The Centers for Medicare and Medicaid Services (CMS) has clarified when a transfer penalty begins for Medicaid applicants who are seeking home and community-based services. The penalty period begins when the applicant would begin receiving services were it not for the penalty period.
After Congress passed the Deficit Reduction Act of 2005 (DRA), CMS issued a guidance letter that a penalty period would not start to run until the date the “individual is eligible for Medicaid and is receiving institutional level of care services” [emphasis added]. But home and community-based services only become “services” once applicants are enrolled in the state’s waiver program and Medicaid is providing coverage. This caused a “Catch-22” for Medicaid applicants who were applying for home and community-based waivers: The penalty period would not begin to run until the applicants began receiving waiver services, but the applicants could not begin to receive waiver services until the penalty had run.
On April 17, 2018, CMS finally issued a new guidance letter, changing the start date of the penalty period to the date the “individual is eligible for medical assistance under the State plan and would otherwisebe receiving institutional level [of] care services” (emphasis added). This means that an applicant for home and community-based services will be eligible once the applicant meets the financial and non-financial requirements for Medicaid eligibility and the level-of-care requirements.