HD7 - Examination of Medicaid Transfer of Assets Rule As It Relates to Land-Use Assessments


Executive Summary:
The 2002 General Assembly passed House Joint Resolution 5 which directed the Department of Medical Assistance Services to examine its transfer of assets rule as such rule relates to land use assessments and eligibility for Medicaid. The Department of Medical Assistance Services (DMAS) prepared this study by reviewing all applicable federal statutes regarding transfer of assets and state statutes pertaining to land use assessments. Written clarification was requested from the Centers for Medicare and Medicaid Services (CMS), the federal agency responsible for oversight of the Medicaid program, regarding the feasibility of implementing a land use assessed value of property in lieu of the federally required "fair market value" of property for determining the value of assets. Additionally, DMAS developed a questionnaire and mailed the survey to all 50 states and the District of Columbia to evaluate whether any states utilized an alternative method for evaluation of assets and asset transfer.

In Virginia, as well as in all 50 states, localities have an option to tax property based on the land use of the property instead of the current market value. The benefit of land use assessment is to encourage preservation of land utilized for agriculture, timberland and open space without property owners incurring a tax liability based on the current market value, thereby slowing urban sprawl and allowing families to continue farming the land. In the Medicaid program, federal regulations require property to be assessed at fair or current market value. Individuals who have transferred property within thirty-six months of requesting Medicaid long term care services (nursing facility admission or home and community based care) must have their applications reviewed to determine if adequate compensation was received or a federal exemption was met for the transferred property. If property is sold or transferred for less than fair market value, a penalty period is calculated during which Medicaid will not pay for long term care services.

The Centers for Medicare and Medicaid Services responded that "tax assessments at other than 100 percent of fair market value would not meet the federal definition of fair market value and could not be used as a proxy for fair market value of Medicaid asset transfer purposes." The 31 states returning the survey questionnaire provided one consistent response, all states apply the current market value of property in evaluating assets and asset transfer for Medicaid eligibility.

Virginia receives a federal dollar match reimbursement for Medicaid services and associated administrative costs when services are provided to individuals within the federal requirements. Adopting a land use assessment method for determining the value of assets and asset transfer would not be in compliance with federal statute. Services provided to individuals outside the federal statutes are funded with State dollars only. If Virginia implemented a land use value assessment for determining the value of assets for the Medicaid program, the federal dollar match (51.55% in fiscal year 2002) would not be available. The cost to Virginia to provide Medicaid coverage for those individuals required to meet asset requirements with State only funds would be approximately 1.5 billion dollars.