Law carries criminal charges for Medicaid-related transfers

Staff Writer

A controversial new law which took effect Jan. 1 will make it a criminal offense to make an unapproved transfer of assets in order to become eligible for Medicaid.

Although the new measure has not been tested, it appears to make the senior citizen who transfers the assets, the family who receives them, health care providers, financial planners and their attorneys criminally liable for such a move.

"The reach of this statute seems endless," says Mary Pat Toups, an emeritus attorney who represents seniors at the Legal Aid Society of Orange County.

Lawyers who specialize in elder law say middle income people cannot afford to pay nursing home costs of between $100 and $200 per day without Medicaid. Transferring assets, usually to trusts or family members, in order to become eligible has become a relatively common practice for some senior citizens.

Estimates of the cost of such transfers to taxpayers range as high as $4.3 billion annually.

Since the creation of Medicaid (MediCal in California) in 1988, Congress has approved limitations on the transfer of assets.

In 1993, it extended the waiting period to 36 months between the time of transfer and eligibility.

Improper transfers

If an improper transfer is made, Medicaid imposes a "period of ineligibility" for the nursing home resident when assistance is not available for a period of time based on the amount transferred.

Now, under the Health Care Reform Bill, signed by President Clinton in August, it is a criminal offense to dispose of assets with the intention of becoming eligible for Medicaid if the transfer results in a period of ineligibility. Toups says the law appears to have no effect on dispositions of assets which do not entail a period of ineligibility, such as exempt or non-countable assets.

But she warns that its potential reach is extensive, possibly affecting health care providers, financial planners, insurance companies and their attorneys.

Criminal liability

One section of the new statute imposes criminal liability on anyone who "aids, abets, counsels, commands, induces or procures" the commission of an offense by another. "It appears that the attorney can be held liable," Toups believes.

She said the individual making the transfer can be convicted of a misdemeanor ($10,000 fine and one year in prison). But if the senior citizen consulted an attorney, or was advised by a health care provider or a financial planner, those individuals can be found guilty of a felony ($25,000 fine, five years in prison), Toups says. Their attorneys also are at risk, as well as the beneficiary of the transfer, usually the senior's child.

"When dear old mom transferred her assets to her son and daughter, and they accepted them, they become part of a conspiracy to commit a misdemeanor and the conspiracy is a felony," says Toups. "That is the potential reach of this law."

Although many elder law lawyers believe the measure ultimately will be found unconstitutional, Toups wonders who will want to be the test case and risk professional ruin.

Lobbying effort

Some patient advocacy groups, financial planners and lawyers are lobbying for the elimination or softening of the penalties, and a spokeswoman for the Clinton administration says it would support such changes.

Toups is a member of the bar's new senior lawyers section, created to provide information for older attorneys and draw on their experience. Among the issues the section may address are retirement planning, second careers, of counsel arrangements, social security law and long-term health care.

The section is accepting applicants for its executive committee until Jan. 15.