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Asset Transfers Allowed During Medicaid Application Process, But Only Within Certain Limits

Federal and state Medicaid law allows an institutionalized spouse to transfer a home or other assets to the spouse not in an institution, but only up to a specific amount, called the community spouse resource allowance (CSRA), the Ohio Supreme Court ruled today. This type of transfer is permitted between the time of applying for Medicaid and notification of approval, Justice Sharon L. Kennedy wrote in the court’s majority opinion.

But any asset amount above the CSRA received by the community spouse must be available to the institutionalized spouse to use for his or her care, the court explained in the 4-3 ruling.

The court noted, however, that the penalties calculated by the state against Marcella and Raymond Atkinson were based on the wrong provision in federal law. The court returned the case to the trial court in Knox County to apply a different federal provision and to adjust the penalty if needed.

Medicaid Reviews Couple’s Assets
In 2000, the Atkinsons placed their home in a revocable trust and named themselves as trustees. Mrs. Atkinson moved into a long-term care facility on April 25, 2011, and Medicaid took a “snapshot” of their financial assets that day as required in federal and state law. The Atkinsons’ house was counted as an asset for Medicaid determination because it was in the trust, not in either of their names.

The house’s value of $53,750 was incorporated into their total asset calculation of $98,320. The CSRA for Mr. Atkinson was determined to be $49,160, half of the total assets. He was not required to use those assets for his wife’s care, but instead could keep the amount to cover his needs.

In June 2011, the couple applied for Medicaid to assist with Mrs. Atkinson’s care. On Aug. 8, they transferred the house to Mrs. Atkinson, and the next day, she transferred it to her husband.

Medicaid Authorized, But Delayed for Moving House to Husband
The Knox County Department of Job and Family Services approved the Medicaid application in September 2011 with a CSRA for Mr. Atkinson of $49,160. But the agency delayed the benefits until the following April, concluding that transferring the house to Mr. Atkinson in August was improper because the house’s $53,750 value was greater than his CSRA. The agency calculated a penalty based on a federal Medicaid provision, which essentially treated the $53,750 as money for Mrs. Atkinson’s care and delayed providing Medicaid benefits until that amount would have been spent for the nursing home costs.

[W]e conclude that transfers between spouses are not unlimited after the snapshot date and before Medicaid eligibility. Those transfers are proper only up to the amount that fully funds the CSRA.
- Justice Sharon L. Kennedy

[W]e conclude that transfers between spouses are not unlimited after the snapshot date and before Medicaid eligibility. Those transfers are proper only up to the amount that fully funds the CSRA.
- Justice Sharon L. Kennedy

The Atkinsons appealed to the Ohio Department of Job and Family Services, but the state agency agreed with the county’s determination. After Mrs. Atkinson’s death, her estate appealed to the Knox County Common Pleas Court, which ruled in favor of the state and county agencies. On appeal, the Fifth District Court of Appeals affirmed the common pleas court’s decision.

Medicaid Background
In 1972, Congress amended the Medicaid program, which gives medical care to the poor through the states, to include assistance for elderly people living in long-term care facilities. Medicaid recipients could not receive benefits unless they met a low-asset threshold, and the 1972 law permitted states to consider the community spouse’s resources in deciding whether the amount was surpassed.

The provisions led couples to deplete their assets to qualify for Medicaid, and some people were almost financially ruined. Meanwhile, well-to-do couples were able to title their assets to exhaust the institutionalized spouse’s resources yet shield their wealth from the Medicaid threshold.

Congress enacted the Medicare Catastrophic Coverage Act (MCCA) of 1988 to address these issues. The law allowed community spouses to maintain some income and assets for their own needs. That amount is the CSRA. Ohio’s Medicaid regulations reflect the federal law’s requirements.

Court’s Analysis
Specific provisions in federal Medicaid law govern how the transfer of assets can affect Medicaid eligibility and set penalties for improper transfers, including the penalty assessed to the Atkinsons.

In 1988, the MCCA added a section stating that “[a]n institutionalized spouse may … transfer an amount equal to the community spouse resource allowance …, but only to the extent the resources of the institutionalized spouse are transferred to (or for the sole benefit of) the community spouse” and that the transfer must take place “as soon as practicable after the date of the initial determination of eligibility.” The MCAA also included a clause declaring that its provisions superseded any other inconsistent sections in the law.

Because of this supersession clause, Justice Kennedy reasoned that the earlier provisions discussing asset transfers and penalties do not apply to this case. Only the newer MCCA provisions are relevant to the spousal transfer of assets, she explained.

“[W]e conclude that transfers between spouses are not unlimited after the snapshot date and before Medicaid eligibility,” she wrote. “Those transfers are proper only up to the amount that fully funds the CSRA.”

“One clarification is needed,” she noted. “While the language of the [MCCA] statute appears to allow the institutional spouse to transfer the entire amount of the CSRA to the community spouse regardless of the assets the community spouse already holds, the statute in fact simply authorizes the institutionalized spouse to bring the community spouse’s assets up to the CSRA level.”

This interpretation is supported by the U.S. Supreme Court’s decision in Wisconsin Dept. of Health & Family Servs. v. Blumer (2002), Justice Kennedy explained.

She added that the Atkinsons’ transfer also was improper under Ohio’s regulations, because any transfers greater than the CSRA are only allowed by state law after a hearing, and the couple did not request a hearing.

Penalty Issue
Justice Kennedy pointed out, however, that the state imposed a penalty against the Atkinsons by delaying Mrs. Atkinson’s benefits based on the full value of the couple’s home, even though Mr. Atkinson was allowed a CSRA of $49,160.

“Neither federal nor state law supports the agency’s confiscation, after the CSRA has been set, of the entire amount of transferred assets, some or all of which may have already been allocated to the community spouse on the snapshot date,” she concluded.

Votes of the Court
The majority opinion was joined by Justices Paul E. Pfeifer, Terrence O’Donnell, and Judith L. French.

Justice William M. O’Neill dissented in an opinion joined by Chief Justice Maureen O’Connor and Justice Judith Ann Lanzinger.

Dissent’s View
Justice O’Neill countered that the 1988 MCCA provision addresses only transfers made after Medicaid’s initial decision about eligibility, while this case involves transferring a house before Medicaid was approved. From his perspective, the MCCA law does not supersede the other federal provision governing asset transfers before Medicaid approval because the two sections deal with different time periods and are not in conflict.

“Under both federal and Ohio law, any transfer of the home from the institutionalized spouse to the community spouse before Medicaid eligibility is determined does not affect the eligibility of the donor spouse, provided that the transfer is for the sole benefit of the receiving spouse,” he wrote.

In addition, he noted that the house is “explicitly excluded” under federal law when determining the CSRA. The state agency should never have included the home’s value when calculating the CSRA, he reasoned.

He further pointed out that the Ohio Department of Job and Family Services has repealed several rules applied in this case after a 2014 ruling in federal district court. Justice O’Neill finds it troubling that the Supreme Court has ordered the trial court to apply a rule in this case that no longer exists.

“I would hold that the transfer of a home between spouses is not an improper transfer at any time prior to the granting of Medicaid eligibility, period,” he wrote. “First, it is critical to note that there is explicit language in federal law and the Ohio Administrative Code permitting transfer of the home between spouses. Second, the house is not a countable resource for purposes of computing the community-spouse resource allowance …. And third, the revocable-trust language in the federal CSRA law excludes the transfer of the home from the definition of improper transfer. It is that simple. What this family did is and was permitted by state and federal law.”

2013-1773. Estate of Atkinson v. Ohio Dept. of Job & Family Servs., Slip Opinion No. 2015-Ohio-1773.

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