The individual s spouse, where the spouse is acting in the place of or on behalf. of the individual;

Transcription

1 11-94 ELIGIBILITY REQUIREMENTS TRANSFERS OF ASSETS AND TREATMENT OF TRUSTS A. General.--Sectin f the Omnibus Budget Recnciliatin Act f 1993 (OBRA 1993) amended 1917 f the Act by incrprating in 1917(c) and (d) new requirements fr treatment f transfers f assets fr less than fair market value and fr treatment f trusts. The fllwing instructins apply nly t transfers made and trusts established after the effective date explained in Fr transfers made and trusts established befre that effective date, the ld plicies regarding treatment f trusts and transfers apply. See 3215 and 3250 fr instructins n the treatment f trusts established and transfers made befre August 11, B. Definitins.--The fllwing definitins apply, as apprpriate, t bth transfers f assets and trusts: 1. Individual.--As used in this instructin, the term "individual" includes the individual himself r herself, as well as: f the individual; The individual s spuse, where the spuse is acting in the place f r n behalf A persn, including a curt r administrative bdy, with legal authrity t act in place f r n behalf f the individual r the individual s spuse; and Any persn, including a curt r administrative bdy, acting at the directin r upn the request f the individual r the individual s spuse. 2. Spuse.--This is a persn wh is cnsidered legally married t an individual under the laws f the State in which the individual is applying fr r receiving Medicaid. 3. Assets.--Fr purpses f this sectin, assets include all incme and resurces f the individual and f the individual s spuse. This includes incme r resurces which the individual r the individual s spuse is entitled t but des nt receive because f any actin by: The individual r the individual s spuse; A persn, including a curt r administrative bdy, with legal authrity t act in place f r n behalf f the individual r the individual s spuse; r Any persn, including a curt r administrative bdy, acting at the directin r upn the request f the individual r the individual s spuse. Fr purpses f this sectin, the term "assets an individual r spuse is entitled t" includes assets t which the individual is entitled r wuld be entitled if actin had nt been taken t avid receiving the assets. The fllwing are examples f actins which wuld cause incme r resurces nt t be received: Irrevcably waiving pensin incme; Rev

2 3257 (Cnt.) ELIGIBILITY REQUIREMENTS Waiving the right t receive an inheritance; Nt accepting r accessing injury settlements; Trt settlements which are diverted by the defendant int a trust r similar device t be held fr the benefit f an individual wh is a plaintiff; and Refusal t take legal actin t btain a curt rdered payment that is nt being paid, such as child supprt r alimny. Hwever, failure t cause assets t be received des nt entail a transfer f assets fr less than fair market value in all instances. Fr example, the individual may nt be able t affrd t take the necessary actin t btain the assets. Or, the cst f btaining the assets may be greater than the assets are wrth, thus effectively rendering the assets wrthless t the individual. Examine the specific circumstances f each case befre making a decisin whether an uncmpensated asset transfer ccurred. 4. Resurces.--Fr purpses f this sectin, the definitin f resurces is the same definitin used by the Supplemental Security Incme (SSI) prgram, except that the hme is nt excluded fr institutinalized individuals. In determining whether a transfer f assets r a trust invlves an SSI-cuntable resurce, use thse resurce exclusins and disregards used by the SSI prgram, except fr the exclusin f the hme fr institutinalized individuals. In determining whether resurces have been transferred fr less than fair market value, yu may nt apply mre liberal definitins f resurces which yu may be using under 1902(r)(2) f the Act. Fr transfer f assets purpses, if yu are a 209(b) State, yu cannt use mre restrictive definitins f resurces that yu may have in yur State plan. Hwever, in determining whether and hw a trust is cunted in determining eligibility, yu may apply mre liberal methdlgies fr resurces which yu may be using under 1902(r)(2) f the Act. Fr trust purpses, if yu are a 209(b) State, yu may use mre restrictive definitins f resurces that yu may have in yur State plan. Fr nninstitutinalized individuals, the hme remains an exempt resurce. 5. Incme.--Fr purpses f this sectin, the definitin f incme is the same definitin used by the SSI prgram. In determining whether a transfer f assets invlves SSI-cuntable incme, take int accunt thse incme exclusins and disregards used by the SSI prgram. Yu may nt, fr transfer f assets purpses, apply mre liberal definitins f incme that yu may be using under 1902(r)(2) f the Act. If yu are a 209(b) State, yu cannt use mre restrictive definitins f incme that yu may have in yur State plan. Hwever, in determining whether and hw a trust is cunted in determining eligibility, yu may apply mre liberal methdlgies fr incme which yu may be using under 1902(r)(2) f the Act. Als, fr trust purpses, if yu are a 209(b) State, yu may use mre restrictive definitins f incme that yu may have in yur State plan Rev. 64

