210 R.I. Code R. 210-RICR-50-00-6.6

Current through December 3, 2024

Section 210-RICR-50-00-6.6 - Transfer of Assets

A. The Federal Deficit Reduction Act (DRA) of 2005 (42 U.S.C. § 1305) governs the treatment of assets in the Medicaid LTSS eligibility determination process. The law presumes transfers of assets for undiscernible or less than fair market value (FMV) prior to or at the time of applying for Medicaid LTSS coverage are transactions made for the principal purpose of gaining or maintaining eligibility. The DRA requires the States to treat all but a narrow range of these transactions as disqualifying transfers that result in a "penalty" period during which a person is ineligible for Medicaid LTSS coverage. For the purposes of this section:

1. Assets - Includes all income and resources of an LTSS applicant and his or her spouse that is countable in the determination of Medicaid eligibility using the SSI method and the home (and associated land) when a person is seeking or receiving Medicaid LTSS.

2. Transfer - The conveyance of right, title, or interest in an asset from one person to another person or entity, the disclaiming, assignment or divestment of an income producing resource or other source of income, or disposal of a lump sum before it is treated as a countable resource or income.

B. The State reviews asset transfers made by an LTSS applicant/beneficiary and/or the non-LTSS spouse in the five (5) year look back period prior to the first (1^st) day of the month in which an application is filed. In determining whether a transfer is disqualifying, the State considers the date, amount of the asset, who is making the transfer, and the instrument used, as well FMV of the transaction, if discernable, as set forth below.

1. Allowed transfers - The DRA identifies the following transfers that are permissible in most circumstances and therefore exempt from a penalty period:

a. Family transfers. Transfers from and between certain family members.

(1) Spouse - A transfer made to a spouse or to someone else if solely for the spouse's benefit;

(2) Child - A transfer made to a dependent child under age nineteen (19); or child of any age who is blind or living with a disability, including the establishment of a trust to or for the sole benefit of such a child; or to an adult child nineteen (19) years of age or older who lived in the home with and provided care to the LTSS applicant/beneficiary for two (2) years prior to the date of application if the home care prevented or delayed the need for Medicaid LTSS;

(3) Sibling - A transfer made to a sibling with an equity interest in the home who lived with the LTSS applicant/beneficiary for at least one (1) year before the date of application.

b. Fair market value. Transfers of assets for fair market value are allowed.

c. Financial transfers. Transfers of assets using certain financial instruments such as Medicaid compliant annuities, loans of various kinds, and specific types of trust are not considered disqualifying transfers when they meet the requirements for allowed transfers set forth in §§ 6.7 to 6.11 of this Part.

d. Prevent hardship. Assets for less than FMV or no discernable FMV may be allowed if the applicant/beneficiary can provide proof that the imposition of the penalty will pose a hardship as defined in § 6.12 of this Part.

e. Other purposes. The applicant/beneficiary can prove to the State's satisfaction that the transfer of assets was not made to gain or retain eligibility for Medicaid LTSS. See §6.6.2 of this Part pertaining to rebuttal process.

f. Asset return. The asset transferred for less than FMV is returned to the person who made the transfer.

2. Disqualifying transfers - Under current State and Federal law, a transfer is considered disqualifying on its face unless allowed under § 6.6(B)(1) of this Part if it was made on or after February 8, 2006, within the sixty (60) month look-back period before an application is filed or on or after the date of application, and is a transfer for less than fair market value. Fair market value is customarily based on a certified appraisal or the amount equal to the last or average selling or purchase price on the open market on the date and in the location of the transfer transaction. A transfer is treated as disqualifying if the State cannot discern the FMV, and the transaction is between private parties, involves a promise to provide future payments or services, and there is no valid contract or agreement that is legally and reasonably enforceable by the applicant, beneficiary or non-LTSS spouse. The range of disqualifying transfers includes, but is not limited to:

a. Gifts. A gift is considered a transfer of an asset for less than FMV and is subject to a penalty period unless the provisions set forth in § 6.6(B)(1) of this Part on family transfers apply.

b. Sale or divesture. Selling or conveying an asset for less than FMV is a disqualifying transfer and is subject to a penalty. Divesting an ownership interest in an asset is also a disqualifying transfer even if it involves only the removal or change of a person's name on a title or other ownership document and no money or goods of value are sold or exchanged. This includes the sale or divesture of real property such as a house, land, or vehicle as well as a business or service in which the Medicaid LTSS applicant or beneficiary and/or the non-LTSS spouse in some instances has an ownership interest. The State determines the FMV of a good or service sold or divested as the average sale or purchase price at the time of the transfer of ownership interest.

