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The “penalty period” is the time period during which an individual is not eligible to receive Medicaid benefits for nursing home care or other institutional care. A penalty period arises when an individual seeking Medicaid benefits has transferred money or property without fair compensation to another person or to a trust.
Nursing Home Care • "Penalty Period" Calculation • Medicaid Benefits
Generally, the penalty period of ineligibility is calculated by dividing the amount transferred by the Medicaid “regional rate” for nursing home care (the actual cost of a particular home may be higher). For example, if Mrs. Jones, who lives alone in New York City (where the Medicaid “regional rate” for nursing home care is currently $9,636 per month) transfers $96,360 to her daughter or to a trust during the “look back period,” she will not be eligible for Medicaid for nursing home care for ten months.
When Does the Penalty Period Begin?
The DRA has changed the rules regarding when the penalty period begins. Under the old law, the penalty period began on the first day of the month following the transfer. In many cases under the old law, the penalty period expired before the individual needed nursing home care. Thus, the individual’s assets were saved without incurring an actual financial penalty. In many cases, even if an individual’s assets were transferred immediately prior to going into a nursing home, at least half of such assets could be saved. Under the DRA, the penalty period begins when:
- the individual has applied for Medicaid,
- the individual is receiving institutional care such as in a nursing home, and
- the individual is eligible for Medicaid but for the penalty period
(meaning that the individual has less than $4,350 in non-exempt assets).
How do the New Rules Affect Your Medicaid Eligibility?
If Mrs. Jones who lives alone in New York City, transferred $96,360 to her daughter on February 28, 2007, and she entered a nursing home on December 31, 2007, and applied for Medicaid, she would not be Medicaid eligible until November 1, 2008, if she had less than $4,350 in assets on the date she entered the nursing home. Under the old law, the penalty period would have expired prior to the time that Mrs. Jones went into the nursing home.
It is easy to see that some people may find themselves in a situation where they need nursing care but have no ability to pay for it.
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