3 11-94 ELIGIBILITY REQUIREMENTS Fr the Sle Benefit f.--a transfer is cnsidered t be fr the sle benefit f a spuse, blind r disabled child, r a disabled individual if the transfer is arranged in such a way that n individual r entity except the spuse, blind r disabled child, r disabled individual can benefit frm the assets transferred in any way, whether at the time f the transfer r at any time in the future. Similarly, a trust is cnsidered t be established fr the sle benefit f a spuse, blind r disabled child, r disabled individual if the trust benefits n ne but that individual, whether at the time the trust is established r any time in the future. Hwever, the trust may prvide fr reasnable cmpensatin, as defined by the State, fr a trustee r trustees t manage the trust, as well as fr reasnable csts assciated with investing r therwise managing the funds r prperty in the trust. In defining what is reasnable cmpensatin, cnsider the amunt f time and effrt invlved in managing a trust f the size invlved, as well as the prevailing rate f cmpensatin, if any, fr managing a trust f similar size and cmplexity. A transfer, transfer instrument, r trust that prvides fr funds r prperty t pass t a beneficiary wh is nt the spuse, blind r disabled child, r disabled individual is nt cnsidered t be established fr the sle benefit f ne f these individuals. In rder fr a transfer r trust t be cnsidered t be fr the sle benefit f ne f these individuals, the instrument r dcument must prvide fr the spending f the funds invlved fr the benefit f the individual n a basis that is actuarially sund based n the life expectancy f the individual invlved. When the instrument r dcument des nt s prvide, any ptential exemptin frm penalty r cnsideratin fr eligibility purpses is vid. An exceptin t this requirement exists fr trusts discussed in Under these exceptins, the trust instrument must prvide that any funds remaining in the trust upn the death f the individual must g t the State, up t the amunt f Medicaid benefits paid n the individual s behalf. When these exceptins require that the trust be fr the sle benefit f an individual, the restrictin discussed in the previus paragraph des nt apply when the trust instrument designates the State as the recipient f funds frm the trust. Als, the trust may prvide fr disbursal f funds t ther beneficiaries, prvided the trust des nt permit such disbursals until the State s claim is satisfied. Finally, "pled" trusts may prvide that the trust can retain a certain percentage f the funds in the trust accunt upn the death f the beneficiary TRANSFERS OF ASSETS FOR LESS THAN FAIR MARKET VALUE General.--Under the transfer f assets prvisins in 1917(c) f the Act, as amended by OBRA 1993, yu must deny cverage f certain Medicaid services t therwise eligible institutinalized individuals wh transfer (r whse spuses transfer) assets fr less than fair market value. Yu may als chse t deny cverage fr certain ther services fr nninstitutinalized individuals wh transfer (r whse spuses transfer) assets fr less than fair market value. The fllwing instructins explain the specific circumstances and rules under which yu must deny Medicaid services. The prvisins explained in these instructins apply t all States, including thse using mre restrictive eligibility criteria than are used by the SSI Rev

4 (Cnt.) ELIGIBILITY REQUIREMENTS prgram, under 1902(f) f the Act. Thus, 209(b) States cannt apply perids f ineligibility due t a transfer f resurces fr less than fair market value except in accrdance with these instructins. A. Definitins.--The fllwing definitins apply t transfers f assets. 1. Fair Market Value.--Fair market value is an estimate f the value f an asset, if sld at the prevailing price at the time it was actually transferred. Value is based n criteria yu use in appraising the value f assets fr the purpse f determining Medicaid eligibility. NOTE: Fr an asset t be cnsidered transferred fr fair market value r t be cnsidered t be transferred fr valuable cnsideratin, the cmpensatin received fr the asset must be in a tangible frm with intrinsic value. A transfer fr lve and cnsideratin, fr example, is nt cnsidered a transfer fr fair market value. Als, while relatives and family members legitimately can be paid fr care they prvide t the individual, HCFA presumes that services prvided fr free at the time were intended t be prvided withut cmpensatin. Thus, a transfer t a relative fr care prvided fr free in the past is a transfer f assets fr less than fair market value. Hwever, an individual can rebut this presumptin with tangible evidence that is acceptable t the State. Fr example, yu may require that a payback arrangement had been agreed t in writing at the time services were prvided. 2. Valuable Cnsideratin.--Valuable cnsideratin means that an individual receives in exchange fr his r her right r interest in an asset sme act, bject, service, r ther benefit which has a tangible and/r intrinsic value t the individual that is rughly equivalent t r greater than the value f the transferred asset. 3. Uncmpensated Value.--The uncmpensated value is the difference between the fair market value at the time f transfer (less any utstanding lans, mrtgages, r ther encumbrances n the asset) and the amunt received fr the asset. 4. Institutinalized Individual.--An institutinalized individual is an individual wh is: An inpatient in a nursing facility; An inpatient in a medical institutin fr whm payment is based n a level f care prvided in a nursing facility; r A hme and cmmunity-based services recipient described in 1902(a)(10)(A)(ii)(VI) f the Act. Fr purpses f this sectin, a medical institutin includes an intermediate care facility fr the mentally retarded (ICF/MR). (See 42 CFR ) 5. Nninstitutinalized Individual.--A nninstitutinalized individual is an individual receiving any f the services described in Nursing Facility Services.--Nursing facility services are services as described in the State Medicaid Plan as nursing facility services Rev. 64

