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A Muddy Medicaid Paper Trail Leads to Potential Financial Ruin (Part 2)

Last week we were discussing Gail’s difficulty getting Medicaid for her mom.  She had spent down Mom’s assets but because there was not a clear paper trail, Medicaid was approved, but with a 6 month penalty.  This meant that Gail would be on the hook for 6 more months of Mom’s nursing home care at a total cost of approximately $60,000.

 Gail insisted that she had legitimately spent her mother’s assets on care as well as to repair damage Mom had caused to Gail’s home while she was living there.   The problem was that she didn’t have the documentation to prove it when we filed the application and still didn’t have it when the State ruled on our application.  Anything we couldn’t prove, they treated as a transfer for less than fair value and that’s how the end result was a Medicaid penalty.  So, was that it?  Would Gail have to pay?

 I explained to Gail that we could appeal the decision and go thru what is called a fair hearing before an administrative law judge.  This would give us more time to gather the necessary paperwork but I told her the result would be the same unless she produced the documentation we needed.

 Gail chased down contractors to get invoices for the work that had been done to her home.  However, we had to carefully outline which work was to repair damage caused by Mom because only that was a permissible spend down.  Any other work performed on Gail’s home and paid for by Mom would, in fact, be a transfer subject to a penalty.

 Gail made purchases of carpet, furniture and appliances.  Tracking down those receipts and how she paid for them was not easy.   The receipts often didn’t clearly indicate what was purchased.  In other instances, I told Gail they wouldn’t count towards the spend down.  For example, Mom caused damage to carpet which had to be replaced.  However, other  “interior decoration” changes as a result of the change in carpet wouldn’t count as a spend down.

 Then there remained the issue of the stock held jointly by Mom and her grandson, Bob.  For starters, we had to determine if Mom owned all of it or only one-half.  Since Gail cashed it and deposited it in her account were we starting with a potential $50,000 transfer for less than fair value or only a $25,000 transfer?

 In conversations with the Medicaid office, I explained that as a joint account holder Bob owned one-half of the account.  The Medicaid caseworker insisted that she needed a statement from the stock transfer company indicating that as a joint account holder, Bob owned 50% of the assets in the account and that each account owner must consent to selling the shares.   

So, when Gail deposited the proceeds in her account, only $25,000 of it was subject to a transfer for less than fair value.  Once we obtained the statement, we had that as our starting number and were able to produce more than $25,000 in bills and expenses which Gail paid for on Mom’s behalf, wiping out the penalty.

 It wasn’t easy, and at times, it looked like we would fall short of producing the necessary documents, but there is a lesson to be learned.  As I have stated previously, you can’t walk into the Medicaid office completely unprepared and expect to get a quick approval.  Everything you submit will be closely scrutinized and your lack of knowledge of the rules could cost you tens or even hundreds of thousands of dollars.  Luckily, Gail had us to guide her on exactly what we needed to eliminate the penalty and to her credit Gail was able to go out and get it.  Certainly, at a potential cost to her of $60,000, she had the motivation.