The Medicaid program is the most significant source of financial assistance for families struggling to meet the cost of long term care. According to the Pennsylvania Health Care Association, 47% of our nation’s $275 billion in annual spending on long-term care –excluding unpaid family caregiving—is paid for by Medicaid. See: PA Long-Term Care Statistics.
In Pennsylvania, in 2012 over $7 billion was spent by Medicaid on long-term care services and supports. Nearly 50% went for nursing facility care while 41% was paid for home and personal care services. See: Distribution of Medicaid Spending on Long Term Care, Kaiser Family Foundation State Health Facts.
Qualification for Medicaid long-term care benefits is critical to meeting the care needs of many of Pennsylvania’s most frail elderly. But, an applicant is ineligible for those benefits if he has disposed of assets for less than fair market value during a five year look-back period.
Imposition of a transfer penalty denies benefits for individuals who otherwise need and qualify for Medicaid long term care benefit. A denial can also effectively make an individual’s children liable for the costs of the needed care. See: Children can be liable for a parent’s long term care costs in Pennsylvania.
The transfer penalty applies when a transfer was made by the individual applying for Medicaid long-term care benefits, or their spouse, or someone else acting on their behalf.
Unless the transfer is for some reason exempt, if an asset is transferred for less than fair consideration within the applicable look-back period, then a period of ineligibility is imposed based on the uncompensated value of that transfer.
New Penalty Divisor for 2014
The length of the penalty period is calculated by taking the uncompensated value of the transfer and dividing it by the average private patient cost of nursing facility care in Pennsylvania at the time of application for benefits. The average cost to a private patient of nursing facility care is often referred to as the “private pay rate” or the “penalty divisor.”
The penalty divisor is revised each year as nursing facility care costs increase. The Pennsylvania Department of Public Welfare has announced that as of January 1, 2014, the penalty divisor will be set at $288.21 per day. This means that the Department has calculated that the average monthly private pay rate in Pennsylvania is $8,766.39 a month (or $105,197 per year).
Uncompensated transfers made during the look-back period will be calculated at one day of ineligibility for every $288.21 transferred away. In Pennsylvania, transfers penalties will be imposed when the value of transfers made in a month exceeds $500.
The rules are complicated. Seniors considering making gifts or other transfers of assets should consult with an experienced elder law attorney before completing the transaction. Call 800-401-4552 to schedule an appointment with an elder law attorney from Marshall, Parker and Weber.