5 11-94 ELIGIBILITY REQUIREMENTS Effective Date.--This sectin applies t all transfers which are made n r after August 11, Transfers made befre August 11, 1993, are treated under the rules in While this sectin applies t transfers made n r after August 11, 1993, penalties fr transfers fr less than fair market value, as described in , cannt be applied t services prvided befre Octber 1, Instead, fr the perid prir t Octber 1, 1993, apply pre-obra 1993 rules regarding transfers f assets t transfers made n r after August 11, 1993, and befre Octber 1, EXAMPLE: An individual wh applies fr Medicaid transfers an asset n September 1, The transfer is fund t have been made fr less than fair market value. As such, a penalty, as described in , is assessed. Because the transfer ccurred after August 11, 1993, the transfer is assessed under the new rules set frth in this sectin. Hwever, because a penalty under OBRA 1993 rules cannt apply befre Octber 1, 1993, the penalty assessed under OBRA 1993 in this case begins n Octber 1, Pre-OBRA 1993 rules are used t determine whether a penalty is assessed fr the perid between September 1 and Octber 1. On Octber 1, begin using the OBRA 1993 rules fr the transfer described in this example Individuals T Whm Transfer f Assets Prvisins Apply.--Yu must apply these prvisins when an institutinalized individual r the individual s spuse dispses f assets fr less than fair market value n r after the lk-back date explained in Yu als have the ptin f applying this prvisin t nninstitutinalized individuals when thse individuals r their spuses dispse f assets fr less than fair market value. See 3258 fr definitins f institutinalized and nninstitutinalized individuals. Fr purpses f this sectin, assets transferred by a parent, guardian, curt r administrative bdy, r anyne acting in place f r n behalf f r at the request r directin f the individual r spuse, are cnsidered t be transferred by the individual r spuse. Fr nninstitutinalized individuals, yu have the ptin f applying these prvisins. If yu wish t apply these prvisins t nninstitutinalized individuals, yu have the further ptin f chsing the grups t which the prvisins apply. Yu may apply them t all nninstitutinalized individuals, r t specific categrical grups. Hwever, if yu chse t apply these prvisins nly t sme grups, the grups yu chse must be recgnized grups as listed in 1905(a) f the Act Lk-Back Date and Lk-Back Perid.--The lk-back date is the earliest date n which a penalty fr transferring assets fr less than fair market value can be assessed. Penalties can be assessed fr transfers which take place n r after the lk-back date. Penalties cannt be assessed fr transfers which take place prir t the lk-back date. The lk-back date varies fr individuals transferring assets, depending n whether they are institutinalized, and there are special rules fr sme trusts, as described in subsectin E. Rev

6 (Cnt.) ELIGIBILITY REQUIREMENTS A. Institutinalized Individual.-- Fr an individual in an institutin, the lk-back date is 36 mnths prir t the baseline date. The baseline date is the first date as f which the individual was: Institutinalized; and Applied fr medical assistance under the State plan. When an individual is already a Medicaid recipient and becmes institutinalized, the baseline date is the date upn which bth f the abve cnditins are met, that is, the first day f institutinalizatin. B. Nninstitutinalized Individual.--Fr a nninstitutinalized individual, the lk-back date is 36 mnths prir t the baseline date, which is the date the individual: Applies fr medical assistance under the State plan; r, if later, The date n which the individual dispses f assets fr less than fair market value. C. Multiple Perids f Institutinalizatin and Multiple Applicatins.--When an individual has multiple perids f institutinalizatin r has made multiple applicatins fr Medicaid (whether r nt they are successful), the lk-back date is based n a baseline date that is the first date upn which the individual has bth applied fr Medicaid and is institutinalized. Similarly, if a nninstitutinalized individual has applied fr Medicaid mre than nce and has made mre than ne transfer f assets, the baseline date is that date n which the individual has first applied fr Medicaid r, if later, made the first transfer f assets fr less than fair market value after applying. Thus, each individual has nly ne lk-back date, regardless f the number f perids f institutinalizatin, applicatins fr Medicaid, perids f eligibility, r transfers f assets. D. Lk-Back Perid.--The lk-back perid is the perid that begins with the lk-back date and ends with the baseline date. This can be 36 r 60 mnths, depending n whether certain kinds f trusts are invlved. (See subsectin E fr lk-back perids invlving trusts.) The lk-back perid is the perid f time prir t the baseline date during which a previus transfer f assets fr less than fair market value can be penalized. Hwever, it is imprtant t nte that transfers which ccur after the baseline date are als subject t penalty if they are made fr less than fair market value. NOTE: The 36 mnth lk-back perids described abve d nt becme fully effective until August 11, Prir t that date, a 36 mnth lk-back perid actually begins at sme time befre the date transfers are cvered by these rules. While the 36 mnth lk-back perid is effective fr transfers made n r after August 11, 1993, any transfers actually made befre that date are treated under the rules described in Thus, the lk-back perid is phased in ver the 36-mnth perid ending August 11, Rev. 64

