• Citizenship and Alienage: The individual must be a citizen of the United States or aliens lawfully admitted for permanent residence or otherwise residing in the United States under the authority of Section 203(a)(7) or 212(a)(7) of the Immigration and Nationality Act (INA). Citizenship and Identity must be documented for anyone applying for or receiving Medicaid benefits. Applicants who receive SSI or are eligible for Medicare Part A or B do not have to provide additional information to verify citizenship and identity.
• Residency:  The individual must be a resident of the state.
• Social Security Number: The individual is required to furnish his/her Social Security Number or apply for a number.
• Assignment of Rights: The individual must assign rights to medical benefits or support to the state and cooperate with the state in obtaining such benefits or support.

An individual’s gross monthly income must be below the Medicaid Cap. The Medicaid Cap is equal to 300 percent of the current SSI Federal Benefit Rate (FBR). Effective 01/01/13, the gross income limit will increase from $2,094 in 2012 to $2,130 per month in 2013. This special income limit of $2,130 can be used only if an individual is institutionalized. An individual is considered to be institutionalized if s/he has resided in a medical institution or received home and community-based waiver services or a combination of these services for a period of 30 consecutive days.

Resources are generally defined as those assets including both real and personal property that an individual owns and can use to meet basic needs of food, clothing and shelter. These are considered “countable assets”. In order to qualify for South Carolina Medicaid Benefits (Healthy Connections) the value of resources or “countable assets” owned by the individual cannot exceed $2,000 (after exclusions).

All assets are considered or “countable” unless they are categorized as “noncountable” or exluded.  The following assets are considered “noncountable”:

• The value of the home (for applications received on or after January 1, 2006, the Deficit Reduction Act of 2005 limits the amount of the exemption for homestead property to $500,000 in equity value, unless there is a spouse, minor child, or disabled child lawfully residing in the home);
• The value of one automobile;
• The value of life estate interest in real property;
• The value of household goods and personal effects;
• The value of undivided interest in heirs property; and
• Up to $1,500; and set aside for the individual’s burial. (An additional $1,500 for a spouse, if living)
• The cash value of life insurance policies owned by the individual when the total face value of all policies is $10,000 or less.

In accordance with Section 1917 of the Social Security Act, payment for institutional services or home and community-based (waiver) services is denied for individuals who dispose of assets for less than the fair market value within 36/60 months of requesting Medicaid sponsorship of such services. The Deficit Reduction Act of 2005 (DRA 2005) created several changes for Medicaid pertaining to the transfer of assets.

The penalty applies to institutionalized individuals and to individuals who receive home and community-based (waiver) services. It also applies if the spouse of the institutionalized individual transferred assets. An institutionalized individual is an individual who resides in a medical institution or nursing facility and his/her eligibility for Medicaid sponsorship of payment depends partly upon his/her meeting the level of care criteria established by the state.

The look-back period is 60 months if the asset was transferred through a trust. The look-back period begins from the date the individual is both in the nursing facility (or receiving home and community-based services) and he/she applies for Medicaid sponsorship in the cost of nursing facility care. The look-back period has been changed by DRA 2005 to 60-months from the date of application.

There is no maximum penalty period. The number of months in the penalty period is calculated by dividing the uncompensated value of the transferred asset(s) by the average private pay nursing home rate. Currently, the South Carolina average private pay nursing home rate is $5,475.  The penalty period usually begins the first day of the month in which assets were transferred.

The date a penalty period may begin has been impacted by DRA 2005. For transfers on or after February 8, 2006, the penalty period is the later of the first day of the month the transfer occurred, or the date an individual would have become eligible for long-term care services except for the penalty period.

If you are considering Medicaid eligibility and transferring assets, seek an experienced Medicaid planning attorney.  Contact us at 864.585.5021.

Example: Transfer Penalty

Congress does not want you to move into a 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. These restrictions, already severe, have been made even harsher by enactment of the DRA.

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 your state.

Example:(using round numbers) For example, if the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months ($100,000 / $5,000 = 20).

Another way to look at the above example is that for every $5,000 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.

Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months ($400,000 / $5,000 = 80).

However, for transfers made prior to enactment of the DRA 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 DRA the so-called lookback period for all transfers is 60 months.

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 20-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 20-month period will not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (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, 2010, moves to a nursing home on April 1, 2011, and spends down to Medicaid eligibility on April 1, 2012, that is when the 20-month penalty period will begin, and it will not end until December 1, 2013.

No penalty will be imposed for the transfer of a home to:

• Spouse;
• Child under age 21 or a blind or disabled child;
• Sibling with equity interest in the home and who lived in the home at least one year before the individual’s admission to the institution;
• Child who lived in the parent(s) home for at least two years before the parent was admitted to the institution and who provided care for the parent, which delayed institutionalization.

Additional allowable Medicaid transfers:

• If the assets were transferred to a community spouse or blind or disabled child.
• If the individual can show that he/she intended to dispose of assets at fair market value or for other consideration. This would be an individual who inadvertently did not receive adequate compensation or an individual who transferred assets to another individual in return for care, which delayed institutionalization.
• If the individual can show that assets were transferred for some reason other than to qualify for Medicaid. For example, an individual may have been elderly or had a disabling condition at the time of transfer, but did not need nursing home care. Subsequent to the transfer, the individual’s condition deteriorated so that nursing home care became necessary. This individual would not be penalized for a transfer that occurred prior to the time his/her health deteriorated.
• If the imposition of the penalty would work an undue hardship. An undue hardship is defined as discharge by the medical facility or denial of home and community-based (waiver) services that would result in the individual being placed in a life-threatening situation.

The Medicaid Catastrophic Coverage Act of 1988 added Section 1924 of the Social Security Act which included provisions affecting the treatment of income and resources when an individual who is in an institution (or receives home and community-based services) has a spouse remaining in the community. The following topics provide a brief discussion of these provisions.

Beginning October 1, 1989, institutionalized individuals who have a spouse in the community are allowed to give a greater amount of their income to the community spouse.

In South Carolina, for 2013, the maximum monthly income amount for the community spouse is $2,841. First, the institutionalized spouse must be determined eligible for Medicaid considering only his/her income. In other words, the institutionalized spouse must have gross monthly income below the Medicaid Cap in order to be eligible. Second, the amount the institutionalized spouse must contribute toward the cost of his/her care (i.e., recurring income) must be established. Generally, the following deductions must be made from the institutionalized spouse’s gross income to determine the monthly recurring income.

The deductions must be made in the following order: Personal needs allowance of $30. The lesser of 10% of gross monthly income or $25 per month when there is a court order requiring guardianship fees.

The community spouse is allowed to keep enough of the institutionalized spouse’s income to bring his/her monthly income up to $2,841, if the institutionalized spouse has that much income.

Beginning October 1, 1989, the community spouse of an institutionalized individual is allowed to retain a portion of the couple’s countable resources. The following steps are taken:

Establish the total combined value of the couple’s countable resources. Resources like the home and surrounding land, household goods and personal effects, one automobile, funds designated for burial, etc., are not counted in this determination. Resources like non-home property, bank accounts, certificates of deposits, stocks, bonds, etc., are counted. Subtract the community spouse’s share from the couple’s total countable resources.

In South Carolina, the community spouse is allowed to retain up to $66,480 in countable resources. The remainder is the institutionalized spouse’s share of resources. If this amount is below $2,000, and he/she is otherwise eligible, the institutionalized spouse is eligible for Medicaid. If this amount is equal to or above $2,000, the institutionalized spouse is not eligible for Medicaid until his/her resources are below $2,000.