It is commonly believed that if a senior makes gifts to family members and subsequently needs long-term care services within five years after making the gifts (the five-year window being commonly referred to as the “look-back” period), such gifts will automatically cause a period of Medicaid ineligibility. While the statutory presumption is that all gifts during the look back period will affect the donor’s subsequently Medicaid eligibility, there are a number of exceptions to the general rule.
One important exception to the transfer penalty rules is set forth in Section 366.5(d) of the New York Social Services Law. Under that provision, gifts made during the look back period will not create a period of Medicaid ineligibility for the donor if a “satisfactory showing is made that … the asset was transferred exclusively for a purpose other than to qualify for Medicaid.”
A 2009 case out of Suffolk County shows the importance of this rule. In that case, an 83 year-old widow (“Mrs. X”) suffered a fall in late 2008 and needed nursing home care. Prior to the fall the woman had been in good health and lived comfortably in her own home.
Beginning in March 2006 and continuing through July 2007, Mrs. X made gifts to various children and grandchildren totaling $71,000. Critically, the testimony showed that Mrs. X’s children were going through various financial hardships – one son was in and out of the hospital and had significant medical bills; another son had lost a job and was teetering on the edge of bankruptcy. Other children and grandchildren needed help to keep up with their own living expenses. The Hearing Examiner noted that even after the gifts, Mrs. X remained financially solvent and was able to comfortably meet her living expenses.
Shortly after Mrs. X entered the nursing home in December 2008, she applied for Medicaid coverage to cover her nursing home expenses. The Suffolk County Department of Social Services (“DSS”) approved her eligibility, but under the transfer penalty rules imposed a six month “penalty period” on account of the $71,000 gifts made by Mrs. X to her family. After DSS’s determination, Mrs. X’s daughter was able to recover from some of the children only $28,000, leaving Mrs. X without the means to cover the nursing home costs during the bulk of the penalty period.
Mrs. X challenged DSS’s imposition of the penalty period, claiming that her gifts were made for a purpose other than to qualify for Medicaid and fell under the exception to the transfer penalty rules found in Social Services Law Section 366.5(d). In her decision, the Hearing Examiner agreed with Mrs. X’s claim that, despite her relatively advanced age, “the gifts were made at a time when there was absolutely no indication that [Mrs. X] would need nursing home level of care,” and that “the record failed to establish that [Mrs. X] made any of the gifts in order to qualify for Medical Assistance.” Accordingly the Hearing Examiner reversed DSS’s imposition of a six month penalty period, rendering Mrs. X immediately eligible for nursing home Medicaid.
Implicit in this decision is the importance of having the right facts. If Mrs. X had evidence of chronic health conditions (e.g., early dementia, arthritis, etc.) at the time the gifts were made, it is almost certain that DSS imposition of a penalty period would have been upheld. But in a circumstance such as Mrs. X’s case where a senior in seemingly good health has made gifts to family members but then suffers a sudden decline in health, a strong argument can be made that the statutory exemption under Social Services Law Section 366.5(d) should apply, precluding DSS from imposing a Medicaid penalty period.