7 11-94 ELIGIBILITY REQUIREMENTS (Cnt.) EXAMPLE 1: Institutinalized Individual An individual is institutinalized n February 13, He/she applies fr Medicaid n April 7, The lk-back date is the date 36 mnths prir t the baseline date, when bth initiating requirements are met, i.e., institutinalizatin and applicatin fr Medicaid. That date is April 7, Thus, the lk-back date is April 7, The lk-back perid is frm April 7, 1994, thrugh April 7, EXAMPLE 2: Institutinalized Individual An individual is institutinalized n February 13, He/she applies fr Medicaid n April 7, The lk-back date is 36 mnths prir t April 7, 1995, r April 7, Hwever, because the transfer prvisins f OBRA 1993 apply nly t transfers made n r after August 11, 1993, any transfers made prir t August 11, 1993, are treated under the rules in EXAMPLE 3: Nninstitutinalized Individual An individual applies fr Medicaid n February 13, On April 7, 1997, he/she transfers an asset fr less than fair market value. The lk-back date in this case is April 7, 1994, 36 mnths prir t the baseline date n which he/she transferred the asset. If the asset had been transferred befre February 13, 1997 (the date f applicatin fr Medicaid), the baseline date wuld have been February 13, 1997 (the date f applicatin). The lk-back perid wuld begin February 13, 1994, and extend t February 13, E. Lk-Back Perid fr Transfers f Assets Invlving Trusts.--When an individual establishes a revcable trust a prtin f which is disbursed t smene ther than the grantr r fr the benefit f the grantr, that prtin is treated as a transfer f assets fr less than fair market value. When an individual establishes an irrevcable trust in which all r a prtin f the trust cannt be disbursed t r n behalf f the individual, that prtin is treated as a transfer f assets fr less than fair market value. When a prtin f a trust is treated as a transfer, the lk-back perid discussed in subsectin D is extended t 60 mnths frm: The date the individual applied fr Medicaid and was institutinalized; r, Fr a nninstitutinalized individual, the date the individual applied fr Medicaid r, if later, the date the transfer was made. When a trust is irrevcable but sme r all f the trust can be disbursed t r fr the benefit f the individual, the lk-back perid applying t disbursements which culd be made t r fr the individual but are made t anther persn r persns is 36 mnths. When the trust is revcable, the transfer is cnsidered t take place n the date upn which the payment t smene ther than the grantr was made. If the trust is irrevcable, the transfer is cnsidered t have been made as f the date the trust was established r, if later, the date upn which payment t the grantr was freclsed. Rev

8 ELIGIBILITY REQUIREMENTS When an individual places assets int an irrevcable trust and can still benefit frm thse assets, the amunt transferred is any f thse assets which have been paid ut fr a purpse ther than t r fr the benefit f the individual. When an individual places assets in an irrevcable trust and can n lnger benefit frm sme r all f thse assets, that unavailable prtin f the trust is cnsidered as transferred fr less than fair market value. The value f these assets is nt reduced by any payments frm the trust which may be made frm these unavailable assets at a later date. See 3259ff. fr a discussin f treatment f trusts in determining eligibility fr Medicaid. See fr rules which apply when assets which may invlve a transfer f assets fr less than fair market value are placed in a trust Penalty Perids.--When an individual (r spuse) makes a transfer f assets fr less than fair market value, payment fr certain services received by the individual is denied fr a specified perid f time. Hwever, the individual remains eligible fr Medicaid and can have payment made fr services nt subject t penalty. (See ) Fr example, an institutinalized individual wh transfers assets fr less than fair market value must be denied reimbursement fr nursing facility services. Hwever, he r she may still be eligible fr reimbursement fr physician s services, prvided such services are nt prvided as part f the individual s nursing hme care. A. Penalty Date.--The penalty date is the beginning date f each penalty perid that is impsed fr an uncmpensated transfer. The penalty date fr all individuals wh transfer assets fr less than fair market value is the first day f the mnth in which the asset was transferred (r, at State ptin, the first day f the mnth fllwing the mnth f transfer), prvided that date des nt ccur during an existing penalty perid. If an asset was transferred prir t the lk-back date discussed in , n penalty can be impsed fr that transfer. B. Penalty Perid - General.--The penalty perid is the perid f time during which payment fr specified services is denied. Unlike the penalty perid under the rules discussed in 3250, which was limited t 30 mnths, the penalty perid under the OBRA 1993 rules has n statutry limit. Rather, the length f the penalty perid is based slely n the value f the assets transferred and the cst f nursing facility care. C. Transfer f Assets Takes Place During Existing Penalty Perid.--When a transfer fr less than fair market value takes place during an existing penalty perid, whether impsed under the pre- OBRA 1993 r pst-obra 1993 rules, a new penalty perid cannt begin until the existing penalty perid has expired. EXAMPLE: An individual transferred an asset in May 1993 fr which a penalty f 12 mnths was impsed. The individual transfers anther asset in Octber 1993 t which anther 12 mnth penalty applies. Because the secnd transfer tk place within the first 12 mnth penalty perid, the secnd penalty perid cannt begin until the first expires, n April 30, Thus, the first penalty perid runs frm May 1, 1993, thrugh April 30, 1994, and the secnd runs frm May 1, 1994, thrugh April 30, Rev. 64

