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Transfer Penalties

Medicaid beneficiaries cannot “fix” eligibility by giving away resources. A transfer of resources without receipt of fair market value will trigger calculation of a transfer penalty. “The penalty for an institutionalized individual consists of ineligibility for certain services for a period or periods of ineligibility that equal the number of months calculated by taking the total, cumulative uncompensated value of all assets transferred by the individual or spouse on or after the look-back date discussed in §3258.4, divided by the average monthly cost to a private patient of nursing facility services in the State at the time of application” See HCFA Transmittal 64, § 3258.5.D. In plain English, the penalty is roughly equivalent to the amount of nursing home care the applicant could have purchased with the funds that were given away. For this reason, Medicaid Planning should not be attempted by anyone who is not intimately familiar with the Medicaid program.

Currently (in 2022) the look-back period is sixty months. Therefore a transfer for less than fair market value made within sixty months prior to a Medicaid application will be penalized. Transfers that occured more than sixty months prior to the Medicaid application are ignored.

Transfers for less than fair market value may be subject to penalty whether made by the applicant, the applicant’s spouse or by any person or entity acting for the applicant or spouse. For example, HCFA 64, Section 3257.B states:

[A]ssets include all income and resources of the individual and of the individual’s spouse. This includes income or resources which the individual or the individual’s spouse is entitled to but does not receive because of any action by:

  • The individual or the individual’s spouse;
  • A person, including a court or administrative body, with legal authority to act in place of or on behalf of the individual or the individual’s spouse; or
  • Any person, including a court or administrative body, acting at the direction or upon the request of the individual or the individual’s spouse.

For purposes of this section, the term “assets an individual or spouse is entitled to” includes assets to which the individual is entitled or would be entitled if action had not been taken to avoid receiving the assets.

By way of example, in DCH v. Medders, 292 Ga. App. 439 (2008), Mrs. Medders was entitled to an inheritance from her husband. Her attorney’s, apparently thinking the IRS rules and Medicaid rules were similar (they aren’t), had Mrs. Medders renounce her inheritance so it would pass to her heirs. When Mrs. Medders applied for Medicaid, she was denied eligibility because she transferred resources for less than fair market value. The Court of Appeals found the inheritance, which she had a right to receive but didn’t, was a resource. It also found that Medicaid is not required to accept the legal fiction under the IRS and probate rules that renunciation results in treating her as if she predeceased her husband.

In Georgia, as of April 1, 2023, the penalty divisor is $9,584. It should be revised as of April 1, 2024.

See also: Medicaid’s Transfer Penalty

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