c. Purchases and loans. The use of certain financial instruments to purchase or loan resources or transform them into an income stream is considered a disqualifying transfer for less than FMV unless the criteria indicated in §§ 6.7 to 6.11 of this Part. The range of disqualifying transfers in this category includes, but is not limited to, the purchase of an annuity that is not actuarily sound or a mortgage that over-values a property; acquiring a debt that reduces the value of an asset such as a home equity loan; and certain buying and lending practices, including entering into contracts for future goods and service, that encumber an asset, lower its FMV, or transform it from an available to unavailable resource.

d. Trusts. The establishment of a trust for the benefit of someone other than the applicant, non-LTSS spouse, a dependent child or person with special needs is a disqualifying transfer in accordance with the provisions in § 6.11 of this Part.

e. Refusing or transferring an inheritance or income stream. The State considers the refusal or transfer of lump sum resources or an income stream available to a Medicaid LTSS applicant through a trust, will or any other such source to be a disqualifying transfer. The penalty period in such cases in based on the total amount of the inheritance or income stream when establishing the penalty period without regard to its availability to the Medicaid LTSS applicant regardless of the source of the funds.

C. If there is a disagreement over the State's determination of FMV or the State is unable to discern the FMV by customary means, the onus is on the parties involved in the transaction to enter into a legally enforceable contract in which all agree to a certified appraisal of the transfer's fair market value by an appropriately qualified independent third (3^rd) party. Depending on the nature of the goods or services transferred, the range of independent third (3^rd) party appraisers includes, but is not limited to, a licensed or certified real estate, financial services, or insurance broker, home health or other service provider, public or private auditor, public accountant, actuary, or attorney.

D. Any transfer that involves a promise to provide future payments or services is considered a disqualifying transfer of assets for less than fair market value if the State is unable to discern the FMV or if the transaction is not embodied in a valid contract that is legally and reasonably enforceable by the applicant, member, or spouse.

E. The treatment of income or resources resulting from both allowable and disqualifying transfers is considered in the financial eligibility determination process. For disqualifying transfers, increases in the countable income and resources of the otherwise eligible LTSS recipient resulting from the transfer, or any subsequent transactions, may affect access to other non-LTSS forms of Medicaid during the penalty period or Medicaid LTSS eligibility once the penalty period expires. Redetermination of financial eligibility before Medicaid LTSS coverage begins may be required.

F. When conducting the initial financial eligibility determination for Medicaid LTSS, and at the time of annual renewal, the State examines the value of assets on the first (1^st) and last day of each month to identify transfers that may be disqualifying and subject to a penalty. An automated asset verification system is used along with city property assessments, tax rolls and financial and legal documents during this review and verification process.

G. A Medicaid LTSS beneficiary is required to report changes in assets in the interim between renewals within ten (10) days from the date the change occurs. Timely determinations of financial eligibility require that applicants provide all information and documentation requested at the time of application and during the period of review in accordance with the requirements set forth in Part 4 of this Subchapter, Medicaid Long-Term Services and Supports Application and Renewal Process.

6.6.1Penalty Periods

A. The State establishes a penalty for disqualifying transfers made during the look-back period. The penalty is a period of Medicaid LTSS ineligibility. During the penalty period, the State does not pay for LTSS provided in a health institution such as a nursing facility, or at home, or in a community setting, including community residences for people with intellectual/developmental disabilities, and shared living and assisted living residences.

B. The look-back period and date a penalty period begins is a function of when a person applied for and began receiving Medicaid LTSS before or after implementation of the Federal DRA - and several other factors as follows:

1. Pre-DRA before February 8, 2006 - For persons who applied for or began receiving Medicaid LTSS before this date, the look-back period extends back in time from the date of initial application for thirty-six (36) months. The penalty period begins on either the date of the disqualifying transfer or the first (1^st) day of the month the person applied for Medicaid LTSS, whichever occurs later, and runs continuously even if long-term care services cease on an interim or permanent basis.

2. Post-DRA on or after February 8, 2006 - For persons who apply for and begin receiving Medicaid LTSS on or after this date, the penalty period begins on the date the State determines a person to be "otherwise eligible" for Medicaid or the date of the disqualifying transfer, whichever occurs later. Under the DRA, the term "otherwise eligible" means that Medicaid LTSS is being denied during a penalty period as a direct result of a disqualifying transfer. An applicant who does not meet any of the other requirements (general, financial, functional/clinical, etc.) for Medicaid LTSS eligibility must be denied on that basis and, therefore, is not considered otherwise eligible.

a. Requirements. To be determined otherwise eligible, the applicant/beneficiary must be receiving LTSS in a health institution, or at least one (1) Medicaid LTSS covered service at home or in a community-based setting monthly, such as assisted living; and have applied for Medicaid LTSS and met all other eligibility requirements for Medicaid LTSS identified in Part 1 of this Subchapter, Medicaid Long-Term Services and Supports Overview and Eligibility Pathways, including having income within the allowable limits for Medicaid LTSS set forth in § 6.4(C) of this Part and resources at or below the four thousand dollar ($4,000.00) limit.

