Penalty Periods

3258. TRANSFERS OF ASSETS FOR LESS THAN FAIR MARKET VALUE 3258.5 Penalty Periods.--When an individual (or spouse) makes a transfer of assets for less than fair market value, payment for certain services received by the individual is denied for a specified period of time. However, the individual remains eligible for Medicaid and can have payment made for services not subject to penalty. (See §3258.8.) For example, an institutionalized individual who transfers assets for less than fair market value must be denied reimbursement for nursing facility services. However, he or she may still be eligible for reimbursement for physician''s services, provided such services are not provided as part of the individual''s nursing home care. A. Penalty Date.--The penalty date is the beginning date of each penalty period that is imposed for an uncompensated transfer. The penalty date for all individuals who transfer assets for less than fair market value is the first day of the month in which the asset was transferred (or, at State option, the first day of the month following the month of transfer), provided that date does not occur during an existing penalty period. If an asset was transferred prior to the look- back date discussed in §3258.4, no penalty can be imposed for that transfer. B. Penalty Period - General.--The penalty period is the period of time during which payment for specified services is denied. Unlike the penalty period under the rules discussed in §3250, which was limited to 30 months, the penalty period under the OBRA 1993 rules has no statutory limit. Rather, the length of the penalty period is based solely on the value of the assets transferred and the cost of nursing facility care. C. Transfer of Assets Takes Place During Existing Penalty Period.--When a transfer for less than fair market value takes place during an existing penalty period, whether imposed under the pre-OBRA 1993 or post-OBRA 1993 rules, a new penalty period cannot begin until the existing penalty period has expired. EXAMPLE: An individual transferred an asset in May 1993 for which a penalty of 12 months was imposed. The individual transfers another asset in October 1993 to which another 12 month penalty applies. Because the second transfer took place within the first 12 month penalty period, the second penalty period cannot begin until the first expires, on April 30, 1994. Thus, the first penalty period runs from May 1, 1993, through April 30, 1994, and the second runs from May 1, 1994, through April 30, 1995. D. Restricted Coverage - Institutionalized Individual.--The penalty for an institutionalized individual consists of ineligibility for certain services for a period or periods of ineligibility that equal the number of months calculated by taking the total, cumulative uncompensated value of all assets transferred by the individual or spouse on or after the look-back date discussed in §3258.4, divided by the average monthly cost to a private patient of nursing facility services in the State at the time of application. As an alternative, the State may use the average monthly cost in the community in which the individual is institutionalized. When the amount of the transfer is less than the monthly cost of nursing facility care, you have the option of not imposing a penalty or imposing a penalty for less than a full month. Under the latter option, the actual length of the penalty is based on the proportion of the State''s private nursing facility rate that was transferred. If you choose to impose penalties for less than a full month, you must impose such penalties in all cases where a partial month penalty applies. When an individual makes a series of transfers, each of which is less than the private nursing facility rate for a month, you have the option of imposing no penalty or imposing a series of penalties, each for less than a full month. E. Restricted Coverage - Noninstitutionalized Individual.--The penalty period for a noninstitutionalized individual is calculated using the same method that is used for an institutionalized individual, including use of the average monthly cost of nursing facility services. The penalty for a noninstitutionalized individual cannot exceed the number of months calculated using this method. However, you may impose shorter penalty periods if you wish to do so. Obtain HCFA approval for any shorter penalty period you choose to impose, including approval of the methodology you use to calculate the shorter penalty period. See subsection D for transfers which are less than the private monthly rate for nursing facility care. F. Individual Has Penalty Period Both As Institutionalized And Noninstitutionalized Individual.--When an individual incurs separate penalty periods as both institutionalized and noninstitutionalized for the same transfer, the total penalty period cannot exceed the penalty period that is applicable under only one category. In other words, a penalty imposed during a period of institutionalization reduces a penalty imposed for the same transfer or transfers made during the period of noninstitutionalization and vice versa. EXAMPLE: An institutionalized individual transfers assets for less than fair market value, thereby incurring a transfer penalty of 24 months. After 12 months have elapsed, the individual leaves the institution and returns home. Because the State imposes penalties on noninstitutionalized individuals for transfers for less than fair market value, the same 24 month penalty applies to the individual, even though he/she left the institution. However, because of the limits on total penalty described above, the individual incurs only the 12 month penalty remaining from the transfer which occurred while he/she was institutionalized. G. Multiple Transfers - General.