Disallowing Partial Cures: Is It the New Trend?

By: Dale M. Krause

For those that are not familiar with the term, a partial cure exists when a giftee returns a portion of a gift to a Medicaid applicant, thereby reducing any previously applied divestment penalty period accordingly. This technique is primarily popular in reverse half-a-loaf planning. For purposes of an example, Martha will illustrate the use of a partial cure.

Martha resides in a nursing home, and is seeking Medicaid eligibility. She gifts her entire spend-down amount to her children, resulting in a 20-month divestment penalty period. From month one through 10 her children return one month's private pay costs to Martha. Martha in turn uses these funds to pay her nursing home bill each month. After month 10, Martha requests her caseworker to readjust the original divestment penalty period in light of the prior gifts that were returned. The desired result is that the returned gifts "partially cure" the previously imposed divestment penalty period, reducing it from 20 months to 10. With 10 months having already passed, Martha would then be immediately eligible for Medicaid benefits.

I've always been of the opinion that using partial cures was a gamble in planning, and could potentially cause a countable resource problem. Over the years, an increasing amount of states are taking the position that the return of a previously made gift would not reduce the penalty period, and instead would be a countable resource in the month returned. Several case decisions have transpired over the years, further confirming the aforementioned. Most recently, Ellis v. Minn. Dept. of Human Services (D. Minn., No. 11-3411, Nov. 30, 2011).

Could this be the new trend?

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Dale M. Krause, J.D., LL.M., has provided Medicaid Compliant Annuities to elder law attorneys, and their clients, throughout the United States. As a result of his practice, Mr. Krause has been labeled "The Pioneer of Medicaid Compliant Annuities." www.medicaidannuity.com/

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