b. Otherwise eligible date. The date a person is determined otherwise eligible is the effective date of the State's denial of Medicaid LTSS eligibility. The date the denial takes effect is generally the first (1^st) day of the month the application was filed.

c. Choice During a penalty period, a person who has been determined otherwise eligible may qualify for non-LTSS Medicaid, if he or she meets the requirements for coverage as an ACA expansion adult under Part 30-00-1 of this Title, Medicaid Affordable Care Coverage Groups Overview and Eligibility Pathways, a low-income adult with disabilities or an elder under Part 40-05-1 of this Title, Medicaid for Elders and Adults with Disabilities: Community Medicaid, or the provisions governing LTSS medically needy eligibility set forth in Part 2 of this Subchapter, Medicaid Long-Term Services and Supports: Medically Needy Eligibility Pathway. To qualify for Medicaid as LTSS medically needy, otherwise eligible status is required. To attain this status, a person must have countable income at or below the penalty divisor and incurred or paid sufficient allowable expenses by the first day of the month to spenddown excess income to the medically needy income limit in accordance with requirements set forth in Part 2 of this Subchapter, Medicaid Long-Term Services and Supports: Medically Needy Eligibility Pathway. The penalty divisor is set by the State and is always the same as the average monthly private pay rate for the type of institutional care the person is seeking, as set forth in § 2.6 of this Subchapter.

d. Limits. To maintain non-LTSS Medicaid coverage during a penalty period, a beneficiary must meet the income and resource limits for the applicable eligibility category as of the first moment of the month and report any changes in financial or clinical/functional eligibility within ten (10) days from the date the change occurs. As the financial eligibility requirements and treatment of LTSS expenses during a penalty period vary across these coverage categories, eligibility for non-LTSS Medicaid coverage is not automatic and may not be advantageous if third-party health coverage is available.

C. Pre-DRA. The State determines the penalty period for disqualifying transfers made before February 8, 2006 as follows:

1. Determine the equity value of all assets transferred in the thirty-six (36) months before the applicant applied for Medicaid, other than those transferred to or by a trust.

2. Determine the equity value of all assets transferred into or by a trust in the sixty (60) months before the applicant applied for Medicaid.

3. Divide the total equity value of the transferred assets by the average monthly cost of nursing services at the time of application to determine the number of months of penalty. Drop any fraction remaining, so the result is in whole months.

D. Post DRA. The State determines the penalty period for disqualifying transfers made on or after February 8, 2006 as follows:

1. Total uncompensated value - The total uncompensated value (UV) is the amount of the transfer for less than fair market value. The UV is calculated by adding the disqualifying transfers made by the Medicaid applicant/beneficiary and/or the non-LTSS spouse during the applicable look-back period if the transfer occurs prior to a determination of eligibility, or the application date if the transfer happens after eligibility is determined.

2. Penalty divisor - The UV of the disqualifying transfers is divided by the average daily/monthly cost of LTSS at the applicable institutional level of care in Rhode Island, at the average private pay rate, indicated in §40-00-3.1 .7(A)(7)(d) of this Title. The amount of the private rate is adjusted annually and is based on a variety of national public and private sources that publish the average monthly/daily costs for LTSS in a nursing facility, hospital, or intermediate care facility for persons with intellectual/developmental disabilities by state using Medicare and Medicaid payment data.

E. The State determines the penalty period of ineligibility in special circumstances as follows:

1. Transfer patterns - If the State detects a pattern of uncompensated transfers over a period of months that when totaled equal or exceed the resource limit, the State presumes these have been made to gain Medicaid LTSS eligibility and treats the amount in total as a disqualifying transfer, unless provided a reasonable rebuttable in accordance with §6.6.2 of this Part.

2. Spousal eligibility - If the non-LTSS spouse becomes eligible for Medicaid LTSS after the penalty period is established, the State divides the period of ineligibility in half and applies one-half (1/2) of the penalty period to each spouse. If one (1) spouse dies before the penalty period is completed, the remaining period of ineligibility applies to the surviving spouse.

3. Multiple disqualifying transfers - The treatment of multiple disqualifying differs depending on the year the transfer occurred and whether there is overlap:

a. Pre-DRA - Transfers before February 8, 2006. When more than one (1) disqualifying transfer is made prior to this date, the State treats each transfer separately and sets the start date for the penalty on the first (1^st) day of the month when each transfer was made. If the penalty periods for the transfers would overlap, the start date for the penalty is the first (1^st) day of the month that the first disqualifying transfer was made.

b. Post-DRA - On or after February 8, 2006. When multiple disqualifying transfers are made on or after this date, and within the five (5) year look-back period, the State considers the total UV of all the transfers when determining the penalty period. The penalty start date is the date the applicant or beneficiary is otherwise eligible or, in the event there is overlap, the first (1^st) day of the month of the first (1^st) transfer, whichever is later.

