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Medicaid Divestment Rules

About the Medicaid divestment penalty period when transferring assets

Medicaid Divestment Planning & Rules There are provisions regarding assets that state that each state must withhold payment for different long-term care services that are provided to individuals who have disposed of their assets for an amount that was less than fair market value. This includes financial resources as well as income. These provisions will apply if any assets are transferred by an individual in a facility. The transfer can also be done by a spouse or any other person who is caring for the individual.
The provisions will apply when any asset is transferred by an individual that is receiving home or community service or by someone who in is a nursing home. States have the power to look back to search for any transaction that transfers assets for the past 60 months or five years. This Medicaid rule is called the five-year look back. This period of time does not begin until the person applies for Medicaid and has qualified.

Medicaid Penalty Period on Transfer of Assets for Less than Fair Market Value

If any transfer of assets was made that was for less than fair market value, the state has the power to withhold payment for any care that is given at a nursing home facility. The amount withheld is the average amount that would be paid for a monthly private-pay rate. For example, if an asset that was worth $90,000 was transferred; it would be divided by a $3,000 monthly rate. There is no limit to the length of this penalty period.

Medicaid's Divestment Penalty Period to Not Pay for Nursing Home Costs

The divestment penalty period is the actual time that Medicaid will not pay for services. During this time, patients may be eligible for limited services through Medicaid. The transfer itself is referred to as a divestment. Individuals must remember that the state can look back up to 60 months (i.e. 5 years), searching for transfers that have been made.

When Medicaid's Divestment Penalty Period Does Not Affect Transfer of Assets

There are some transfers that penalties are not applied to. These can include transfers that are made to a spouse, transfers made by a spouse for the sole benefit of the spouse, transfers to a disabled person, any transfer made that does not involve Medicaid eligibility and any transfer made in which imposing a penalty would result in financial hardship.

Calculating the Medicaid's Divestment Penalty Period for Nursing Home Costs

The actual penalty period is determined by dividing the value of the asset that was transferred by the divestment penalty divisor. This is calculated as the monthly private-rate for care received from a nursing home in the state in which the individual is applying for Medicaid.
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