ElderLawAnswers Blog: GAO Says Few Asset Transfers Occurring. Are They Right?

In a recently-published report, Medicaid Long-Term Care: Few Transferred Assets before Applying for Nursing Home Coverage; Impact of Deficit Reduction Act on Eligibility Is Uncertain, the Government Accounting Office finds that few seniors are transferring assets in advance of entering a nursing home and applying for Medicaid coverage.

This, of course, runs counter to the perception of the Congressional proponents of the Deficit Reduction Act transfer restrictions that such transfers were rampant. And, admittedly, thousands of elder law attorneys across the country are advising seniors and their families how they may protect their hard-earned savings in the face of high long-term care costs. How do we reconcile these perceptions and the GAO conclusions?

The GAO reviewed 540 Medicaid nursing home applications in three states -- Maryland, South Carolina and Pennsylvania -- and found that 90 percent had nonhousing assets of $30,000 or less, 85 percent had annual incomes of $20,000 or less, and that only one-fourth of applicants owned homes with a median value of $52,954. Of the approved applicants, 47 had transferred assets with a median value of $15,152 causing a period of ineligibility that had expired by the time they applied for benefits. These are the people likely to be adversely affected by the new DRA rules.

Nationally, the study reports, 70 percent of nursing home residents had less than $70,000 in nonhousing assets when they entered the facility and 11 percent had nonhousing resources of more than $300,000.

Of the 540 individual applications the GAO reviewed, only two were denied for having transferred assets. Of the 465 approved applications, 47 had transferred assets during the three years prior to application, but the transfer penalty had expired by the time they applied, though the proportions varied among counties from a low of 4 percent to a high of 24 percent of approved applications. The median penalty resulting from these transfers was two months. The median amount transferred was $15,152 with the largest transfer being $201,516.

So, what can we make of these numbers? And what do they mean in terms of the DRA?

First, it seems like only about 10 percent of nursing home residents who apply for Medicaid are sufficiently affluent to transfer substantial assets. Second, the study did not pick up applicants who had transferred assets more than three years prior to applying for Medicaid. In other words, there may be asset transfers, both large and small, that don't appear on Medicaid applications by reason of being done as appropriate asset protection planning. Third, the DRA is likely to adversely affect at least 10 percent of applicants, most of whom did not transfer a substantial amount of assets -- not the people who should be targeted for transferring assets.