Whenever we are preparing to file a Medicaid application on behalf of a client we closely examine the 5 years of records that we will need to provide to the State together with the 16 page application. Those records include every statement for every asset the client owned in the 5 years directly preceding the month we want Medicaid benefits to begin.
As I explain to my clients, we are looking at what the Medicaid caseworker will be scrutinizing – money going into the client’s accounts and money leaving those accounts. Money leaving the accounts – whether by check, electronic transfer, cash withdrawal etc. – is important because Medicaid wants to determine whether the applicant received something of equal fair market value back in product or service. If he/she did not, then the uncompensated transfer is subject to a Medicaid penalty.
When I explain how the penalty works most people understand very quickly how that can negatively impact the applicant and his/her family. The penalty is actually a waiting period for benefits. If I am in a nursing home and spent down to $2000, but I have transferred $50,000 in the past 5 years for which I did not receive something of equal value back, the State will impose a penalty of just shy of 4 months. This means I must continue to pay the facility for another 4 months at its private pay rate after I have spent down to $2000 and met all the other Medicaid requirements for eligibility. Of course, at that point I do not have any money left so now my family must figure out how to cover that cost.
The focus of the process becomes all about explaining the transfers out of the applicant’s accounts so as to reduce or ideally eliminate any penalty. Some penalties for unexplained or uncompensated transfers can be so large that they can ruin a family’s financial wellbeing.
As bad as these penalties can be, however, it is the transfers into the client’s accounts – the deposits, wire transfers etc. that have the potential to be even more catastrophic. Next week I’ll explain why.