Wednesday, August 13, 2014

Recent GAO Report Finds Only Five Percent of Medicaid Applicants Transferred Assets to Qualify For Medicaid

In May 2014, the U.S. Government Accountability Office ("GAO") released the results of a study conducted to determine "the extent to which individuals may be using available methods to become eligible for Medicaid coverage for long-term care."

The GAO reviewed 294 approved Medicaid applications filed in Florida, New York, and South Carolina to determine what methods, if any, Medicaid applicants are using to attain eligibility for Medicaid long-term care services. As part of the investigation, GAO researchers made undercover calls to 17 law firms whose websites specified that the firms assisted consumers with Medicaid planning. The callers pretended to be adult children looking for information on how to preserve their parents' assets when seeking Medicaid coverage on behalf of a parent.

Upon conclusion of the research, the GAO issued its report to Congress.  Here are some of the key findings:

  • Only five percent of all applicants had transferred assets for less than fair market value, with the median amount being transferred of $24,608, with the highest figure of $296,221. Of those transferring assets, all but one of the cases involved a New York applicant (the other was in South Carolina).
  • Thirteen applicants used the spousal refusal technique to allow the community spouse to retain assets.
  • Sixty-five percent of the applicants had annual gross incomes of $20,000 or less, while only five percent had annual gross incomes exceeding $50,000.
  • Only two percent of the applicants used the "half-a-loaf" technique that involves gifting some assets (typically about half) to family members with a loan used for the remaining assets.  This technique results in a reduction of the Medicaid "penalty period" for asset transfers and results in the preservation of a portion of the Medicaid applicant's assets.
  • Five percent of the applicants had entered into personal service contracts that permit payments to family members for the care of an elderly or infirm parent, with the payments being exempt from the imposition of a Medicaid penalty period.

The entire GAO report can be found here.