Letha Sgritta McDowell, CELA, InterActive Legal
On April 17, 2018, the acting director of the Centers for Medicare and Medicaid Services issued a policy clarification to all state Medicaid Directors regarding the imposition of penalty periods for individuals requesting Home and Community Based Services. The reaction to this guidance is mixed. In some states this clarification may be beneficial to many hoping to receive services in their home, while in others, this clarification may result in further delays in obtaining home services.
Individuals requesting Medicaid assistance with the payment of their nursing care expenses must meet certain eligibility criteria, both financial and non-financial, before Medicaid will begin assistance. The non-financial criteria include US Citizenship or lawful permanent resident status, state residency, and a demonstrated need for a certain level of care. The financial criteria include meeting certain income requirements and having minimal countable assets (there is no limit on non-countable assets). In addition, if an applicant or their spouse has made any uncompensated transfers, then Medicaid will impose a penalty based on the asset transfer.
Asset transfers include gifting cash or property, paying bills or expenses for other individuals, and selling real or personal property for less than fair market value. For example, selling real property for less than the tax assessed value, even if it was a third-party sale, is considered an uncompensated transfer. Paying for a child’s wedding or college tuition is another example of an uncompensated transfer. In many instances, a disability and need for care are unforeseen and gifting occurs without regard or thought to the need for Medicaid services; nonetheless, the transfer penalty will likely apply. If a Medicaid applicant has made uncompensated transfers, then the total value of the transfers will be added together and the amount divided by a penalty divisor (set by each state). The resulting number is a period of months in which Medicaid will not pay for the applicant’s care.
Prior to the Deficit Reduction Act of 2005, the penalty for an uncompensated transfer began in the month of transfer. Therefore, for many applicants, gifts made prior to any spell of illness never affected them, because the penalty period ran before the applicant needed to qualify for Medicaid. The Deficit Reduction Act of 2005 altered the Medicaid policy on uncompensated transfers by stating that any uncompensated transfer made within the sixty months prior to application had to be disclosed and the resulting penalty period would not run until the applicant was otherwise eligible for Medicaid services and receiving institutional level of care services.
For individuals in a nursing facility, it is easy to understand and apply the “would otherwise be receiving institutional level of care services” standard. It involves meeting the financial eligibility requirements as well as the non-financial eligibility requirements, including residence in a nursing facility. For individuals hoping to receive Medicaid services in their homes however, the interpretation of the policy has meant that the penalty period would not begin unless they moved into a nursing facility, resulting in a penalty period that never started.
The clarification issued on April 17 states that the policy shall now be interpreted to read that the penalty will begin when the applicant meets the financial and non-financial criteria for Medicaid and “would otherwise” be receiving home and community based waiver coverage.
The guidance issued on April 17 continues to clarify that “would otherwise be receiving” means that the “state has determined that the applicant meets the financial and nonfinancial requirements for Medicaid eligibility and the level-of-care criteria for the waiver; developed for the individual a person-centered service plan; and identified an available waiver slot for the individual’s placement.” (emphasis added)
In some states, such as Virginia, Medicaid does not have an allotted number of slots for some of its home and community based services programs and therefore, so long as the individual is determined to need a nursing level of care by the appropriate agency, then the penalty period can begin. For practitioners working in these states, the guidance is welcome news.
However, in many states, there are very few waiver slots and they often require years on a waiting list. The issued guidance appears to state that, not only must the applicant meet the functional medical need, but also that a waiver slot must be available for that person in order for the penalty to run. For practitioners in those states, the policy guidance appears to be a further barrier to people with disabilities obtaining home services in direct violation of the Olmstead decision. In addition, a number of states have previously interpreted the uncompensated transfer penalty to apply only to entitlement programs, not waiver services. Therefore, practitioners in these states may find that they are facing barriers to home services due to penalties which have never before existed. In short, while the newly issued CMS guidance may be welcome in some states, it has led to more uncertainty and additional barriers in many other states.
Meet Letha Sgritta McDowell, CELA
Director of Legal Strategy, InterActive Legal
Letha Sgritta McDowell currently serves as InterActive Legal's Director of Legal Strategy and she practices law with The Hook Law Center.
Letha Sgritta McDowell is licensed to practice in both North Carolina and Virginia and has been an elder law and special needs planning attorney for more than 10 Years. Ms. McDowell is a Certified Elder Law Attorney and Board Certified as a specialist in Elder Law by the North Carolina State Bar Board of Legal Specialization and she is accredited to prepare and prosecute claims with the Department of Veterans Affairs.