The financial eligibility criteria are based on  individuals’ assets—income and resources together. States are  responsible for determining whether applicants meet the financial and  other eligibility criteria for Medicaid coverage for long-term care. (See table 1 for  examples of different types of income and resources.) Federal law limits Medicaid payment for long-term care services for  persons who divest themselves of—or “transfer”—their assets for less  than FMV within a specified time period. If the  state determines an applicant transferred an asset for less than FMV  during the look-back period, the individual may be ineligible for Medicaid  coverage for long-term care for a period of time, called the penalty period. To assess applicants’ financial eligibility for Medicaid coverage for long- term care, and to determine whether they transferred assets for less than  FMV, states generally require applicants to submit applications and to  provide documentation of certain assets reported on the applications. States Required Applicants to Document Most Assets, but What Was Considered Acceptable Proof Varied

States reported requiring applicants to provide documentation for most of  the 13 types of assets contained in our survey; however, the types and  number of months of documentation that the states considered to be  acceptable proof for determining an applicant’s financial eligibility for  Medicaid coverage for long-term care varied. All States Obtained Some Amount of Asset Information from Third Parties, and No State Had Implemented an Asset Verification System

All 51 states reported that they obtained some amount of asset  information from third parties, although the extent of the screenings  conducted varied by state. CMS officials were aware  of states’ progress in implementing the AVS and told us that the agency  was regularly communicating with states regarding AVS implementation. It Is Unclear Whether Some States Obtain Sufficient Information to Implement Certain DRA Provisions

On the basis of states’ responses to questions about the documentation  required from applicants and the asset information obtained from third  parties, it is unclear whether some states obtain sufficient information to  implement certain DRA provisions, particularly the provisions related to  the look-back period and home equity. The results of our survey raise  questions about some states’ implementation of the DRA, but are not  conclusive, and we have additional work planned related to Medicaid  long-term care financial eligibility. Three of the 31 states reported  requiring a single month of documentation from applicants and did not  obtain any information from financial institutions. Thus, these officials stated, it was  understandable for states to use discretion and only conduct reviews  when there is reason to believe that a transfer could have been made  during the look-back period. States must balance the costs of eligibility determination efforts with the  need to ensure that those efforts provide sufficient information to  implement federal requirements. Given the complexities involved, it may be  reasonable for states to adhere to a risk-based approach and focus their  eligibility determination efforts on applicants who appear to be more likely  to have assets or to have transferred assets that would make them  ineligible. However, it is too early to  assess its overall effectiveness, which will ultimately depend on the  breadth of the financial institutions participating and the depth of the  information obtained. HHS concurred with our findings and  noted that the results of our comprehensive report will serve as a  resource for all interested parties. Appendix III: States’ Use of Data Matches to Verify Applicants’ Assets

	Table 27a: Proportion of Applicants for which States Conduct Data Matches with Third Parties to Verify Applicants’ Assets, by State and Source of Data Match, 2011

	Social Security Administration

 = All applicants.
Why GAO Did This Study

Medicaida joint federal-state health care financing program for certain low income individualspaid for nearly half of the nations $263 billion long-term care expenditures in 2010. To be financially eligible for Medicaid coverage for long-term care, applicants cannot have assetsincome and resourcesabove certain limits. Federal law discourages individuals from artificially impoverishing themselves in order to establish financial eligibility for Medicaid. Specifically, those who transfer assets for less than fair market value during a specified time periodor look-back periodbefore applying for Medicaid may be ineligible for coverage for longterm care for a period of time. The DRA extended the look-back period to 60 months and introduced new requirements for the treatment of certain types of assets, such as annuities, in determining eligibility. States are responsible for assessing applicants eligibility for Medicaid, the criteria for which varies by state.
GAO was asked to provide information on states requirements and practices for assessing the financial eligibility of applicants for Medicaid long-term care coverage. GAO examined the extent to which states (1) require documentation of assets from applicants, (2) obtain information from third parties to verify applicants assets, and (3) obtain information about applicants assets that could be used to implement eligibility-related DRA provisions. From October 2011 to November 2011, GAO surveyed Medicaid officials from each of the 50 states and the District of Columbia. GAO also interviewed officials from CMS, the agency within HHS that oversees Medicaid.

What GAO Found

States reported requiring applicants to provide documentation for most of the 13 types of assets included in GAOs survey.
States varied in the extent to which they obtained information from third parties to verify applicants assets. For example, all states conducted data matches with the Social Security Administration but used other sources to a lesser extent. While states implementation of an electronic asset verification system (AVS) was required on a rolling basis beginning in 2009, no state had fully implemented an AVS at the time of GAOs survey. Among the implementation challenges reported by states were lack of resources and getting financial institutions to participate. Officials from the Centers for Medicare & Medicaid Services (CMS) were aware of states progress and challenges and told GAO that they regularly communicated with states on AVS implementation.
On the basis of states responses to questions about the extent of documentation required from applicants and information obtained from third parties, it is unclear whether some states obtain sufficient information to implement certain provisions of the Deficit Reduction Act of 2005 (DRA). For example, 31 states reported requiring less than 60 months of documentation from applicants and financial institutions. The results of GAOs survey raise questions about states implementation of the DRA, but are not conclusive. CMS officials said that it is reasonable for states to only conduct reviews when there is reason to believe a transfer of assets occurred. GAO has additional work planned related to Medicaid long-term care financial eligibility.
States must balance the costs of eligibility determination efforts with the need to ensure that those efforts provide sufficient information to implement federal requirements. Given the complexities involved, it may be reasonable for states to adhere to a risk-based approach and focus their eligibility determination efforts on applicants who appear to be more likely to have assets or to have transferred assets that would make them ineligible. It is too early to assess the effectiveness of the AVS; its utility will ultimately depend on the breadth of the financial institutions participating and the depth of the information obtained.
The Department of Health and Human Services (HHS) concurred with GAOs findings and commented that GAOs comprehensive report will serve as a helpful resource for CMS and other interested parties.