In Shelales v. Director of the Office of Medicaid (Mass.App.Ct., No. 08-P-2052, Oct. 30, 2009), the Massachusetts Appeals Court ruled that the transfer penalty period resulting when an applicant for nursing home Medicaid benefits transferred some of her assets to her children and then gave the remainder to a nursing home as prepayment for care would not begin until the prepaid funds are exhausted.

On January 11, 2007, Mary Shelales transferred $41,993 to her two children and also paid her nursing home $50,447 to cover the cost of her care through July 2, 2007. Ms. Shelales then applied for Medicaid and sought coverage beginning on January 11th, the first day on which she was resource eligible. The state Medicaid agency denied Ms. Shelales’ application and assessed a 164-day penalty period based on the $41,993 transfer to the children. The state also indicated that the penalty period would not begin until June 28, 2007, the date that the state believed that Ms. Shelales’ nursing home prepayment would be exhausted.

Ms. Shelales claimed that the penalty period should begin on January 12th. She based her argument on the wording of the Massachusetts Medicaid regulation governing transfers of resources, which states that “the period of ineligibility begins on the first day of the month in which resources were transferred for less than fair-market value or the date on which the individual is otherwise eligible for MassHealth payment of long-term care services, whichever is later.” Ms. Shelales asserted that she was “otherwise eligible” for Medicaid on the day after she made the transfers, while the state contended that Ms. Shelales was not “otherwise eligible” for Medicaid until the end of June because she had already paid for nursing home care through that time and was therefore self-insured. On appeal, a hearing officer and a Superior Court judge both ruled in favor of the state.

The Massachusetts Appeals Court upheld the state’s determination. The court found that the state’s interpretation of the regulation was reasonable and in accordance with federal Medicaid law. Focusing almost entirely on the purpose behind the Deficient Reduction Act of 2005, the court explained that “MassHealth’s interpretation of its parallel regulation is consonant with the expressed purpose of delaying or even obviating the need for taxpayer- financed care. By extending the commencement date of the disqualification period, the regulation discourages the transfer of assets that could have been used to pay privately for long-term care and prevents placement of the burden of payment for those services on the taxpayer.”

Source: ElderLawAnswers website