Certain Medicaid programs impose a transfer penalty on applicants who have transferred resources (assets) for less than fair market value within five (5) years preceding the Medicaid application. Simply stated, the transfer penalty is a period of time wherein Medicaid services will be withheld, regardless of whether those services are being sought in a long-term care facility or in the community.  The length of the penalty period is determined by a penalty divisor. The penalty divisor is adjusted each year, with the 2024 penalty divisor resulting in one (1) month of non-coverage for every $13,423.05 transferred (gifted) within the five (5) year lookback. Few exceptions to the transfer penalty rule exist, however, this article will focus on the Caregiver Child Exception and a recent Final Agency Decision that reaffirmed the criteria for claiming it.   

Generally, the Caregiver Child Exception permits a Medicaid applicant to transfer his or her primary residence to their adult child, penalty-free, so long as the child has  (1) provided continuous care and assistance to the Medicaid applicant for a period of two (2) or more years directly preceding the Medicaid applicant’s admission to a long-term care facility; (2) the care and assistance provided to the Medicaid applicant must have met or exceeded the level of care the Medicaid applicant would expect to receive in a skilled nursing facility; and (3) but for the care and assistance provided, the Medicaid applicant would have required placement in a long-term care facility much earlier. See, N.J.A.C. 10:71-4.10(d)4 and 42 U.S.C.A. 1396p(c)(2)(A)(iv). These criteria were recently reaffirmed in a Final Agency Decision captioned R.M. v. DMAHS and Hudson County Department of Family Services, OAL Docket Number HMA 05059-2023. The relevant facts of the case are as follows:

1. R.M. applied for Medicaid after entering a long-term care facility. The five-year lookback yielded information about the transfer of R.M.’s home to her son, valued at $398,117.99. A transfer penalty was imposed on the full transfer of $398,117.99, effectively preventing R.M. from receiving Medicaid coverage for approximately 2.5 years.

2. R.M. filed a request for Fair Hearing so that an Administrative Law Judge (“ALJ”) could decide whether R.M.’s son would qualify as a “caregiver child” thereby avoiding the imposition of a 2.5 year penalty. To that end, R.M. presented evidence that demonstrated the following:

(a) R.M.’s son had lived with her (in her home) for more than two (2) years preceding her institutionalization;

(b) R.M. presented medical records that demonstrated her need for nursing-like assistance/services during those two (2) years;

(c) R.M.’s son provided her with those daily nursing-like services. Specifically, evidence was presented that R.M.’s son provided assistance with bathing, toileting, walking, standing from seated or reclined position, climbing stairs, meal preparation, medication management, and more.

3. Based on the evidence presented at the Fair Hearing, the Assistant Commissioner of the Division of Medical Assistance and Health Services concluded that R.M.’s son met or exceeded all of the criteria for Caregiver Child status, and the 2.5 year penalty was disregarded.

If you find yourself in a similar caregiving situation and are considering the Caregiver Child Exception in the future, it is important to meticulously document the services you provide to your parent. It is also a good idea to involve yourself in your parent’s medical appointments, getting to know their doctors and making sure those doctors are getting to know you. Those doctors may serve as your greatest asset when applying for the Caregiver Child Exception in the future.