Understanding Penalties in Title 19 Medicaid and Who Pays the Price

When applying for long-term care Medicaid in Connecticut, families are often shocked when they learn that even though their loved one has been approved for Medicaid, there may still be a span of time during which Medicaid will not pay for care.

This happens when the State of Connecticut determines that transfers or gifts were made during the 5-year look-back period. Even completely innocent gifts such as holiday money to grandchildren, helping a family member with bills, or selling a car below market value can trigger a penalty.

What Is the Medicaid Penalty?

A Medicaid penalty is a period of ineligibility for long-term care coverage (nursing home, home care in some cases) because the applicant transferred assets for less than fair market value within the past 60 months.

Approval With a Penalty: The Most Misunderstood Outcome

Many families assume that being “approved with a penalty” means everything is handled.

But in reality, an approval with a penalty means Medicaid will NOT pay for care during the penalty period.The patient is considered Medicaid-eligible on paper, but not eligible for payment.

During the Penalty Period, the Nursing Home Is Not Paid

When a penalty is imposed:

• The resident has no assets (they already spent down or transferred assets).

• Medicaid won’t pay because of the penalty.

• The nursing home cannot discharge the resident solely for inability to pay.

• The facility “eats” the cost of care during the penalty period.

This means the nursing home is providing 24/7 skilled care without reimbursement until the penalty ends. This is why facilities are extremely cautious and why they require strong financial documentation before accepting a Medicaid-pending resident.

Examples of Situations That Trigger Penalties

• Gifting money to a child who is “helping” manage finances

• Transferring the home to a child within 5 years without meeting an exemption

• Selling a vehicle for less than market value

• Adding someone to a bank account incorrectly

• Paying family caregivers “under the table” without a signed care contract

• Moving money around without receipts or explanations

Even innocent transactions can be flagged despite the intent. Reimbursements for care of an elderly loved one must be itemized. Medicaid only looks at the numbers.

How to Avoid Penalties

• Begin Medicaid planning early; ideally 5+ years before care is needed

• Use approved planning tools such as:

  • Medicaid Asset Protection Trusts (MAPTs)

  • Caregiver agreements

  • Spend-down plans

  • Pooled trusts (for disabled individuals)

• Keep documentation for every transfer and expense

• Work with an elder law firm familiar with Title 19 applications and DSS review patterns

Why This Matters for Families

A Medicaid penalty doesn’t just complicate finances, it creates stress for the resident and their family, the facility and the case manager. A transaction worksheet must be provided to the caseworker breaking down verifications for all transactions over $5,000. Understanding how penalties work helps families avoid unexpected bills, delays, and conflicts with care facilities.

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