(a) Introduction.
  (1) The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) (P.L. 103-66) revised policy for transfers of assets that occur on or after August 11, 1993, when an uncompensated value remains.
  (2) The penalty for transfers of assets affects payments for institutional facility services (nursing facility (NF) care, intermediate care facility for persons with mental retardation or related conditions (ICF/MR) provider services, care in state supported living centers and state centers, and care in institutions for mental diseases (IMD)) and eligibility for §1915(c) waiver program services. Both the recipient and the service provider are notified of the penalty period.
  (3) Except for residents of state supported living centers and state centers, persons in an institutional setting remain eligible for all other Medicaid benefits and continue to receive monthly identification forms for the length of the penalty period. For residents of state supported living centers and state centers, Medicaid eligibility is denied for any penalty period resulting from an uncompensated transfer of assets. This is because the only Medicaid benefit a resident of a state supported living center or state center receives is provider payments.
  (4) If the Medicaid eligibility of a person receiving services under a §1915(c) waiver program requires receipt of waiver services, then the person is ineligible for all Medicaid benefits for the length of the penalty period. Denial of §1915(c) waiver program services based on an uncompensated transfer of assets does not disqualify the person for pure Qualified Medicare Beneficiary (QMB) or Specified Low-Income Medicare Beneficiary (SLMB) benefits, as described in Chapter 359 of this title (relating to Medicare Savings Program).
  (5) A person in a noninstitutional setting who is eligible for Medicaid may transfer assets without penalty, provided the person does not become institutionalized or apply for §1915(c) waiver program services. A transfer of assets does not affect eligibility for QMB or SLMB benefits.
  (6) In spousal situations, if assets are transferred to a third party before institutionalization or by the community spouse, the Texas Health and Human Services Commission (HHSC) does not include the uncompensated amount of the transfer in calculating the spousal protected resource amount or countable resources upon application for Medicaid.
(b) Definitions. The following words and terms, when used in this section, have the following meanings unless the context clearly indicates otherwise.
  (1) Person--"Person" includes the applicant or recipient, as well as:
    (A) the person's spouse;
    (B) an individual, including a court or administrative body, with legal authority to act in place of or on behalf of the person or person's spouse; and
    (C) any individual, including a court or administrative body, acting at the direction or upon the request of the person or the person's spouse.
  (2) Assets--
    (A) Assets include all income and resources of a person and of the person's spouse, including any income or resources that the person or the person's spouse is entitled to but does not receive because of action:
      (i) by the person or the person's spouse;
      (ii) by an individual, including a court or administrative body, with legal authority to act in place of or on behalf of the person or the person's spouse; or
      (iii) by any individual, including a court or administrative body, acting at the direction or upon the request of the person or the person's spouse.
    (B) Actions that would cause income or resources not to be received include:
      (i) irrevocably waiving pension income;
      (ii) waiving the right to receive an inheritance;
      (iii) not accepting or accessing injury settlements; and
      (iv) a defendant diverting tort settlements into a trust or similar device to be held for the benefit of the plaintiff.
(c) Transfer of income.
  (1) A person may incur a transfer penalty by transferring income on or after August 11, 1993. Transfers of income include:
    (A) waiving the right to receive an inheritance even in the month of receipt;
    (B) giving away a lump sum payment even in the month of receipt; or
    (C) irrevocably waiving all or part of federal, state, or private pensions or annuities.
  (2) The date of transfer is the date of the actual change in income, if on or after August 11, 1993. Interspousal transfers of income are permitted (for example, obtaining a court order to have community property pension income paid to a community spouse).
  (3) Because revocable waivers of pension benefits can be revoked and the benefits reinstated, no uncompensated value is developed, and no transfer-of-assets penalty is incurred. Such waivers are subject to the utilization-of-benefits policy, and the person must apply for reinstatement of the full pension amount or the person is ineligible for all Medicaid benefits.
(d) Exceptions to transfers of assets.
  (1) Transfer of the person's home does not result in a penalty when the title is transferred to the person's:
    (A) spouse, who lives in the home (the transfer penalty applies when the community spouse transfers the home without full compensation);
    (B) minor or disabled child (a disabled child must meet Social Security Administration disability criteria; there is no age limit for a disabled child for transfer of assets purposes);
    (C) sibling who has equity interest in the home and has lived there for at least one year before the person transferred to an institutional setting; or
    (D) son or daughter (other than a disabled or minor child) who lived in the home for at least two years before the person transferred to an institutional setting and provided care that prevented institutionalization. To substantiate this claim, there must be a written statement from the person's attending physician or a professional social worker familiar with the case documenting the care provided by the son or daughter.
  (2) Assets, including the person's home, may be transferred without resulting in a penalty when:
    (A) transferred to the person's spouse or to another for the sole benefit of that spouse, or from the person's spouse to another for the sole benefit of that spouse;
    (B) transferred to the person's child or to a trust, including an exception trust described in §1917(d)(4) of the Social Security Act (42 U.S.C. §1396p(d)(4)), established solely for the benefit of the person's child. The child must meet Social Security Administration disability criteria. There is no age limit for a disabled child for transfer of assets purposes;
    (C) transferred to a trust, including an exception trust as specified in §1917(d)(4) of the Social Security Act (42 U.S.C. §1396p(d)(4)), established for the sole benefit of a person under 65 years of age who meets Social Security Administration disability criteria;
    (D) satisfactory evidence exists that the person intended to dispose of the resource at fair market value;
    (E) satisfactory evidence exists that the transfer was exclusively for some purpose other than to qualify for Medicaid;
    (F) imposition of a penalty would cause undue hardship;
    (G) a person changes a joint bank account to establish separate accounts to reflect correct ownership of and access to funds; or
    (H) a person purchases an irrevocable funeral arrangement or assigns ownership of an irrevocable funeral arrangement to a third party.
  (3) In determining whether an asset was transferred for the sole benefit of a spouse, child, or person with a disability, there must be a written instrument of transfer, such as a trust document, which legally binds the parties to a specified course of action and which clearly sets out the conditions under which the transfer was made, as well as who can benefit from the transfer. The instrument or document must provide for the spending of the funds involved for the benefit of the person on a basis that is actuarially sound based on the life expectancy of the person involved. When the instrument or document does not so provide, there can be no exemption from the penalty. Exception trusts created under §1917(d)(4) of the Social Security Act (42 U.S.C. §1396p(d)(4)) are exempt from the actuarially sound distribution provisions of this section.
  (4) The situations in paragraphs (1) - (3) of this subsection are the only situations in which an uncompensated transfer does not result in a penalty for care in an institutional setting. Under the transfer provisions of OBRA 1993, the home is not an excluded resource for a person in an institutional setting. Therefore, if the home of a person in an institutional setting is transferred, unless the transfer meets one of the criteria in paragraphs (1) - (3) of this subsection, it could affect payment for the person's care in an institutional Cont'd...