The Perils of GoFundMe – Part 2

In my post last week, I wrote about a particular solution – really attempted solution – to the financial burdens caused by a catastrophic illness or injury.  In the age of the internet, crowd funding websites have made it easier to raise money from a large group of people.  The GoFundMe site is maybe the most commonly known one.

Efforts to raise the money needed to pay medical bills and the cost of long term care are rarely successful simply because the target amount is so undefined in terms of dollars and length of time.  The road to recovery is a long one and for those without long term care insurance the Medicaid program will be the only alternative, which is where the fundraising efforts can create a problem.

As regular readers of this blog know, Medicaid is a needs based program with an asset test and an income test.  A Medicaid applicant must have less than $2000 in assets to qualify for Medicaid.  In the case of married couples, the non-Medicaid spouse also has an asset limit.  When an application is filed, 5 years of account statements must be provided for every account the applicant and spouse had in that time frame.  All transfers into and out of those accounts are scrutinized.

Money going out of these accounts will be treated as transfers for less than fair value unless the applicant can prove he or she (or a spouse) received fair market value in product or service for the money transferred.  Otherwise a Medicaid penalty – a waiting period for benefits – is imposed.  Money coming in, however, is also scrutinized because Medicaid believes this may be an indication of other accounts owned by the applicant (and/or spouse).

This is where crowd funding creates a problem.  When families set up an account thru GoFundMe, for example, they tend to receive small amounts from a lot of different people.  This results in many transactions and money potentially coming into an applicant’s (or spouse’s) bank account.  

This creates two problem from a Medicaid standpoint.  Next week I’ll detail what those are.