Magazine article The CPA Journal

Criminalization of Medicaid Asset Transfers

Magazine article The CPA Journal

Criminalization of Medicaid Asset Transfers

Article excerpt

Congress and the President have attempted to control the cost of the Medicaid program by enacting the Health Insurance Portability and Accountability Act of 1996, commonly known as the Kennedy/Kassebaum Health Reform Act, which became effective January 1, 1997. The following information is our current understanding and analysis of this statute. Since this is a new law and there is not yet any court experience as to the interpretation of the law, practitioners must proceed with extreme caution when advising clients.

Section 217 of the Act, 42 U.S.C. Section 1320a-7b(aX6), makes it a crime punishable by up to one year in prison and a fine of $10,000 to transfer assets in order to qualify for Medicaid benefits under certain circumstances.

The new law basically provides that whoever knowingly and willfilly disposes of assets (including by any transfer in trust) in order for an individual to become eligible for Medicaid, if disposing of the assets results in the imposition of a period of ineligibility for such assistance, shall be subject to a criminal sanction. There are several issues concerning the interpretation of the statute because it is ambiguous and unclear. There is also legislation pending in both the House and the Senate which seek repeal of this new criminal law.

What Activity Is Criminal?

The statute applies when there is a knowing and willfil disposition of assets to obtain Medicaid benefits and the transfer results in the imposition of a period of ineligibility. There are two issues here.

What will determine a "knowing and willful disposition" of assets? Must this be the sole or principal intention of the individual? What if Medicaid eligibility is only one of several motivating factors of the individual?

What does "which resulted in the imposition of a period of ineligibility" mean? Are there different results depending upon the timing of the transfers?

Who Is the Criminal?

Clearly, the statute applies to an individual who makes the transfers and then applies for Medicaid. It is not clear if the statute applies to individuals who act on behalf of the individual, such as a practitioner-in-fact, co-owner of joint assets, a trustee, or a guardian.

Can the Act Be Cured?

What if the assets are returned and the penalty period is eliminated? …

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