State Incorrectly Interprets Transfer Penalty Period in Medicaid Communication No. 10-02

On May 26, 2010 the State issued Medicaid Communication No. 10-02. In denying give-backs (the basis of reverse half-a-loaf planning), Medicaid authorities have relied on the underlined language, "all assets transferred for less than fair market value have been returned to the individual", of the federal statute (42 U.S.C. Section 1396p(c)(2)(C)).

I cited to the Medicaid authorities Comment 7 to the OBRA '93 regulations and the State's Response. The language expressly allows for give-backs.

It was then called to my attention that under the Supremacy Clause, all assets have to be returned, when the federal statute is read in conjunction with the aforementioned Comment and Response to the OBRA '93 regulations.

It is my respectful opinion that the State is incorrect on this point and that federal pre-emption is not applicable. My reasoning is as follows:

(1) 42 U.S.C. Section 1396p(c)(2)(C) does appear to contradict the above and control under the doctrine of federal pre-emption;

(2) However, the federal statute requiring a transfer of all assets was also in effect at the time that the aforementioned Comment and Response were made (Response being the State's interpretation);

(3) Therefore, since the State law allowing give-backs is less restrictive than the federal statute, give-backs and reverse half-a-loaf planning are not impaired.


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

© June 2010, Post # 110