4. Penalty period of less than one month - If the penalty period of ineligibility is determined to be less than one (1) month, the State imposes a partial-month penalty and does not round down or disregard any fractional period of ineligibility. The date the penalty period begins is the date the person is otherwise eligible for Medicaid LTSS or the first (1^st) day of the month during or after the disqualifying transfer. If a penalty period is in effect on that date, the penalty period is extended by the appropriate number of days.

5. Lump-sum income - When there is a disqualifying transfer of income in a lump sum, the State calculates the penalty period on the lump-sum value.

6. Stream of income - The State calculates the penalty for each income payment that is periodically transferred.

F. In instances in which disqualifying asset is returned in its entirety, the transfer penalty is expunged as of the first moment of the first day of the month after the return. When an asset transferred for less than FMV is returned in full in the same month, a period of ineligibility does not apply and the disqualifying transfer is treated as if it never occurred. If an asset transferred for less than FMV is returned in a subsequent month, the uncompensated value of the asset is recomputed to determine whether any period of ineligibility applies through the month of the return or subsequent months based on the adjusted uncompensated value.

G. During the penalty period, the Medicaid LTSS coverage is unavailable for Medicaid LTSS provided in a health institution as specified under Subchapter 05 Part 1 of this Chapter, Medicaid Long-Term Services and Supports: Institutionally Based LTSS, and in the home or community-based setting as set forth in Subchapter 10 Part 1 of this Chapter, Medicaid Long-Term Services and Supports: Home and Community-Based Services (HCBS). All non-LTSS Medicaid State Plan and waiver services are available to a person subject to the penalty if otherwise eligible and enrolled in one of the coverage groups identified in Chapters 30 or 40 of this Title.

H. The EOHHS reserves the discretion to refer to the appropriate State and/or Federal authorities any applicant who has transferred assets in a manner that indicates an attempt has or is being made to fraudulently gain Medicaid LTSS eligibility.

6.6.2Rebuttal of Disqualifying Transfer Determination

A. The State presumes that disqualifying transfers of assets during the look-back period were made to gain or retain eligibility for Medicaid LTSS. The State has established a process that provides an opportunity to rebut this presumption. The burden of proof is on the LTSS applicant/beneficiary to prove that the assets were not transferred to meet eligibility requirements.

B. There are certain factors the State takes into consideration when evaluating whether there is credible evidence that a disqualifying transfer was made for a reason other than to obtain Medicaid eligibility:

1. Unexpected need for LTSS - Transfers made before the applicant or beneficiary was diagnosed with a previously undetected disabling condition or experiences a sudden traumatic injury from an accident.

2. Financial calamity - Transfers made to cover unexpected loss of income or resources, including any deemed available from another person, necessary to meet financial obligations or prevent imminent risk to health and/or safety.

3. No impact on eligibility - Total countable resources would have been at or below the resource limit at all times from the month of disqualifying transfer through the present month even if the asset had been retained.

4. Court-ordered - Transfers made to satisfy a court-order, including any required to cover familiar support obligations or satisfy liens or debts.

C. The person making the rebuttal, whether the applicant or beneficiary or an authorized representative making the rebuttal on his or her behalf, must provide a written statement that includes:

1. Reasons for the transfer - An explanation of why the asset was transferred and the relationship of the LTSS applicant's/beneficiary to the person who received the transfer.

2. Value of the asset - Information establishing the fair market value and the equity value of the asset transferred and from an appropriately qualified independent, third (3^rd) party appraiser when the FMV is disputed or cannot be discerned.

3. Proof of effort - Verification of an attempt to dispose of the asset for a fair market value and an explanation of why the transfer ultimately occurred for less than this amount.

4. Compensation terms - The terms of an agreement, contract, or other expectation established at the time of the transfer indicating that the applicant or beneficiary received or will receive compensation for the fair market value of the transfer. Compensation may be made in cash or other tender, real or personal property, food, shelter, or services received by an owner in exchange for an asset. (See § 6.10 of this Part for personal service/care contract provisions.)

5. Self-support - An explanation of how the applicant or beneficiary planned for self-support after the asset was transferred.

D. Initiating a rebuttal does not restrict the right of the applicant, beneficiary, or an authorized representative thereof from requesting a hardship exemption in accordance with § 6.12 of this Part or making an appeal for a hearing pursuant to Part 10-05-2 of the Title.

210 R.I. Code R. 210-RICR-50-00-6.6

Adopted effective 1/20/2019
Amended effective 7/21/2021