Medicaid: Divestment

There are two types of Medicaid long-term programs:

• Institutional Medicaid—This type covers medical services if you live in a medical care facility for 30 or more days. These facilities include:
  • Hospitals.
  • Intermediate care facilities.
  • Skilled nursing facilities.
• Community-Based Waiver Programs—This type lets you get long-term care services in a community setting (for example, your home) rather than in a nursing home or hospital. These programs include:
  • Family Care.
  • Family Care Partnership.
  • IRIS (Include, Respect, I Self Direct).
  • PACE: Program of All-Inclusive Care for the Elderly

A divestment penalty period is the length of time Medicaid will not pay for your long-term care.

To figure out the number of days for your divestment penalty period, divide the value of the income or assets you divested by the current average nursing home rate. The average nursing home daily rate is updated annually. The current rate, which took effect Jan. 1, 2022, is $307.40.

Equation: The amount you divested divided by the current average nursing home daily rate = divestment penalty period (in days).

Example 1 (Paul gives away money he could have spent on his nursing home care): Paul gave $10,000 to his niece on Dec. 1, 2021. He was admitted to a nursing home and applied for Institutional Medicaid on Jan. 1, 2022. Paul is eligible for Institutional Medicaid, but he will have a divestment penalty period because he gave away money that he could have used toward his care. To calculate Paul’s divestment penalty period, divide the $10,000 he divested to his niece by the nursing home average daily rate of $307.40. Paul’s divestment penalty period is 32 days. He can start receiving card services immediately, but he can’t start getting Institutional Medicaid services until Feb. 2, 2022.

• The average cost of nursing home care is $307.40 per day, so Paul’s divestment penalty period is 32 days ($10,000 divided by $307.40 = 32.53).
• The penalty period starts Jan. 1 and ends Feb. 1 (counting 31 days in January and one day in February to get to 32 days).
• On Feb. 2, 2022, Paul can get his long-term care covered.

Example 2 (Jim sold his home to a family member for less than fair market value): Jim sold his home to his daughter for $100,000 on Feb. 2, 2021. Because the fair market value of the home was $200,000, the $100,000 difference is considered a divestment. Jim was admitted to a nursing home and applied for Institutional Medicaid on Jan. 19, 2022. Jim is eligible for Institutional Medicaid, but he will have a divestment penalty period. To calculate Jim’s divestment period, divide the $100,000 he divested by the nursing home average daily rate, which is currently $307.40. Jim’s divestment penalty period would be 325 days.

• The average cost of nursing home care is $307.40 per day, so Jim’s divestment penalty period is 325 days ($100,000 divided by $307.40 = 325.31).
• The penalty period starts Jan. 19, 2022, and ends Dec. 9, 2022.
• On Dec. 10, 2022, Jim can get his long-term care covered.