Medical Assistance for Long-Term Care Services

2.4.1.3.2 Transfer Penalty

The transfer penalty for uncompensated transfers is a period of ineligibility for Medical Assistance for Long-Term Care Services (MA-LTC). The transfer penalty only applies to people who meet all of the other criteria to receive MA-LTC. See MA-LTC Eligibility Requirements for more information regarding MA-LTC eligibility. Therefore, the transfer penalty cannot start until a person would be otherwise eligible for MA-LTC. This section discusses how the transfer penalty is calculated.

Uncompensated Transfer Amount

The calculation for the transferred penalty starts by determining the uncompensated transfer amount.

The amount of the uncompensated transfer varies for certain assets. See Other Asset Transfer Considerations for transfers involving the following assets:

  • An annuity

  • A life estate

  • A trust

The uncompensated amount of all other transfers is the amount of income transferred or the fair market value (FMV) of the asset transferred, less any encumbrances and compensation received, on the transfer date.

Determining the Transfer Penalty

The transfer penalty begin date depends on several factors, including:

  • When the transfer took place

  • When the transfer was reported or discovered

  • When the person first applied for or requested MA-LTC

  • When the person was otherwise eligible

  • Whether the person was receiving LTC services at the time the transfer was reported or discovered

The transfer penalty is applied differently for applicants and enrollees.

Applicants Requesting MA-LTC

For applicants, the transfer penalty may be imposed for transfers made during the lookback period. The transfer penalty is calculated by adding together all uncompensated transfers and dividing that amount by the MA Statewide Average Payment for a Skilled Nursing Facility (SAPSNF) in effect in the month the applicant was found to be otherwise eligible for MA-LTC. The penalty period is the full number of months plus any partial months resulting from this calculation.

  • The partial month is an amount that the MA-LTC payment is reduced in that month.

  • If the transfer penalty amount is less than a full month of eligibility for MA-LTC, the MA-LTC payments are reduced by the transfer penalty amount.

If the person is eligible for MA during the transfer penalty period, MA will pay for non-LTC services.

The transfer penalty period begins with the first month for which the person is requesting and is otherwise eligible for MA-LTC. Once the transfer penalty has started it runs uninterrupted until it expires, even if the person is no longer in a long term care facility (LTCF) or receiving MA or MA LTC services.

Enrollees Receiving MA-LTC

For enrollees, a transfer penalty may be imposed for transfers made during the lookback period but not previously reported and transfers made while the person was enrolled in MA-LTC. The transfer penalty is calculated by adding together all uncompensated transfers and dividing by the SAPSNF in effect at the time of the last renewal. The penalty period is the full number of months plus any partial months resulting from this calculation.

  • The partial month is an amount that the MA-LTC payment is reduced in that month.

  • If the transfer penalty amount is less than a full month of eligibility for MA-LTC, the MA-LTC payments is reduced by the transfer penalty amount.

If the person remains eligible for MA during the transfer penalty period, MA will pay for non-LTC services.

The transfer penalty period begins with the first month following the month in which a 10-day notice is provided. In order to impose the full transfer penalty, the agency must send the 10-day notice no later than three calendar months after the uncompensated transfer is reported or otherwise discovered. If the agency does not send the 10-day notice within those three calendar months, only the remaining months of the transfer penalty following the month the 10-day notice is sent can be imposed. Once the transfer penalty has been started it runs uninterrupted until it expires, even if the person is no longer in a LTCF or receiving MA or MA LTC services.

Imposing a Transfer Penalty for People who are Married

The policy below describes how a transfer penalty is applied when one or both spouses of a married couple receive MA-LTC.

The transfer penalty is applied as follows if only one spouse is requesting MA-LTC:

  • If only one spouse is applying for or enrolled in MA-LTC, the entire transfer penalty is applied to the spouse who is applying for or enrolled in MA-LTC, regardless of which spouse transferred the asset.

Transfer penalties are divided between spouses when they are both requesting MA-LTC and receiving LTC services.

  • If one spouse is subject to an existing transfer penalty period at the time the other spouse requests MA-LTC, any remaining transfer penalty is divided evenly between the spouses.

  • If the transfer penalty is not exhausted when one spouse’s MA-LTC ends, the remaining balance is applied to the remaining spouse receiving MA-LTC until the penalty expires.

Eliminating a Transfer Penalty

A transfer penalty is imposed on the date the agency calculates a transfer penalty and sends the person a notice regarding the penalty period. Once the penalty is imposed, it runs continuously and without interruption until it expires. The transfer penalty cannot be reduced or shortened. The only way to eliminate a transfer penalty is if the person receives a full return of the transferred assets. A transfer penalty is not eliminated if assets are partially returned.

Clarification of Full Return

A transfer penalty cannot end unless the transferor(s) receives a full return of the transferred assets. When the transferee is returning the same transferred asset, the value of the asset at the time of the return must be equal to or greater than the value of the asset at the time of the transfer in order to be considered a full return.

For non-cash transfers, the transferee has the option to substitute a cash payment in exchange for the return of the transferred asset. The amount of the cash payment must be equal to or greater than the uncompensated amount used to calculate the transfer penalty. If the value of the transferred asset has decreased or the transferee no longer has the transferred asset, the only way the transfer penalty can end is if the transferee provides a cash payment to the transferor. A transferee cannot substitute a non-cash asset in exchange for the transferred asset.

In order to return transferred assets, the transferee must make the returned asset or its cash equivalent available to the transferor. It is available if the transferor has both the legal authority and the actual ability to use the asset or to convert it to cash. A direct payment of the transferor’s obligations by the transferee (such as payment of his or her nursing home bill) is not a return of transferred assets because the assets are never actually available to the transferor.

Verification Requirements

The transfer penalty cannot end due to full return of the asset(s) unless a person has verified that:

  • The transferee returned all of the transferred assets or their cash equivalent to the transferor.

  • The value of the returned asset at the time of the return is equal to or greater than the value of the asset at the time of the transfer.

Upon receipt of the verification, the transfer penalty ends the first of the month following the month of the full return.

Effect of Returned Assets on Eligibility for MA

Once returned, the assets are treated as if they had been available to the transferor from the date of the transfer. Asset eligibility is evaluated when the assets are returned to determine a person’s ongoing eligibility for MA. If the return of assets results in excess countable assets, the enrollee should be provided the opportunity to reduce excess countable assets, and if the enrollee is unable to reduce the assets MA should be closed with timely notice. See MA for People Who Are Age 65 or Older and People Who Are Blind or Have a Disability (MA-ABD) Excess Assets for more information.

If the asset would have put the person over the MA asset limit during that time, an overpayment occurred during the months the person was an MA enrollee.

Eligibility for MA-LTC

A person is not automatically eligible for MA-LTC upon the end of a transfer penalty. Ending the transfer penalty only eliminates a barrier for MA-LTC identified in a previous request. When a transfer penalty ends, a determination must be made to ensure the person currently meets all eligibility requirements for MA-LTC.

  • People not enrolled in MA when the transfer penalty ends must reapply for MA if it is outside the application processing period associated with the last completed application

  • People enrolled in MA when the transfer penalty ends must submit a Minnesota Health Care Programs (MHCP) Request for Payment of Long-Term Care Services (DHS-3543) if they had a gap of one calendar month or more between the date the transfer penalty was imposed and the date of the request for MA-LTC.

Legal Citations

Minnesota Statutes, section 256B.0595

United States Code, title 42, section 1396p(c)

Social Security Act §1917(c)