The Elrod Firm

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Medicaid Increases Penalty Divisor to 5,098

Many people are aware of the fact that Medicaid has a five year look back relating to the transfer of assets by a Medicaid applicant.  This five year look back does not mean that a person cannot receive any Medicaid assistance if he or she transferred or gifted assets in the past five years.  The five year look back is simply the window through which DHS is permitted to look when examining an applicant’s financial position.

When transfers or gifts occurred during the five years preceding the submission of a Medicaid application, Medicaid will take a total of all assets transferred and divide that total by the then-current penalty divisor.  The penalty divisor is supposed to represent the average cost of one month in a nursing home for one person in the state of Arkansas.  The most recent previous penalty divisor was 4,955  Effective April 1, that number was increased to 5,098, representing an increase in the average monthly nursing home price in Arkansas of almost $150 per month over the past year.

This increase in the penalty divisor is good news for Medicaid applicants.  Take for example a single applicant who gifted $50,000 in order to become Medicaid qualified before submitting a Medicaid application.  Under the old penalty divisor, that applicant would be approved for Medicaid with a penalty of 10.1 months ($50,000 / 4,955) or almost 44 weeks.  Under the new penalty divisor, that applicant would be approved for Medicaid with a penalty of 9.8 months ($50,000 / 5098) or just over 42 weeks.  This may not seem like a huge difference, but a difference of two weeks in Medicaid penalty time can equal several thousands of dollars considering the current cost of nursing home care.

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