Transfer of Asset Rules in Medicaid -- The Deficit Reduction Act of 2005

The Deficit Reduction Act of 2005 (DRA, enacted in 2006, made major changes to  the transfer penalty rules for eligibility for Medicaid to pay for nursing home care.  At the time, and until now, nursing home care was the only Medicaid service that had a lookback and transfer penalty.See GIS 06 MA/016. 

In this article:

1. New 30-Month Lookback for Home Care and Assisted Living Program (Not in Effect until 2025)

2. See Rules for People with MAGI Medicaid (No Medicare)

3. See the 5-year lookback for Nursing Home Care 

1. New 30-Month Lookback for MLTC & Other Home Care and Assisted Living Program  - on hold until 2025 because of COVID Protections 

There has been NO lookback or transfer penalty for applying for Medicaid  for Managed Long Term Care or other home care services, or for  the  Assisted Living Program,    In the April 2020 NYS FY 20-21 Budget, NY enacted for the first time a 30-month lookback and transfer penalty for COMMUNITY long-term care coverage,   The lookback will not apply to the waiver programs (TBI NHTDW, and OPWDD), or to Medicaid for primary or acute care - only long-term care.    

The State has not proposed regulations but it did submit a request to CMS to modify the 1115 waiver, which governs the Managed Long Term Care program, giving some insight about  how the lookback will be implemented.  NYLAG filed these comments expressing concerns about these proposed procedures.  In March 2021, the state  amended its requrest to CMS.   (Web) - (PDF) .

See webinar conducted April 15, 2021 with the latest on the lookback.

The NYSBA and NYLAG support a bill that would repeal the 30-month lookback -S6414.

• See NYLAG's  NY FY 24-25 Budget Testimony that includes support for this bill (p.11)

In discussions with elder law attorneys in the NYSBA, DOH administrators provided this informal information:

• The lookback will apply to new applications filed after it goes into effect - which is sometime in 2025  (check here for updates) The delay is partly  to get CMS approval, to allow time for the state to develop procedures for local Medicaid programs to train staff, and because of a Maintenance of Effort Requirement of the American Rescue Plan (ARPA).  States cannot restrict eligibility for Home & Community-Based Services (HCBS )until the earlier of when they spend the federal ARPA funds  or March 31, 2025.  See this link.  See NYS ARPA website for its spending plan and quarterly reports to CMS.    DOH has informally told the NYSBA that it won't go into effect unto 2025.
  • Check this article for updates
• The lookback will look for transfers made in the 30 months before the application.   
• Applications will need to submit a medical form, to be developed by DOH, on which a doctor may indicate that the applicant meets the functional requirements for home care.  This is important, as DOH indicated that a transfer penalty can start “running” in the month in which the applicant is both financially and functionally eligible for Medicaid home care.  This could potentially be retroactive back to the month of application.  This is good news on the “start date” of the penalty.   
• DOH acknowledged that the definition of “undue hardship” exception to transfer penalty as used for nursing home Medicaid does not make sense for community-based eligibility.  This is the exception that waives the transfer penalty if denial of home care would cause an “undue hardship.”   We are hopeful that this standard will be revised by DOH for use in the community.  The  exceptions to the transfer penalty that apply in nursing homes are explained here.   
• A big question has been whether Pooled Income Trusts will still be permitted once the lookback starts.  NYLAG and the NYSBA contend that they should be allowed under federal guidance.  We were encouraged to hear that DOH may allow them, but mayrequire a periodic showing that the deposited funds were spent on the beneficiary’s needs.  It is unclear how often this documentation would be required – monthly, quarterly or as part of the annual renewal.  We will continue to advocate for continuing use of these trusts; without them, many recipients will not be able to pay their living expenses, and could be forced into nursing homes.
• DOH listened to our concerns about inevitable delays caused by the lookback review.  They are considering our request to permit applicants using the fast-track Immediate Need process to "attest" that they made no transfers, rather than submit all of the required financial documentation.  

5-Year Lookback for Nursing Home Care - Rules since 2006

Because the DRA is a Federal law, it was implemented differently in each State.  CMS, the Federal agency administering Medicaid, issued guidance to the States on implementing the DRA (see State Medicaid Director Letter #06-018, and enclosures).

