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 pension income or an inheritance.
- Buy certain types of assets, such as a life estate, loan, or annuity.
How does divestment affect Medicaid?
Divestment can delay your ability to get Medicaid long-term care benefits. When you apply for Medicaid and you had a divestment within the past 60 months, you may be subject to a divestment penalty period.
What is Medicaid long-term care?
There are two types of Medicaid long-term care coverage:
- Institutional Medicaid provides coverage of medical services if you reside in a medical care facility, such as skilled nursing facilities, intermediate care facilities, institutions for mental disease, and hospitals, for 30 or more days.
- Home and Community-Based Services Waiver Programs allow you to get long-term care services in a community setting (for example, your home) rather than in a nursing home or hospital. Community waiver programs include:
What is fair market value?
Fair market value is an estimate of the price an asset could have been sold for on the open market at the time it was given away or sold below value.
What is an annuity?
An annuity is an investment product that provides you a series of fixed periodic income payments over time.
What is a divestment penalty period?
A divestment penalty period is the amount of time Medicaid will not cover long-term care benefits. If you have a divestment penalty period and are eligible for Medicaid, you cannot get coverage for long-term care services, but you may still be able to get coverage for Medicaid card services.
What are Medicaid card services?
Medicaid card services include health care services, like doctor visits and lab work, but does not include long-term care services, like adult day care, home modifications, and supportive home care, or the costs associated with services provided for individuals living in a nursing home.
How long is a divestment penalty period?
The divestment penalty period begins when you are first eligible to get Medicaid benefits. This could be:
- The date you applied for Medicaid long-term care benefits (institutional or community waiver programs).
- The date you entered a long-term care facility or requested community waiver services.
To figure out the number of days for a 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, effective July 1, 2018, is $286.15.
Equation: The value of the income or assets you divested divided by the current average nursing home daily rate = Divestment penalty period (days)
Paul gave $10,000 to his niece on January 1. He was admitted to a nursing home and applied for Institutional Medicaid on July 1, 2018. 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 $286.15. Paul’s divestment penalty period is 34 days. Paul can begin receiving card services immediately, but he cannot start getting Institutional Medicaid services until August 3.
$10,000 divided by $286.15 = 34 days
Jim sold his home to his daughter for $100,000 on February 2. 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 July 19. The agency determines Jim is otherwise eligible for Medicaid but will have to serve a divestment penalty period. To calculate Jim’s divestment penalty period, the agency would divide the $100,000 he divested by the nursing home average daily rate, which is currently $286.15. Jim’s divestment penalty period would be 349 days.
$100,000 = 349 days
Jane divested $20,000 on July 15. She was admitted to a nursing home and applied for Institutional Medicaid on July 20. The agency determines she is able to enroll in Medicaid and can get card services, but she cannot get coverage for institutional long-term care because she has a divestment penalty period due to divesting on July 15.
- The average cost of nursing home care is $286.15 per day, so her divestment penalty period is 69 days ($20,000 divided by $286.15 = 69.89).
- Partial days are rounded down to the nearest whole number (69.89 days is rounded down to 69 days).
- The penalty period starts July 20 and ends September 26 (12 days in July, 31 days in August, and 26 days in September = 69 days).
- On September 27, Jane can get coverage for her institutional long-term care.
Tom divested $20,000 on July 15. He is living in his home. He applied for Medicaid on July 20 to receive long-term care services in his home through Family Care. Tom meets all of the requirements for Family Care and is otherwise eligible for Medicaid through community waiver services, but he is over the income limit for other forms of Medicaid. Because he has divested and is over the income limit, Tom will have to meet a deductible before he can be eligible for card services. Members cannot receive card services through home and community-based waivers Medicaid while they are serving a divestment penalty period.
- The average cost of nursing home care is $286.15 per day, so his divestment penalty period is 69 days ($20,000 divided by $286.15 = 69.89). Partial days are rounded down to the nearest whole number (69.89 days is rounded down to 69 days).
- His penalty period starts July 20, and ends September 26 (12 days in July, 31 days in August, and 26 days in September = 69 days).
- On September 27, Tom may be able to get coverage for his home and community-based waiver services. Tom must contact his aging and disability resource center (ADRC) in the 45 days prior to his divestment penalty period ending to reapply for long-term care services.
Where can I get more information?
- Contact your ADRC.
- Refer to the ForwardHealth Enrollment and Benefits Handbook, P-00079.
- Call Member Services at 800 362 3002 (voice) or 711 (TTY).
- Contact your local income maintenance agency.