In our last Watch Your Language post, we talked about the penalty period Medicaid imposes if you transfer assets before applying for assistance with your nursing home bill. As you may recall, a transfer occurs anytime you sell, trade, or give away property. In each of those cases, the Iowa Department of Human Services (DHS) assumes that you are making those transfers in order to qualify for Medicaid unless you can prove otherwise.
The easiest way to prove you’re not giving away property to get Medicaid benefits is to prove you received fair compensation in exchange (e.g., trading your car). But if you can’t prove you didn’t make the transfer to get on Medicaid, that transfer becomes a disallowed transfer. And that’s bad because a disallowed transfer means a penalty period will be imposed, delaying the time you are allowed to receive Medicaid coverage for the nursing home.
The real question becomes: how do you calculate the penalty period?
While the obvious answer to that question is that you should consult with an elder law attorney, that’s not the point of this blog post. If you want to figure out the penalty period yourself, look no further than Iowa Income Maintenance Manual 8-D, which says:
“The penalty period for transferring assets depends on … how much the assets were worth at the time the transfer occurred. The value of the assets transferred is divided by the statewide average cost of nursing facility services at the time of application.”
Let’s assume you have three kids and give each of them $25,000. A short time later, you apply for Medicaid for Facility Services. The penalty period in this example is 13 months, 26 days. The following shows the Penalty Calculation* that the person processing your Medicaid application will perform to reach this number:
There are two things to take away from this table:
- Iowa uses a pre-determined rate to figure the penalty period. Before you can even attempt to figure out what your penalty period is going to be, you need to figure out what amount Iowa says is the average cost of a nursing home in a month.
- Iowa doesn’t just use months. First you figure out the number of months of penalty, then you figure out the number of days. The process, as you can see, isn’t necessarily obvious, either.
The moral of this story is that you can’t give your stuff away without first consulting an expert like us on the Medicaid eligibility rules. Sometimes gifting/transferring makes sense. A lot of times it doesn’t. And not every transfer results in a penalty. All transfers are subject to the lookback period, which is the subject of our next Watch Your Language post.
If you want help sorting out the Medicaid transfer rules, give us a call. We’re the only boutique elder law firm in the region, and we would love to help you find a solution that helps you care for your senior loved ones.
*This post was written using the July 1, 2015 – June 30, 2016 Iowa penalty divisor.