Two key New York State Department of Health directives give NYS policy on transfers of assets:

1.  2006 OMM/ADM-5 -- implementing the DRA --.  The guidance took effect August 1, 2006. 
2.  1996-ADM-08 Provisions on Transfers & Trusts  also continues to apply regarding transfer penalties and their exceptions. .

NOTE that these rules on transfer penalties apply to people who are Disabled, Aged 65+ or Blind (DAB).   People who are not in this category or who do not have Medicare are in the  "MAGI" Medicaid category.  If they need nursing home care, they do have a "lookback" and transfer penalty, but the rules are slightly different.  See this link below.

The Evelyn Frank Legal Resources Program published these training materials explaining the effects of the DRA on New York State's Medicaid program, including strategies for avoiding or minimizing transfer penalties:

• Training Outline: Medicaid Provisions in the Deficit Reduction Act of 2005 (revised  to show 2010 transfer penalty rates 1/15/2010)(not updated since 2010)
• Summary of Changes to Medicaid in the Deficit Reduction Act of 2005 (revised 10/4/2007; shorter summary of above outline)

Calculating the Look-Back Period

One of the changes in the DRA was to lengthen the look-back period for transfers of assets for nursing home Medicaid applications.  When you apply for Medicaid coverage of a nursing home stay, the old rule was that you would be asked for the last 36 months (3 years) of financial documentation (bank statements, etc.)  Transfers to a trust were subject to a 60-month (5-year) look-back period.  The local district would review these to find any uncompensated transfers of assets (aka "gifts"), which are presumed to have been made in order to qualify for Medicaid.  The total amount of transfers found is divided by the monthly regional nursing home rate (determined by the State DOH), and the quotient is the number of months that Medicaid will not pay for your nursing home stay (aka "the transfer penalty").

The DRA lengthened the look-back period from 36 months to 60 months for all transfers (not just to trusts).   However, when the lookback is implemented for community-based care in January 2021, it will be 30 months.  

Applying the Transfer Penalty

In addition, the DRA changed how the transfer penalty itself is imposed.  It used to be that the penalty period would begin to run at the date of the transfer (which may have occurred long before the applicant is in the nursing home and applying for Medicaid).  With the DRA, the penalty period does not begin to run until the applicant is in the nursing home, is otherwise eligible for Medicaid (i.e., is below the asset limit), and has submitted an application for Medicaid (which will inevitably be denied, because of the transfers).  This new rule only applies for transfers that occurred after the effective date of the DRA.  This table attempts to illustrate which penalty period rule applies, based on the date of the transfer:

The  regional nursing home transfer penalty rates change annually in "General Information System" (GIS) messages posted at http://www.health.ny.gov/health_care/medicaid/publications/index.htm.    The 2024 rates are published in  

• GIS 23 MA/21 - Medicaid Regional Rates for Calculating Transfer Penalty Periods for 2024 (PDF) (NYC is $14,473)

Exceptions to the Transfer Penalty

The general exceptions to the transfer penalty are as follows.  For more detailed information consult an elder law attorney.

TRANSFER OF A HOME

Transfer of the home by applicant or spouse in 5-Year Lookback Period triggers a transfer penalty for NH Medicaid unless home transferred to:

1. Spouse

2. Child under 21 or certified blind/disabled child of any age – May be child over age 65 -  See GIS 08MA036 - Disability Reviews for Adult Children over 65

3. Sibling with an equity interest in the home who has resided in the home for at least ONE year immediately prior to the applicant’s most recent institutionalization; or

4. Caretaker Adult Child  -- who resided in the home for at least  2 years, immediately prior to the most recent institutionalization and who provided care to the applicant which permitted her or him to reside at home rather than in a medical facility. It is presumed that the child “provided care” unless there is evidence to the contrary. 

TRANSFERS OF PROPERTY OTHER THAN THE HOME

Transfer of asset penalties are not imposed when an asset other than the individual’s home is transferred by the applicant or spouse to

1. spouse, or to another for the sole benefit of the individual’s spouse (may not be to a trust or annuity with a remainderman/ beneficiary other than the spouse) 

2. individual’s child who is certified blind or disabled (may transfer cash, does not require in trust);  May be over age 65 -  ,GIS 08MA036 - Disability Reviews for Adult Children over 65 (December 29, 2008)

3. a trust established solely for the benefit of an individual under 65 years of age who is disabled (Does NOT have to be applicant’s child or even related)(Can be supplemental needs trust for oneself if <65).

