Medicaid Recipient Who Transferred Assets to Wife During Period of Ineligibility Is Subject to Penalty Period

A U.S. district court in Connecticut rules that a husband who became ineligible for Medicaid benefits during a redetermination and then transferred assets to his wife during the period of ineligibility was properly assessed a penalty period when he reapplied for Medicaid benefits. Fagan v. Bremby (U.S. Dist. Ct., D. Conn., No. 3:16cv73 (JBA), March 21, 2017).

Martin Fagan was injured in a motorcycle crash and entered a nursing home. In 2012, he began receiving Medicaid benefits. In 2015, he received a $2 million personal injury settlement, and the state discontinued his Medicaid benefits. Mr. Fagan transferred $879,453.32 of the settlement proceeds to his wife in two chunks. When Mr. Fagan reapplied for Medicaid, the state determined that he transferred assets for less than market value and imposed a transfer penalty.

Mr. Fagan appealed, arguing that because the transfers to his wife were pre-eligibility transfers, he could transfer an unlimited amount to her without incurring a penalty. The state upheld the penalty period, and Mr. Fagan sued for injunctive relief in federal court. The state and Mr. Fagan filed motions for summary judgment.

The U.S. District Court, District of Connecticut, grants summary judgment to the state, holding that the penalty period is appropriate. The court rules that any transfer to a community spouse made after the institutionalized spouse is Medicaid eligible is prohibited if it happens during the same period of institutionalization. According to the court, there is no reason why statutory language "should be interpreted to give an institutionalized individual, found ineligible for benefits upon redetermination, a second opportunity to make transfers to his spouse prohibited at the time of his initial eligibility determination when the coverage relates to the same period of institutionalization." 

For the full text of this opinion, click here.

Out thanks to California ElderLawAnswers member Gene L. Osofsky for alerting us to this decision.

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