Can I Give Away My Assets and Qualify for MassHealth?

One of Medicaid’s (aka MassHealth in Massachusetts) eligibility rules is the penalty for transferring assets. Congress does not want you to move into a Massachusetts nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return. 

This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in Massachusetts.

For example, if you live in Boston and the average monthly cost of care in a Massachusetts  nursing home has been determined to be $10,000 per month, and you give away property worth $100,000, you will be ineligible for benefits for 10 months ($100,000/$10,000 = 10).

Another way to look at the above example is that for every $10,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month.

In theory, there is no limit on the number of months a person can be ineligible.

Let’s look at another example involving real estate. If a house in Newburyport worth $400,000 is transferred, the period of ineligibility for the transfer of property would be 40 months ($400,000/$10,000 = 40).

However, for transfers made prior to enactment of the Deficit Reduction Act on February 8, 2006, state Medicaid officials will look only at transfers made within the 36 months prior to the Medicaid application (or 60 months if the transfer was made to or from certain kinds of trusts). But for transfers made after passage of the Deficit Reduction Act the so-called lookback period for all transfers is 60 months.

So, to use the above example of the $400,000 transfer, if the individual made the transfer on January 1, 2003, and waited until February 1, 2006, to apply for Medicaid — 37 months later — the transfer would not affect his or her Medicaid eligibility. However, if the individual applied for benefits in December 2005, only 35 months after transferring the property, he or she would have to wait the full 40 months before becoming eligible for benefits. On the other hand, if the individual made the transfer on February 10, 2006, he or she would have to wait 60 months before applying for Medicaid in order to avoid an ineligibility period.

The second and more significant major change in the treatment of transfers made by the DRA has to do with when the penalty period created by the transfer begins. Under the prior law, the 10-month penalty period created by a transfer of $100,000 in the example described above would begin either on the first day of the month during which the transfer occurred, or on the first day of the following month, depending on the state. Under the DRA, the 10-month period will not begin until (1) the transferor has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility (ie., $2,000), (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer.

For instance, if an individual transfers $100,000 on April 1, 2007, moves to a nursing home on April 1, 2008, and spends down to Medicaid eligibility on April 1, 2009, that is when the 10-month penalty period will begin, and it will not end until February 1, 2010.

Check out my other post where I discuss certain exceptions to the transfer penalties here.

If you or a family member would like to discuss the transfer of assets or Medicaid in more detail please contact me at 978.270.2189.