9 11-94 ELIGIBILITY REQUIREMENTS (Cnt.) D. Restricted Cverage - Institutinalized Individual.--The penalty fr an institutinalized individual cnsists f ineligibility fr certain services fr a perid r perids f ineligibility that equal the number f mnths calculated by taking the ttal, cumulative uncmpensated value f all assets transferred by the individual r spuse n r after the lk-back date discussed in , divided by the average mnthly cst t a private patient f nursing facility services in the State at the time f applicatin. As an alternative, the State may use the average mnthly cst in the cmmunity in which the individual is institutinalized. When the amunt f the transfer is less than the mnthly cst f nursing facility care, yu have the ptin f nt impsing a penalty r impsing a penalty fr less than a full mnth. Under the latter ptin, the actual length f the penalty is based n the prprtin f the State s private nursing facility rate that was transferred. If yu chse t impse penalties fr less than a full mnth, yu must impse such penalties in all cases where a partial mnth penalty applies. When an individual makes a series f transfers, each f which is less than the private nursing facility rate fr a mnth, yu have the ptin f impsing n penalty r impsing a series f penalties, each fr less than a full mnth. E. Restricted Cverage - Nninstitutinalized Individual.--The penalty perid fr a nninstitutinalized individual is calculated using the same methd that is used fr an institutinalized individual, including use f the average mnthly cst f nursing facility services. The penalty fr a nninstitutinalized individual cannt exceed the number f mnths calculated using this methd. Hwever, yu may impse shrter penalty perids if yu wish t d s. Obtain HCFA apprval fr any shrter penalty perid yu chse t impse, including apprval f the methdlgy yu use t calculate the shrter penalty perid. See subsectin D fr transfers which are less than the private mnthly rate fr nursing facility care. F. Individual Has Penalty Perid Bth As Institutinalized And Nninstitutinalized Individual.--When an individual incurs separate penalty perids as bth institutinalized and nninstitutinalized fr the same transfer, the ttal penalty perid cannt exceed the penalty perid that is applicable under nly ne categry. In ther wrds, a penalty impsed during a perid f institutinalizatin reduces a penalty impsed fr the same transfer r transfers made during the perid f nninstitutinalizatin and vice versa. EXAMPLE: An institutinalized individual transfers assets fr less than fair market value, thereby incurring a transfer penalty f 24 mnths. After 12 mnths have elapsed, the individual leaves the institutin and returns hme. Because the State impses penalties n nninstitutinalized individuals fr transfers fr less than fair market value, the same 24 mnth penalty applies t the individual, even thugh he/she left the institutin. Hwever, because f the limits n ttal penalty described abve, the individual incurs nly the 12 mnth penalty remaining frm the transfer which ccurred while he/she was institutinalized. Rev

10 (Cnt.) ELIGIBILITY REQUIREMENTS G. Multiple Transfers - General.--OBRA 1993 prvides that the number f mnths f restricted cverage discussed in subsectins C and D is based n the ttal, cumulative uncmpensated value f the assets transferred. When a single asset is transferred r a number f assets are transferred during the same mnth, the penalty perid is calculated using the ttal value f the asset(s) divided by the average mnthly cst f nursing facility care. When assets are transferred at different times, use the fllwing methds fr calculating the penalty perids. H. Transfers Made S That Penalty Perids Overlap.--When assets have been transferred in amunts and/r frequency that make the calculated penalty perids verlap, add tgether the value f all assets transferred, and divide by the cst f nursing facility care. This prduces a single penalty perid which begins n the first day f the mnth in which the first transfer was made. EXAMPLE: An individual transfers $10,000 in January, $10,000 in February, and $10,000 in March, all f which are uncmpensated. Calculated individually, based n a nursing facility cst f $2,500 a mnth, the penalty fr the first transfer is frm January thrugh April, the secnd is frm February thrugh May, and the third is frm March thrugh June. Because these perids verlap, calculate the penalty perid by adding the transfers tgether (a ttal f $30,000) and dividing by the nursing hme cst ($2,500). This yields a penalty perid f 12 mnths, which runs frm January 1 thrugh December 31 f that year. As an alternative, calculate the individual penalty perids, as abve, and impse them sequentially. Thus, the penalty fr the first transfer extends frm January thrugh April, the secnd extends frm May thrugh August, and the third extends frm September thrugh December. In this example, the result is the same regardless f the methd used. I. Transfers Made S That Penalty Perids D Nt Overlap.--When multiple transfers are made in such a way that the penalty perids fr each d nt verlap, treat each transfer as a separate event with its wn penalty perid. EXAMPLE: An individual transfers $5,000 in January, $5,000 in May, and $5,000 in Octber, all f which are uncmpensated. Assuming a State private nursing facility cst f $2,500 a mnth, the penalty perids fr transfers are, respectively, January thrugh February, May thrugh June, and Octber thrugh Nvember. If yu wish t use ther methdlgies fr determining penalty perids, yu may d s, prvided yu btain HCFA apprval fr thse methds. Hwever, any alternative methd must adhere t the basic principles that: The ttal, cumulative uncmpensated value f the asset r assets transferred is used t determine the length f the penalty perid r perids; Penalty perids d nt verlap, nr in any way run cncurrently; and N penalty perid can begin while a previus penalty perid is in effect Rev. 64