4. Transfer of an exempt asset has no penalty – ie Holocaust restitution, assets under $14,850. 18 NYCRR § 360-4.4 (c)(1)(ii).

5. Applicant/spouse intended to dispose of the asset for its fair market value or exchange it for other consideration of similar value;

6. Transfer was made exclusively for a purpose other than to qualify for Medicaid nursing home coverage.  See factors in 1996-ADM-08; Sandoval v. Shah, 131 A.D.3d 1254, 17 N.Y.S.3d 450 (2nd Dept. 2015)

7. All of the assets transferred for less than the fair market value have been returned to the individual.  Gift can be returned by private-paying for nursing home care, but not home care, rent, or other expenses.    Partial return reduces penalty proportionally  2006 ADM, p. 18.  See Weiss v Suffolk County DSS, 121 A.D.3d 703, 993 N.Y.S.2d 368 (2d Dept. 2014) (family paying for Assisted Living did not  “return” assets so did not cancel transfer penalty)

8. Denial of Medicaid would cause an UNDUE HARDSHIP.  Undue hardship may be found where individual is:

A.  Otherwise eligible for Medicaid (citizenship, assets within limits, etc.);

B.   Unable to have the resources returned despite his/her best efforts, or to obtain fair market value for them, or to void a trust (if transfer was to a trust)(FH No. 6660774R, Suffolk Co. 3/12/2014 an undue hardship exemption was granted when, the Appellant’s representatives were in close contact with the DSS, apprising them of all developments and difficulties encountered in obtaining the Appellant's spousal financial documentation. AND

C.  EITHER (1) Unable to obtain appropriate medical care such that the individual’s health or life would be endangered without Medicaid for nursing home services; OR  (2) The transfer of assets penalty would deprive the individual of food, clothing, shelter, or other necessities of life. 

EXAMPLES:  No hardship found where Appellant not threatened with discharge from nursing home. FH No. 6657601M Albany Co. 3/10/2014, FH No. 67841713Z, Schenectady  Co. 7/21/2014;
But see FH No. 6660774R, Suffolk Co. 3/12/2014 (Finds hardship where NH affidavit indicated would be discharged if Medicaid not secured.)

1996-ADM-08 Provisions on Transfers & Trusts at 23;  2006 OMM/ADM-5 at 19-20;
18 NYCRR § 360- 4.4(d)(2)(iii) 
 

Impact of the Affordable Care Act on Transfer Penalties, Medicaid Liens and other Medicaid Rules - for "MAGI" Recipients (Under 65, without Medicare)

The Affordable Care Act (ACA) did not change the rules on transfer penalties described above for most people who need institutional (nursing home) Medicaid, since most people needing nursing home care are "Disabled, Aged 65+ or Blind" (known as "DAB.")  The DAB budgeting rules were not changed by the ACA.  This category is also known as "non-MAGI," as opposed to the "MAGI" category whose eligibility for Medicaid was significantly changed by the ACA.  Generally, the "MAGI" are people who are not on Medicare. See articles on MAGI here.    Even MAGI people -- those under age 65 who do not have Medicare and who are not disabled -- sometimes need nursing home care.  For them, the State issued special rules on asset transfers, liens, and institutional budgeting.  See NYS DOH GIS 14 MA/016: Long Term Care Eligibility Rules and Estate Recovery Provisions for MAGI Individuals -- PDF

Under the GIS, MAGI individuals who are "medically frail" may receive coverage for medically necessary nursing facility services. The need for nursing facility services qualifies the individual as "medically frail" and no further documentation is required.  Individuals whose eligibility is determined under MAGI rules are not subject to a resource test for purposes of determining Medicaid eligibility.”  However, MAGI Medicaid recipients are still subject to the transfer penalty, home equity limit, and estate recovery (but only for “the cost of nursing facility services, home and community-based services, and related hospital and prescription drug services received on or after the MAGI individual's 55th birthday”).  However, they do NOT have to pay a NAMI, and a lien cannot be placed on their home.

This article was authored by the Evelyn Frank Legal Resources Program of New York Legal Assistance Group.