A Medicaid Penalty is Presumed Against You for Certain Transactions

A lot of people get confused about Medicaid penalties. How does the HHSC discover transactions that might create penalties and how do they determine if there is a Medicaid nursing home penalty? Today I am going to go through a sample Medicaid nursing home penalty scenario so you can get a better idea of how things work and what you might run into in your case. This is just an example for discussion purposes, you should speak with your Woodlands Medicaid Attorney before undertaking any financial transaction when you expect a loved one to need Medicaid eligibility within five years.

The HHSC reviews every Medicaid nursing home application under the five year lookback period rule. This means all transactions by the Medicaid applicant (or their spouse) during the 60 months from the later of the date they applied for Medicaid or the date they entered a nursing home is open to examination by the HHSC. This includes transactions that you do not disclose to them and they discover through their own investigation, although you do have a legal obligation as part of the Medicaid application to disclose transfers you are aware of.

Now that we have the boundaries of the lookback period established, what transactions create penalties?

Medicaid regulation I-4000 applies the transfer of assets rules to transfers for less than fair market value. For example, if a Medicaid applicant transferred a home with $50,000 in equity to a family member in exchange for the family member taking over the mortgage payments that total $20,000; that is a transfer of a $50,000 asset in exchange for $20,000 which is going to trigger the penalty process. If there are ATM cash withdrawals totalling as little as $201 in a month the HHSC is going to treat it as a transfer for less than fair market value unless you provide convincing evidence that the cash was used to obtain goods or services equal in worth to the amount of the withdrawal.

So now that we have a transaction that is for less than fair market value under the microscope we get to the key regulation that plays a huge role in whether or not your loved one is stuck with a Medicaid penalty – the presumption. You may have a very good reason for why this transaction took place which has nothing to do with your loved one qualifying for Medicaid, but the HHSC already has the deck stacked against you with its legal presumption that ALL transfers for less than fair value are to qualify for Medicaid and subject to penalty. The practical significance of this presumption is that the HHSC does not have to prove anything other than the Medicaid applicant (or their spouse) made a transfer for less than fair market value during the lookback period in order to impose a penalty. The burden of proof is now on the Medicaid applicant (you) to rebut the HHSC imposing a Medicaid penalty based on the law and evidence available.

With the presumption against you, the strategy that some people have of stonewalling the HHSC and planning to not give them enough information to impose a penalty or to not admit to a transfer is a recipe for disaster. Once that transaction or cash withdrawal shows up as part of the application process the HHSC does not have to prove anything other than that it was for less than fair market value in order to impose a penalty (and cash withdrawals are on their face for less than fair market value). Depending on the evidence available in your case, your Woodlands nursing home Medicaid attorney may be able to provide you with a more attractive solution than crossing your fingers and hoping for the best in the face of these obstacles.

If you do not make a convincing case with the law and the evidence you have available, then the HHSC imposes a Medicaid penalty based on the following formula (numbers accurate as of the date of publication). For every $162.41 in value that the HHSC imposes a Medicaid penalty for, the Medicaid applicant is ineligible for Medicaid nursing home services for one day. That may not sound too bad, but there are two things to keep in mind. First, the penalty does not begin to expire until the Medicaid applicant is otherwise Medicaid eligible but for the penalty. The penalty used to begin to expire once the transfer was made but that is no longer the case. Second, it only takes less than $5,000 to have a penalty for an entire month and if you have bigger transfers than that the penalties can become a very big problem for everyone involved. If Medicaid is not going to pay for that month or more, who will? Now would be a good time to check the admissions contract you signed.

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  1. I have just applied for Medicaid for my husband, stupidly, I just withdrew 1,800 dollars from an atm, will this red flag me? And, or, disqualify the application ? Help, I am worried sick ?

  2. The ATM withdrawal does not create an automatic denial but the caseworker will certainly have some questions and ask for documentation on it. If you need assistance let us know.

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