11 11-94 ELIGIBILITY REQUIREMENTS J. Transfer By a Spuse That Results in Penalty Perid fr the Individual.--When a spuse transfers an asset that results in a penalty fr the individual, the penalty perid must, in certain instances, be apprtined between the spuses. Yu must apprtin the penalty when: The spuse is eligible fr Medicaid; A penalty culd, under nrmal circumstances, be assessed against the spuse, i.e., the spuse is institutinalized, r the State has elected t impse penalties n nninstitutinalized individuals; and Sme prtin f the penalty against the individual remains at the time the abve cnditins are met. When these cnditins are met, yu must apprtin any existing penalty perid between the spuses. Yu may use any reasnable methdlgy yu wish t determine hw the penalty is apprtined. Hwever, the methdlgy yu use must prvide that the ttal penalty impsed n bth spuses des nt exceed the length f the penalty riginally impsed n the individual. EXAMPLE: Mr. Able enters a nursing facility and applies fr Medicaid. Mrs. Able transfers an asset that results in a 36 mnth penalty against Mr. Able. Twelve mnths int the penalty perid, Mrs. Able enters a nursing facility and becmes eligible fr Medicaid. The penalty perid against Mr. Able still has 24 mnths t run. Because Mrs. Able is nw in a nursing facility, and a prtin f the riginal penalty perid remains, yu must apprtin the remaining 24 mnths f penalty between Mr. and Mrs. Able. Yu may apprtin the remaining penalty perid in any way yu wish, prvided that the ttal remaining penalty perid assessed against bth spuses des nt exceed 24 mnths. When, fr sme reasn, ne spuse is n lnger subject t a penalty (e.g., the spuse n lnger receives nursing facility services, r the spuse dies), the remaining penalty perid applicable t bth spuses must be served by the remaining spuse. In the abve example, assume the 24 mnth penalty perid was apprtined equally between Mr. and Mrs. Able. After six mnths, Mr. Able leaves the nursing facility, but Mrs. Able remains. Because Mr. Able is n lnger subject t the penalty, the remaining ttal penalty (12 mnths) must be impsed n Mrs. Able. If Mr. Able returns t the nursing facility befre the end f the 12 mnth perid, the remaining penalty is again apprtined between the tw spuses. K. Penalty Perid When Individual Leaves Institutin.--A penalty perid impsed fr a transfer f assets runs cntinuusly frm the first date f the penalty perid (the penalty date), regardless f whether the individual remains in r leaves the institutin (r waiver prgram). Thus, if the individual leaves the nursing facility, the penalty perid nevertheless cntinues until the end f the calculated perid Treatment Of Incme As Asset.--Under OBRA 1993, incme, in additin t resurces, is cnsidered t be an asset fr transfer (and trust) purpses. Thus, when an individual s incme is given r assigned in sme manner t anther persn, such a gift r assignment can be cnsidered a transfer f assets fr less than fair market value. Rev

12 (Cnt.) ELIGIBILITY REQUIREMENTS In determining whether incme has been transferred, d nt attempt t ascertain in detail the individual s spending habits during the 36 r 60 mnth lk-back perid. Absent sme reasn t believe therwise, assume that rdinary husehld incme was legitimately spent n the nrmal csts f daily living. Hwever, yu shuld attempt t determine whether the individual has transferred lump sum payments actually received in a mnth. Such payments, while cunted as incme in the mnth received fr eligibility purpses, are cunted as resurces in the fllwing mnth if they were retained. Dispsal f such lump sum payments befre they can be cunted as resurces culd cnstitute an uncmpensated transfer f assets. Als attempt t determine whether amunts f regularly scheduled incme r lump sum payments, which the individual wuld therwise have received, have been transferred. Nrmally, such a transfer takes the frm f a transfer f the right t receive incme. Fr example, a private pensin may be diverted t a trust and n lnger be paid t the individual. Yu may raise questins n whether lump sums f incme r the right t incme have been transferred based n infrmatin given n the Medicaid applicatin r thrugh active questining f the individual cncerning surces f incme, incme levels in the past versus the present, direct questins abut giving incme t thers, etc. When yu find that incme r the right t incme has been transferred, a penalty fr that transfer must be impsed fr institutinalized individuals (if n exceptins apply). In determining the length f the penalty perid, yu may use several methds f treating the incme invlved. When a single lump sum is transferred (e.g., a stck dividend check is given t anther persn in the mnth in which it is received by the individual), the penalty perid is calculated n the basis f the value f the lump sum payment. When the amunt f the payment is small enugh that a full mnth s penalty des nt result, yu have the ptin f nt impsing a penalty r, if yu chse, applying the penalty fr nly part f the mnth. EXAMPLE: A lump sum amunt f $1,000 is transferred, but the State s private nursing facility rate is $2,000. Yu can either impse n penalty r apply a penalty fr half f the mnth. When a stream f incme, (i.e., incme received in a regular basis, such as a pensin) r the right t a stream f incme is transferred, yu can calculate the penalty perid as yu wuld fr a single lump sum. Using this methd, a penalty perid is impsed fr each incme payment. When the transfer invlves a right t incme (as ppsed t peridic transfers f incme the individual wns) yu can, as an alternative, make a determinatin f the ttal amunt f incme expected t be transferred during the individual s life, based n an actuarial prjectin f the individual s life expectancy, and calculate the penalty n the basis f the prjected ttal incme. Yu may chse t use alternative methds fr determining the length f the penalty perid where incme is transferred. Hwever, yu must btain apprval frm HCFA fr use f alternative methds Treatment Of Jintly Owned Assets.--When an asset is held by an individual in cmmn with anther persn r persns via jint tenancy, tenancy in cmmn, jint wnership, r a similar arrangement, the asset (r affected prtin f the asset) is cnsidered t be transferred by the individual when any actin is taken, either by the individual r any ther persn, that reduces r eliminates the individual s wnership r cntrl f the asset Rev. 64

