In last week’s post, I was talking about how Medicaid eligibility hinges in large part on the State’s scrutiny of 5 years of records under Medicaid’s look back period. Transfers of money out of the applicant’s accounts for less than fair value trigger a Medicaid penalty or waiting period for benefits. Clients and their families are very focused on whether a penalty will result because they understand that means they’ll need to cover the additional costs of care.
But, documenting the money flowing into the applicant’s accounts is as important if not more so. That’s because failing to explain where money deposited into an account came from will result in a denial of the application for what’s called lack of verification.
Let’s say there is a $1,000 deposit into Mom’s account that occurred 1 year before the application was filed. The State will want us to prove where the money came from. Their thinking is that maybe there is another financial account that Mom owns that we didn’t tell them about.
And what if there is no such additional account that can be located? It doesn’t matter to the State. As far as they are concerned we haven’t complied with the requirements to obtain Medicaid. We didn’t give the State all the documents required as part of the Medicaid application. Our application will be denied for lack of verification.
They’ll tell us, “when you get the requested documents, just refile the application”. However, if we can’t locate the source of the $1000 deposit what happens in that case? Our only option is to wait until the $1000 deposit falls outside the 5 year look back. In my example, if the deposit occurred 4 years ago, I’ll have to wait 4 years and private pay for that period of time until I can refile without the need to produce the source of that deposit.
It’s easy then to see why unexplained deposits can be much worse than withdrawals. If instead Mom had withdrawn $1000 and we couldn’t document it, we would just accept the penalty which in that case would be about 2 days. A $1000 deposit, however, would be like getting a 4 year penalty.
That’s why when we file Medicaid applications we impress upon clients that as hard as they are trying to track down the transfers out of the accounts they must be equally focused on tracking down the source of every deposit.