For applications filed on or after September 1, 2011, the divisor is $142.92 (representing the average daily cost of a nursing home in Texas). Prior to September 1, 2011, the divisor was $130.88. As a result of the Deficit Reduction Act of 2005, signed by President Bush on February 8, 2006 and implemented in Texas on October 1, 2006, there is a 5 year look-back period for for uncompensated transfers (unless it falls within one of the exceptions) and the transfer penalty begins as of the first day of the month from which the Medicaid application is made. For example, if a Medicaid applicant made a gift of $50,000 in October 2007, but subsequently applied for long-term care Medicaid in January 2012 (assuming the divisor had not changed by that date) then there would be transfer penalty of 349 days ($50,000/$142.92) from January 1, 2012. As a result, there would be ineligibility and the applicant would private pay for a period of 349 days from January 1, 2012 in this example - even though the transfer took place in year 2007 (so in this example one would have better simply waited out the 5 year look-back period prior to applying). This is important since very few Americans have long-term care insurance coverage and the cost of care (such as nursing home care) is so great. As a result, many attempt to reduce resources to get public benefits for cost of care and drugs, etc. This law is in effect an anti-fraud law as it presumes transfers within 5 years for less than fair market value were purposefully done to reduce resources to obtain Medicaid benefits to help pay for those care costs.
There are some exceptions to the rule, and there are various strategies to reduce the transfer penalty. Furthermore, you can rebut the presumption that the transfer was done for purposes of attempting to reduce assets to obtain Medicaid eligibility (since Medicaid is "means tested" - there is a limit to resources to obtain government benefits). The transfer penalty divisor usually changes every 2 years. Federal law permits the state to choose the option of a statewide or region-wide transfer penalty divisor. Texas has chosen the divisor to be statewide - which is detrimental to applicants in cities such as Dallas, Houston and Austin where the cost of care is greater than the statewide average.