13 11-94 ELIGIBILITY REQUIREMENTS Under this prvisin, merely placing anther persn s name n an accunt r asset as a jint wner might nt cnstitute a transfer f assets subject, f curse, t the specific circumstances f the situatin. In such a situatin, the individual may still pssess wnership rights t the accunt r asset and thus have the right t withdraw all f the funds in the accunt r pssess the asset at any time. Thus, the accunt r asset is still cnsidered t belng t the individual. Hwever, actual withdrawal f funds frm the accunt r remval f the asset by the ther persn remves the funds r prperty frm the cntrl f the individual and s cnstitutes a transfer f assets. Als, if placing anther persn s name n the accunt r asset actually limits the individual s right t sell r therwise dispse f the asset (e.g., the additin f anther persn s name requires that the persn agree t the sale r dispsal f the asset where n such agreement was necessary befre), such placement cnstitutes a transfer f assets. Use regular Medicaid rules t determine what prtin f a jintly held asset is presumed t belng t an applicant r recipient. This prtin is subject t a transfer penalty if it is withdrawn by a jint wner. Hwever, yu must als prvide an pprtunity fr the wners t rebut the presumptin f wnership. If either the applicant/recipient r the ther persn can establish t yur satisfactin that the funds withdrawn were, in fact, the sle prperty f and cntributed t the accunt by the ther persn, and thus did nt belng t the applicant/recipient, withdrawal f thse funds shuld nt result in the impsitin f a penalty Penalties fr Transfers f Assets fr Less Than Fair Market Value.--When yu find that assets have been transferred fr less than fair market value, OBRA 1993 prvides fr specific penalties. These penalties invlve the denial f reimbursement fr certain services received by the individual. The specific services fr which reimbursement must be withheld depend n the individual s situatin. A. Penalties Fr Institutinalized Individuals.--Fr institutinalized individuals, the services fr which payment must be withheld are: Nursing facility services, as defined in the State Medicaid Plan; A level f care in any institutin equivalent t that f nursing facility services; and Hme and cmmunity-based services prvided under a waiver fr individuals eligible fr such services under 1915(c) r (d) f the Act. B. Penalties fr Nninstitutinalized Individuals.--Fr a nninstitutinalized individual, the services fr which payment must be withheld are the fllwing, nt including thse services described abve: Hme health services, as described in 1905(a)(7) f the Act; Hme and cmmunity care (t the extent allwed and as defined in 1929 f the Act) fr functinally disabled elderly adults (see 1905(a)(22) f the Act); and Persnal care services furnished t individuals wh are nt inpatients in certain medical institutins. (See 1905(a)(24) f the Act.) Rev

14 ELIGIBILITY REQUIREMENTS At the ptin f the State, yu may als withhld reimbursement fr services prvided t nninstitutinalized individuals fr ther lng term care services fr which medical assistance is therwise available under the State plan t individuals requiring lng term care. Such services might include, fr example, private duty nursing. Hwever, the specific services invlved depend n yur wn State plan Treatment f Certain Kinds f Transfers fr Less Than Fair Market Value.--Certain financial transactins r purchases may cnstitute a transfer f assets fr less than fair market value. Treat the fllwing as described. A. Life Estates.--Under a life estate, an individual wh wns prperty transfers wnership f that prperty t anther individual while retaining, fr the rest f his r her life (r the life f anther persn), certain rights t that prperty. Generally, a life estate entitles the wner f the life estate (the grantr) t pssess, use, and btain prfits frm the prperty as lng as he r she lives. Hwever, actual wnership f the prperty has passed t anther individual. In a transactin invlving a life estate, a transfer f assets is invlved. This transfer is fr less than fair market value whenever the value f the transferred asset is greater than the value f the rights cnferred by the life estate. In determining whether a penalty is assessed because f a life estate and hw lng that penalty shuld be, cmpute the value f the asset transferred and the value f the life estate, and calculate the difference between the tw. The value f the asset transferred is cmputed by using the regular Medicaid rules fr determining the value f assets. T calculate the value f the life estate, use the life estate table belw (frm POMS SI ). Determine the value f the life estate by multiplying the current market value f the prperty by the life estate factr that crrespnds t the grantr s age. The value f the life estate is then subtracted frm the value f the asset transferred t determine the prtin f the asset that was transferred fr less than fair market value. Or, if nly the value f the transferred prtin is needed, multiply the current market value f the asset by the remainder factr. EXAMPLE: Mrs. Able, age 65, wns a huse with a small farm attached t it, wrth $100,000 in ttal. She deeds the huse and farm t her sn but retains a life estate in the prperty. Under the terms f the life estate, Mrs. Able is entitled t live in the huse fr the rest f her life and t any prduce, incme, etc. generated by the farm. T determine the value f Mrs. Able s life estate, the current market value f the prperty ($100,000) is multiplied by a life estate factr crrespnding t Mrs. Able s age in the table (.67970), resulting in a life estate wrth $67,970. The penalty is assessed fr the difference between the value f the asset transferred ($100,000) and the value f the life estate ($67,790), r a penalty based n $32,030 f assets transferred fr less than fair market value. Sme States allw life estates with pwers, wherein the wner f the prperty creates a life estate fr himself r herself, retaining the pwer t sell the prperty, with a remainder interest t smene else, e.g., a child. Since the life estate hlder retains the pwer t sell the prperty, its value as a Rev. 64

15 11-94 ELIGIBILITY REQUIREMENTS (Cnt.) resurce is its full equity value. In this situatin, the individual has nt transferred anything f value, because he r she can terminate the life estate at any time and restre full wnership t himself r herself. Instead, the full value f the asset in questin is treated as a cuntable resurce t the individual (assuming, f curse, that it is nt an therwise excluded resurce). LIFE ESTATE AND REMAINDER INTEREST TABLE (See 26 CFR and 49 FR Vl. 49 N. 93/ ) AGE LIFE ESTATE REMAINDER AGE LIFE ESTATE REMAINDER Rev