--OBRA 1993 provides that the number of months of restricted coverage discussed in subsections C and D is based on the total, cumulative uncompensated value of the assets transferred. When a single asset is transferred or a number of assets are transferred during the same month, the penalty period is calculated using the total value of the asset(s) divided by the average monthly cost of nursing facility care. When assets are transferred at different times, use the following methods for calculating the penalty periods. H. Transfers Made So That Penalty Periods Overlap.--When assets have been transferred in amounts and/or frequency that make the calculated penalty periods overlap, add together the value of all assets transferred, and divide by the cost of nursing facility care. This produces a single penalty period which begins on the first day of the month in which the first transfer was made. EXAMPLE: An individual transfers $10,000 in January, $10,000 in February, and $10,000 in March, all of which are uncompensated. Calculated individually, based on a nursing facility cost of $2,500 a month, the penalty for the first transfer is from January through April, the second is from February through May, and the third is from March through June. Because these periods overlap, calculate the penalty period by adding the transfers together (a total of $30,000) and dividing by the nursing home cost ($2,500). This yields a penalty period of 12 months, which runs from January 1 through December 31 of that year. As an alternative, calculate the individual penalty periods, as above, and impose them sequentially. Thus, the penalty for the first transfer extends from January through April, the second extends from May through August, and the third extends from September through December. In this example, the result is the same regardless of the method used. I. Transfers Made So That Penalty Periods Do Not Overlap.--When multiple transfers are made in such a way that the penalty periods for each do not overlap, treat each transfer as a separate event with its own penalty period. EXAMPLE: An individual transfers $5,000 in January, $5,000 in May, and $5,000 in October, all of which are uncompensated. Assuming a State private nursing facility cost of $2,500 a month, the penalty periods for transfers are, respectively, January through February, May through June, and October through November. If you wish to use other methodologies for determining penalty periods, you may do so, provided you obtain HCFA approval for those methods. However, any alternative method must adhere to the basic principles that: o The total, cumulative uncompensated value of the asset or assets transferred is used to determine the length of the penalty period or periods; o Penalty periods do not overlap, nor in any way run concurrently; and o No penalty period can begin while a previous penalty period is in effect. J. Transfer By a Spouse That Results in Penalty Period for the Individual.--When a spouse transfers an asset that results in a penalty for the individual, the penalty period must, in certain instances, be apportioned between the spouses. You must apportion the penalty when: o The spouse is eligible for Medicaid; o A penalty could, under normal circumstances, be assessed against the spouse, i.e., the spouse is institutionalized, or the State has elected to impose penalties on noninstitutionalized individuals; and o Some portion of the penalty against the individual remains at the time the above conditions are met. When these conditions are met, you must apportion any existing penalty period between the spouses. You may use any reasonable methodology you wish to determine how the penalty is apportioned. However, the methodology you use must provide that the total penalty imposed on both spouses does not exceed the length of the penalty originally imposed on the individual. EXAMPLE: Mr. Able enters a nursing facility and applies for Medicaid. Mrs. Able transfers an asset that results in a 36 month penalty against Mr. Able. Twelve months into the penalty period, Mrs. Able enters a nursing facility and becomes eligible for Medicaid. The penalty period against Mr. Able still has 24 months to run. Because Mrs. Able is now in a nursing facility, and a portion of the original penalty period remains, you must apportion the remaining 24 months of penalty between Mr. and Mrs. Able. You may apportion the remaining penalty period in any way you wish, provided that the total remaining penalty period assessed against both spouses does not exceed 24 months. When, for some reason, one spouse is no longer subject to a penalty (e.g., the spouse no longer receives nursing facility services, or the spouse dies), the remaining penalty period applicable to both spouses must be served by the remaining spouse. In the above example, assume the 24 month penalty period was apportioned equally between Mr. and Mrs. Able. After six months, Mr. Able leaves the nursing facility, but Mrs. Able remains. Because Mr. Able is no longer subject to the penalty, the remaining total penalty (12 months) must be imposed on Mrs. Able. If Mr. Able returns to the nursing facility before the end of the 12 month period, the remaining penalty is again apportioned between the two spouses. K. Penalty Period When Individual Leaves Institution.--A penalty period imposed for a transfer of assets runs continuously from the first date of the penalty period (the penalty date), regardless of whether the individual remains in or leaves the institution (or waiver program). Thus, if the individual leaves the nursing facility, the penalty period nevertheless continues until the end of the calculated period.