In the first post in our Watch Your Language series of articles, we defined the term “transfer” in the context of a Medicaid application. That definition is important for today’s explanation of the penalty period.

To recap, a transfer occurs anytime you sell, trade, or give away money or property. Sometimes a transfer is for fair value, such as when you trade in your car or buy groceries. Sometimes, though, you make a transfer without expecting anything in return – like a birthday or Christmas gift. This is called a disallowed transfer, and it means you will not be eligible for Medicaid for a certain period of time called the penalty period.

Put simply, the penalty period is the period of time during which a Medicaid applicant will be disqualified from receiving Medicaid benefits as a result of disallowed transfers made prior to applying for Medicaid even though the applicant would otherwise be eligible.

Let’s go over that again. This year, you gave your kids, grandkids, and great-grandkids Christmas gifts in December. You have a stroke in January and have to move into a nursing home. You meet all of the financial requirements for Medicaid coverage, so you apply for facility benefits.

However, the Department of Human Services says you have to find a way to pay for your care out of your own pocket for a while because you recently made several disallowed transfers!  It was Christmas presents!  The same thing you’ve done every year for all your kids, grandkids, and great-grand kids.

This result could be disastrous! The penalty period is based on when a transfer occurred, how much you transferred, and the average cost of care across the state, and we’ll talk about how to calculate the penalty period in our Devils, Details, and Deadlines series.