Medicaid: Divestment
Divestment is when you or your spouse:
- Give away income and/or assets for less than fair market value.
- Avoid taking income or assets you are entitled to, such as a retirement income or inheritance.
- Buy certain types of assets, such as:
- Annuities.
- Life estates.
- Loans.
This page is meant to explain divestment at a high level, and explore some common examples of divestment. Each situation is different, and not everyone will have a penalty. Use the contacts at the bottom of this page to get help with your own situation.
Divestment affects when you can get Medicaid long-term care benefits
Divestment can make it take longer for you to get long-term care benefits. If you’ve had a divestment within the past 60 months when you apply for Medicaid, you may have a penalty period.
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:
A divestment penalty period is the length of time Medicaid will not pay for your long-term care.
What Medicaid services can I get during a divestment penalty period?
During a divestment penalty period, Medicaid may still pay for things like doctor visits and lab work.
During a divestment penalty period, Medicaid will not cover long-term care services, like:
- Adult day care.
- Changes to your home to make it more accessible.
- Supportive home care.
- The costs for services provided by a nursing home.
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, 2025, is $340.99.
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, 2023. He was admitted to a nursing home and applied for Institutional Medicaid on Jan. 1, 2025. 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 $340.99. Paul’s divestment penalty period is 29 days. He can start receiving card services immediately, but he can’t start getting Institutional Medicaid services until January 30, 2025.
- The average cost of nursing home care is $340.99 per day, so Paul’s divestment penalty period is 29 days ($10,000 divided by $340.99 = 29.33).
- The penalty period starts Jan. 1 and ends Jan. 29.
- On January 31, 2025, 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, 2024. Because the fair market value of the home was $150,000, the $50,000 difference is considered a divestment. Jim was admitted to a nursing home and applied for Institutional Medicaid on Jan. 19, 2025. Jim is eligible for Institutional Medicaid, but he will have a divestment penalty period. To calculate Jim’s divestment period, divide the $50,000 he divested by the nursing home average daily rate, which is currently $340.99. Jim’s divestment penalty period would be 146 days.
- The average cost of nursing home care is $340.99 per day, so Jim’s divestment penalty period is 146 days ($50,000 divided by $340.99 = 146.63).
- The penalty period starts Jan. 19, 2025, and ends June 11, 2025.
- On June 12, 2024, Jim can get his long-term care covered.
What is fair market value?
Fair market value is about how much you could have sold an asset for on the open market. Divesting happens when you instead gave the asset away or sold it below market value.
For more information
- Contact your local aging and disability resource center.
- Ask hospital or nursing home staff.
- Contact your local agency.
- Read the ForwardHealth Enrollment and Benefits Handbook, P-00079.
Print the Wisconsin Medicaid Divestment fact sheet, P-10058 (PDF)