16 (Cnt.) ELIGIBILITY REQUIREMENTS LIFE ESTATE AND REMAINDER INTEREST TABLE (Cnt.) AGE LIFE ESTATE REMAINDER AGE LIFE ESTATE REMAINDER B. Annuities.--Sectin 1917(d)(6) f the Act prvides that the term "trust" includes an annuity t the extent and in such manner as the Secretary specifies. This subsectin describes hw annuities are treated under the trust/transfer prvisins. When an individual purchases an annuity, he r she generally pays t the entity issuing the annuity (e.g., a bank r insurance cmpany) a lump sum f mney, in return fr which he r she is prmised regular payments f incme in certain amunts. These payments may cntinue fr a fixed perid f time (fr example, 10 years) r fr as lng as the individual (r anther designated beneficiary) lives, thus creating an nging incme stream. The annuity may r may nt include a remainder clause under which, if the annuitant dies, the cntracting entity cnverts whatever is remaining in the annuity int a lump sum and pays it t a designated beneficiary. Annuities, althugh usually purchased in rder t prvide a surce f incme fr retirement, are ccasinally used t shelter assets s that individuals purchasing them can becme eligible fr Medicaid. In rder t avid penalizing annuities validly purchased as part f a retirement plan but t capture thse annuities which abusively shelter assets, a determinatin must be made with regard t the ultimate purpse f the annuity (i.e., whether the purchase f the annuity cnstitutes a transfer f assets fr less than fair market value). If the expected return n the annuity is cmmensurate with a reasnable estimate f the life expectancy f the beneficiary, the annuity can be deemed actuarially sund Rev. 64

17 11-94 ELIGIBILITY REQUIREMENTS (Cnt.) T make this determinatin, use the fllwing life expectancy tables, cmpiled frm infrmatin published by the Office f the Actuary f the Scial Security Administratin. The average number f years f expected life remaining fr the individual must cincide with the life f the annuity. If the individual is nt reasnably expected t live lnger than the guarantee perid f the annuity, the individual will nt receive fair market value fr the annuity based n the prjected return. In this case, the annuity is nt actuarially sund and a transfer f assets fr less than fair market value has taken place, subjecting the individual t a penalty. The penalty is assessed based n a transfer f assets fr less than fair market value that is cnsidered t have ccurred at the time the annuity was purchased. Fr example, if a male at age 65 purchases a $10,000 annuity t be paid ver the curse f 10 years, his life expectancy accrding t the table is years. Thus, the annuity is actuarially sund. Hwever, if a male at age 80 purchases the same annuity fr $10,000 t be paid ver the curse f 10 years, his life expectancy is nly 6.98 years. Thus, a payut f the annuity fr apprximately 3 years is cnsidered a transfer f assets fr less than fair market value and that amunt is subject t penalty. Rev

18 (Cnt.) ELIGIBILITY REQUIREMENTS LIFE EXPECTANCY TABLE - MALES Life Life Life Age Expectancy Age Expectancy Age Expectancy Rev. 64

19 11-94 ELIGIBILITY REQUIREMENTS (Cnt.) LIFE EXPECTANCY TABLE - FEMALES Life Life Life Age Expectancy Age Expectancy Age Expectancy Rev

20 ELIGIBILITY REQUIREMENTS Exceptins t Applicatin f Transfer f Assets Penalties.--There are a number f instances where, even if an asset is transferred fr less than fair market value, the penalties discussed abve d nt apply. These exceptins are: A. The asset transferred is the individual s hme, and title t the hme is transferred t: The spuse f the individual; A child f the individual wh is under age 21; A child wh is blind r permanently and ttally disabled as defined by a State prgram established under title XVI in States eligible t participate in such prgrams r blind r disabled as defined by the SSI prgram in all ther States; The sibling f the individual wh has an equity interest in the hme and wh has been residing in the hme fr a perid f at least ne year immediately befre the date the individual becmes institutinalized; r A sn r daughter f the individual (ther than a child as described abve) wh was residing in the hme fr at least tw years immediately befre the date the individual becmes institutinalized, and wh (as determined by the State) prvided care t the individual which permitted the individual t reside at hme, rather than in an institutin r facility. B. The assets were: Transferred t the individual s spuse r t anther fr the sle benefit f the individual s spuse; Transferred frm the individual s spuse t anther fr the sle benefit f the individual s spuse; Transferred t the individual s child, r t a trust (including a trust described in ) established slely fr the benefit f the individual s child (The child must be blind r permanently and ttally disabled, as defined by a State prgram established under title XVI, in States eligible t participate in such prgrams r blind r disabled as defined under SSI in all ther States); r Transferred t a trust (including a trust as discussed in ) established fr the sle benefit f an individual under 65 years f age wh is disabled as defined under SSI. f." 1. Fr the Sle Benefit f.--see 3257 fr a definitin f the term "fr the sle benefit In determining whether an asset was transferred fr the sle benefit f a spuse, child, r disabled individual, ensure that the transfer was accmplished via a written instrument f transfer (e.g., a trust dcument) which legally binds the parties t a specified curse f actin and which clearly sets ut the cnditins under which the transfer was made, as well as wh can benefit frm the transfer. A transfer withut such a dcument cannt be said t have been made fr the sle benefit f the spuse, child, r disabled individual, since there is n way t establish, withut a dcument, that nly the specified individuals will benefit frm the transfer Rev. 64