Eligibility for Medicaid long-term care benefits in Michigan--divesture.

Mackey v Dep’t of Social Servs, ___ Mich App ___ (#288966, 9/7/2010)


To be eligible for Medicaid long-term care benefits in Michigan, an individual must meet a number of criteria, including having $2,000 or less in countable assets. Ronney v Dep’t of Social Servs, 210 Mich App 312, 315 (1995). A Medicaid applicant eligible for long-term care benefits is subject to a divestment penalty if she transfers a resource during the five-year “look-back” period for less than fair market value and that resource is not otherwise excluded as a divestment. 42 USC 1396p(c)(1).

Less than fair market value means the compensation received in return for a resource was worth less than the fair market value of the resource” and elaborates that compensation must have “tangible form” and “intrinsic value.” i.e. the amount of money that a ready, willing, and able buyer would pay for the asset on the open market . . . . Wolfe-Haddad Estate v Oakland Co, 272 Mich App 323, 325-326 (2006) (emphasis added).

In this case petitioner invested a sizeable sum in the Marden Family L.L.C., created solely for the purpose of circumventing Medicaid eligibility requirements and which ceded total control to petitioner’s daughter (and fiduciary) for a fraction of the cost of petitioner’s investment. Under the terms of the agreement, petitioner would only receive a marginal return on her unsecured investment after two years. A willing buyer could not acquire such an asset on the open market, in an arm’s-length transaction. Therefore, the transaction was for less than fair market value and constituted a divestment of assets not subject to an exclusion.