Medicaid Policy
Medicaid Policy
Contact DHHS Policy Specialist for Previous Policy (371-1 was renumbered to 575-1 as of November 1, 2017)
Treat transfers of certain assets as a transfer for less than fair market value unless they meet specific requirements defined below.
Annuities: Annuities are a countable asset. If the individual or spouse purchases an annuity on or after February 8, 2006, treat the purchase as a transfer for less than fair market value unless the annuity names the State as the preferred remainder beneficiary. The language must show intent to pay the state up to the total amount of medical assistance paid on behalf of the individual or spouse (554-1).
Life Estates: Treat the purchase of a life estate in someone else's home as an asset transfer for less than fair market value, unless the purchaser lives in the home for a period of at least 12 consecutive months after the date of the purchase.
If the residency does not last 12 consecutive months, the person has not met this requirement. If a person is absent from the home for 30 days or more consecutive days, consider this an interruption. Apply a penalty based on the entire purchase price.
If the purchase price of the life estate is more than its market value, a transfer of assets has occurred even if the individual lives in the home for 12 or more months. Compare what the individual paid with the fair market price of the life estate using the life estate tables. Apply a penalty period based on the difference between what the individual paid and the market value of the life estate when the individual has met the 12-month residency requirement but paid more than the market value for the life estate.
Notes, loans or mortgages:
A transfer of assets includes funds used to purchase a promissory note, loan or mortgage unless the note, loan or mortgage meets the following conditions:
It has a repayment term that is actuarially sound based on the life of the individual (the individual, or spouse, must be receiving the payments), and
It provides for payments to be made in equal amounts during the term of the loan, with no deferral and no balloon payments made, and
It prohibits the cancellation of the balance upon the death of the individual (lender). In other words, the note, loan or mortgage must be payable to the individual's estate.
If the note, loan or mortgage meets these requirements, the person has not transferred an asset. The note, loan or mortgage must be in writing, signed, dated and include the required terms shown above. The individual must provide evidence of the date funds were used to purchase such note, loan or mortgage, and evidence of the payments being received.
When notes, loans and mortgages an individual or spouse owns are not treated as a transfer of assets, they are countable resources. Count the balance still owed on the note, loan or mortgage. Count any missed payments as part of the unpaid balance.
Interest earned on such arrangements is countable income.
If the note, loan or mortgage does not meet these requirements, treat it as a transfer of an asset for less than fair market value. The amount of the transfer is the outstanding balance due on the note, loan or mortgage as of the date the individual applies for institutional or waiver Medicaid. Request evidence of payments made to verify the remaining balance.
Was the Transfer for Less Than Fair Market Value
Follow these steps to decide if a transfer occurred and if Medicaid will pay for nursing home or waiver services.
Did the individual, spouse, or someone acting for the individual transfer assets or income on or after the look-back date (575-2)? If yes, continue to the next step.
Definition: Someone acting for the individual could be the spouse, someone acting at the request of the individual or spouse (most often a relative), or someone with legal authority acting on behalf of the individual or spouse including a court or administrative body.
Medicaid services may be restricted because of a transfer when assets or income belong to the:
Individual.
Spouse.
Individual and spouse.
Individual and someone else.
Spouse and someone else.
Determine the fair market value at the time of the transfer.
Determine the amount the individual received for the asset, if any. The amount received is the total of all compensation the individual received. It may include the amount it took to pay off any loans against the asset as well as cash the individual actually received. If the individual received something other than cash, the value of what the individual received must be equivalent to the fair market value of the asset.
Subtract the amount the individual received from the fair market value of the transferred asset.
If the individual received:
More than or equal to the fair market value, continue with the eligibility process. The transfer was not made for less than fair market value.
Less than the fair market value, continue to the next step.
Fair market value |
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Value received |
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Uncompensated value |
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Determine the transfer date of any transfers for less than fair market value.
For transfers made on or after the look-back date combine the amount transferred. This includes transfers of amounts that are less than the monthly average private pay rate (fractional transfers), and those which equal or exceed the monthly average private pay rate. Use this combined amount to determine the length of the penalty period.
Does the transfer meet one of the conditions in 575-4?
Yes, continue with the eligibility process.
No, continue to the next step.
Determine the penalty period (575-10).
Transfers By a Spouse After Eligibility
Apply a penalty period when a spouse transfers assets after the institutionalized or waiver spouse is eligible for Medicaid. The community spouse can use his or her assets for his or her needs, and/or for the institutionalized spouse; however, the spouse cannot transfer assets to someone else for less than fair market value.
At each review, request verification of assets the community spouse holds.
Ask the community spouse if he or she has given away any assets.
Ask the community spouse how he or she used the assets if the amount of assets changes.
Question and verify anything that appears to be a transfer for less than fair market value. Transfers include transfers of income.
If a transfer for less than fair market value occurred after eligibility started for the institutionalized or waiver spouse, the start date of the penalty period is the first day of the month after the month of the transfer.
Complete an overpayment referral as needed. If the penalty period is still in effect, close the nursing home or waiver case and determine eligibility for non-institutional Medicaid.
Notify the individual and spouse of the penalty period and their right to request undue hardship and/or a fair hearing.