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Example Mr. Jones owns a parcel of land that has a full market value of $40,000. On January 10, 2006, he sells the parcel of land to his son for $2,000. He applies for Medicaid on September 15, 2006 under the Community Based Care Waiver program and is determined eligible effective September 1, 2006. If the average cost of private-pay nursing facility care in DC is $3,000 per month, the penalty period is determined as follows: Full Market Value of Transferred Asset = $40,000 minus Compensation Received - $2,000 Uncompensated Value of Transferred Asset = $38,000 Uncompensated Value $38,000 divided by Monthly Private-Pay Nursing Cost ÷ $3,000 Penalty Period = 12 and 2/3 months Mr. Jones is subject to a penalty period of twelve and 2/3 months that begins on January 1, 2006 and ends on in January, 2007. Therefore he is subject to restricted Medicaid reimbursement for the period September 1, 2006 into January, 2007. If the transfer had occurred on or after February 8, 2006, the penalty period would start on September 1, 2006 and end in September, 2007.

If a spouse transfers a countable asset for less than market value, the penalty period will be divided in half and equally apportioned to the spouses, if both spouses are eligible for Medicaid. If the status of one spouse changes and he/she is no longer subject to a penalty period, the remaining full penalty period must be served by the remaining spouse.

Penalties due to transfers of income streams will be handled as follows: • for lump sum transfers, the lump sum value will be used to determine the penalty period; • for transfers of individual payments from an income stream, separate penalties will be imposed for each payment, including partial months; and • for transfers of the right to an income stream, the actuarial value of all payments transferred will be used to calculate the penalty period.

Transfers of assets or income streams between spouses are not subject to these penalties and should be handled under the provisions in Chapter 2: Impoverished Spouse in this Part.

Notification of Penalty Period and Undue Hardship Determination

When a person is subject to a penalty period of restricted Medicaid reimbursement, ESA will notify the applicant/recipient in writing.

The notice of the penalty period will also inform the individual of his/her opportunity to claim that the penalty would result in undue hardship and to present evidence backing that claim. The agency will determine that an undue hardship exists if: • the individual has been threatened with eviction from a long-term care facility or other medical institution and has exhausted all legal methods to prevent the eviction, or the individual’s medical provider has threatened to terminate home and community-based services based on a waiver; and • the transferee is no longer in possession of the transferred asset, has no other assets of comparable value with which to pay the cost of care, and there is no organization, family member, or other individual able and willing to provide care.

Penalty periods will not be imposed if it creates undue hardship to the individual.