New Transfer Rules and Their Effect

New Transfer Rules and Their Effect

When I commenced writing articles for my blog, I promised I would not immediately discuss the new transfer rules as it is my opinion that the basics should be understood first. This article compares the prior transfer rules to the new transfer rules in a general sense as I feel the time is appropriate to have such discussion.

However, before discussing the current rules, I will review the prior transfer rules as a comparison.

I. Transfers – Prior Law

A. Transfers within 36 months of application are scrutinized by Medicaid; may or may not give rise to a period of ineligibility.

B. Transfer Penalty = amount transferred divided by penalty rate (assume $6,525). Example: individual transfer $30,000 to daughter upon entering nursing home. Penalty is $30,000/6,525 = 4.59 months (rounded down to 4 months).


C. New Jersey Medicaid has adopted the favorable rule that penalty periods are “rounded down”. For example, if a transfer gives rise to a period of ineligibility of 4.9 months, treat it as a penalty of 4.0 months. This favorable rule has been changed by the new law as will be discussed.

D. Numerous Exemptions to the Transfer Rules – Typical exemptions are transfers to spouse, real estate to designated individuals, transfer for sole purpose other than Medicaid eligibility, transfers to disabled child or trust for disabled child, transfers to a trust for a disabled individual under age 65 (the applicant), assets transferred that are returned to the individual.

II. The New Law (Transfers)

A. Transfers – deemed to have been made on date individual would otherwise be eligible for Medicaid but for the new law. Example considers only single applicant.

1. five-year lookback.

2. individual in nursing home.

3. assets down to $2,000 (except if income exceeds the income cap of $2,022 in which case the number is $4,000).

B. Basically, transfers within 60 months treated as made when assets reduced to $2,000. That is, the penalty commences when an individual is out of funds, and has no money to pay the nursing home. Statute makes no sense in that the period of ineligibility commences when individual has no funds to pay for nursing home.

C. Major Effects of New Transfer Law

1. Individual has no funds but has obligation to pay nursing home until end of penalty period.

2. Nursing home does not receive Medicaid nor payments from individual who has exhausted his or her assets. New law creates burden on nursing home to review resident’s records prior to admission to determine any transfers within 60 months. Nursing home might face financial problems as fewer people might apply to nursing homes in light of the onerous transfer rules.

3. Families will be seeking alternative living arrangements such as day care and home care.

4. Children might have to pay for nursing home costs till end of penalty period.

5. Long-term care insurance will increase in popularity, and the typical period of coverage will increase from 36 to 60 months. In addition, individuals will be more likely to purchase long-term care insurance options such as cost of living adjustment.

6. People will be transferring assets to children at younger ages (possibly when in good health to beat the 60-month rule).

7. Hardship waivers will be sought by applicant or by nursing home on behalf of applicant. Individual could qualify for hardship waiver for Medicaid when application of transfer rules would deprive individual of medical care such that individual’s health or life would be endangered or is deprived of food, clothing or necessities of life. Nursing home could apply for waiver on behalf of individual. States have the option to pay nursing home costs for 30-day period while application is pending.


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© March 2009, Post #15