The Money Wasn’t a Gift – It Was a Transfer to a Caregiver (Part 1)

I received a call last week from Jim.  His tale was a variation on the same theme you have heard me reiterate for the last few years if you have been reading my blog – how the Medicaid rules are a trap for the unwary.  Jim’s dad had cared for Jim’s grandmother until he could do it no longer and placed her in a nursing home.  When she ran out of money Dad applied for and obtained Medicaid for Grandmom.  Everything was fine until Jim received a letter from Medicaid about a year later stating that unless the State received $50,000 in 30 days it would kick Grandmom off of Medicaid.

 During the course of our conversation Jim told me that Dad had a joint bank account with Grandmom which Dad transferred to himself about a year before he applied for Medicaid.  The State apparently ran a check on Grandmom’s Social Security number and turned up the account.  Jim didn’t know for sure why it hadn’t been disclosed on the original application but to make things more complicated, Jim’s dad had recently died.  Jim told me he pleaded his case to the Medicaid caseworker.  “The account was always Dad’s and at some point he put Grandmom’s name on the account”, he said.  He then added, “Dad was Grandmom’s caregiver and so this was simply repayment for those services and other money he paid out of his own pocket for her care.”

 I patiently explained to Jim that he needs to back up those statements with documentation.  I asked him how much in receipts he could prove Dad spent.  “About $5000”, Jim replied.  “Well”, I said, “the other $45,000 is still subject to a Medicaid penalty for being a transfer for less than fair value.”  “You see”, I explained, the Medicaid system works differently than the criminal system.  In the criminal system you are innocent till proven guilty.  The Medicaid system views it the other way around.  If you can’t prove by written documentation how you spent the money than it will be treated as a penalty.”

 I could now hear the panic in Jim’s voice.  “The nursing home is calling us daily, demanding to know whether we are going to pay back the money”, he said.  “We’ve tried to talk to the Medicaid caseworker to no avail.  What do we do?  Will the nursing home kick Grandmom out?”

 Jim’s problem is a common one, made more complicated because Medicaid wrongly approved Grandmom’s application and now wants its money back and the one person who might have been able to provide the answers has died.  And I know what you may be thinking.  Just because the State made a mistake in approving the application in the first instance doesn’t mean they waive a right to get the money back.  Stay tuned next week for what I told Jim to do.