A Center for Medicare and Medicaid
Services (CMS) official says that the agency believes states now have
the option of imposing a transfer penalty on an institutionalized
spouse if the community spouse transfers protected resources after the
institutionalized spouse’s eligibility has been determined.

In a recent e-mail exchange with CMS officials, North Caroliina attorney Robert Mason
asked whether a community spouse’s conveyance of assets
post-eligibility would affect the institutionalized spouse’s ongoing
eligibility. Roy R. Trudel, a Technical Director at CMS’s Centers for
Medicaid and State Operations, replied that as a result of the U.S.
Supreme Court’s decision in Wisconsin v. Blumer,
534 U.S. 473 (2002), states have the option of imposing a transfer
penalty on the institutionalized spouse if the community spouse
transfers protected resources after eligibility has been determined for
the institutionalized spouse.

Trudel
acknowledged that CMS previously had an informal policy that once the
institutionalized spouse’s eligibility for
Medicaid was determined, the resources of the community spouse were
deemed to be unavailable to the institutionalized spouse. If the
community spouse transferred protected resources, no penalty would have
been imposed on the institutionalized spouse. Trudel suggested that
attorneys contact state agencies directly because imposition of the
penalty is at the state’s option and CMS has no information as to which
states, if any, have adopted this approach.

Trudel does not address attorney Mason’s additional question of what
effect, if any, the imposition of a penalty on an institutionalized spouse as a
result of a post-eligibility transfer by the community spouse would have on the
later potential eligibility of the community spouse.

Allowing states to sanction
post-eligibilty transfers creates problems, especially in regard to
possible double sanctions, and does not fit as neatly into the overall
statutory scheme. That was a position CMS held for years.  Prior to
this, the CMS position was that the community spouse was free to do
what it wanted with assets after the Institutionalized Spouse qualified
for Medicaid.  This new position draws into question the spouse’s
ability to make gifts to friends, family, or even to their church, for
fear that it will result in a termination of benefits for their spouse.