Medicaid – same-sex spouse or domestic partner beneficiary – Transfer of Assets

Transfers of Assets:

States are required to have provisions regarding transfers of assets for less than fair market value under sections 1902(a)(18) and 1917(c) of the Act. A State Medicaid plan must provide that, if an institutionalized individual or the spouse of an individual transfers assets for less than fair market value after the “look-back” date defined in the statute, the State will calculate and impose a period of ineligibility. Medicaid payment is not available for the long-term care services the individual receives during the period of ineligibility, although the individual remains eligible for Medicaid coverage of non-long term care State plan services.

While periods of ineligibility are generally required, the Act establishes certain exceptions to the provisions regarding transfers of assets to prevent hardship, allowing individuals who have transferred assets to receive long-term care services without the imposition of any penalty period in certain circumstances. The statute specifically exempts transfers of any type of asset to a spouse or to another person for the sole benefit of the spouse under section 1917(c)(2)(B)(i) of the Act, and also exempts the transfer of a home to a spouse under section 1917(c)(2)(A)(i) of the Act. The exemptions for transferring assets to a spouse cannot be directly applied to same-sex spouses or partners as a result of DOMA.

However, under section 1917(c)(2)(D) of the Act, a transfer of assets penalty period will not be applied if the State determines, under procedures established by the State, that denial of eligibility would create an undue hardship. The Deficit Reduction Act of 2005 (DRA, Pub. L. No. 109-171) provided that, in applying this provision, States should determine that an undue hardship exists when application of the transfer of assets penalty and denial of eligibility for Medicaid payment for long-term care would deprive the individual of medical care such that the individual’s health or life would be endangered, or the individual would be deprived of food, clothing, shelter, or other necessities of life.

The Centers for Medicare & Medicaid Services has provided guidance on undue hardship determinations in the State Medicaid Manual and in a State Medicaid Director letter (SMD #06-018, dated July 27, 2006) emphasizing that States have considerable flexibility in determining whether undue hardship exists, and the circumstances under which they will not impose transfer of assets penalties. Because of the flexibility afforded to States in determining undue hardship, we believe that States may adopt criteria, or even presumptions, that recognize that imposing transfer of assets penalties on the basis of the transfer of ownership interests in a shared home to a same-sex spouse or domestic partner would constitute an undue hardship.

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