaid says that a nursing home charge averages $3,000 per month.
  • Medicaid then determines how long George must wait from the date of transfer for Medicaid eligibility by dividing the average monthly cost into the ineligible amount. In George case, $60,000 divided by $3,000 equals 20. George must wait twenty months before becoming eligible for Medicaid.

Another way to look at the penalty is to say that for every (dollar amount equal to the average cost of a month in a nursing home in your area) transferred, you are not eligible for Medicaid nursing home benefits for one month. There is no limit on the amount of months you can be ineligible.

The clock for counting the time that eligibility is delayed due to a transfer of assets starts running on the date of the sale not the date of application for Medicaid. In our example, if George gave Shirley the money 35 months before he entered a home, a penalty would be imposed because the transfer occurred during the 36 months. However, the penalty period has already passed since it only lasted 20 months so he is now eligible for Medicaid to pay for his nursing home care. If he gives his daughter the money the month before going into a nursing home, he would have to wait 20 months from the date of the gift before he is eligible for Medicaid to pay.

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