As Americans, we know that the virtue of spending money at will is as classic an American tradition as eating apple pie. The need to exchange sometimes exorbitant amounts of cash for goods and services is a need that is ingrained in our freedom-loving, capitalist minds. Today’s society makes it easier than ever to find new ways to spend our money. Glossy advertisements from credit card companies arrive in the mailbox with the announcement “Pre-approved” liberally plastered on the mail-out. Installment plans can be used to pay for anything from automobiles to Disney World park passes. Automated Teller Machines have replaced their human bank teller counterparts with their instantaneous ability to dispense cash. In America, we cherish the freedom to spend our money as we see fit. However, not all methods of payment were created equal. Future Medicaid applicants should be especially wary of certain means of payment, including the use of debit cards. Debit cards hold the potential to sabotage seniors’ Medicaid eligibility.

One of the primary selling points of debit cards is that they are simple and easy to use. Many times, all that is required is signing up for the card at a branch of the bank in which you are an account holder. You are given a pin number for identification purposes and the card usually arrives in the mail within two weeks. Debit cards truly are a simple way to make payments. They operate as checks without the hassle of writing anything each time you make a payment. However, there can be serious ramifications in regards to Medicaid eligibility if seniors who intend to apply for benefits routinely use debit cards for their purchases.

Debit card transaction records do not have a verifiable way to determine what the purchase was for. Details other than the amount of the transaction are conspicuously missing from the record. Medicaid eligibility workers are required to be able to account for the recipient and purpose of each payment made by a Medicaid applicant over the last five years. The “look-back” period begins five years prior to the day your application for Medicaid benefits is received. These workers, who effectively have the power to determine one’s Medicaid eligibility, assume all payments and expenses are transfers of assets unless otherwise noted. A transfer of assets is a gift in the eyes of Medicaid and almost always comes with a penalty of ineligibility, known as a transfer penalty. Even though paying for gas is clearly not an attempt to deplete one’s assets in order to become eligible for Medicaid benefits, it is viewed as such by the Medicaid agency if no proof exists that a gas station was actually the recipient of a debit card transaction. A senior who uses a debit card when filling up the car with gas every week, without any documentation proving the source of the debit transaction, will be penalized for giving a gift every week for five years if he or she applies for Medicaid benefits. Add in debit card transactions for things such as meals and grocery shopping and the transfer penalty could become quite heavy.

So is there a remedy to these debit dangers? Fortunately, there is. However, the solution is not an easy one. Seniors who may be eligible for Medicaid benefits at some later date would be well-advised to keep a detailed log of the amounts, recipients, and purpose of each debit card transaction. The log can double as a record for cash payments as well. While keeping such a record is clearly a time-consuming venture, it is a necessary step that must be taken if a debit card is regularly or even occasionally used. The simplest way to bypass this extra effort is to avoid using a debit card.    

It is also imperative that seniors who are approaching Medicaid eligibility not allow a personal debit card to be used by relatives or friends for their own purchases. Children and grandchildren should be encouraged to get a debit card under their own accounts and names rather than simply using Grandma’s debit card for personal purchases. Family members need to understand that any and all payments under their elderly relative’s name will be considered by the Medicaid agency in the eligibility evaluation. In other words, a night at the movies financed by Grandma’s debit card will be the cause of a penalty when she applies for Medicaid benefits.

Seniors need to be aware of the dangers associated with debit cards when it comes to Medicaid eligibility. If at all possible, seniors should avoid debit cards and similar payment methods that make it impossible to determine the purpose and recipient of purchases. We cherish the freedom to spend our money the way we choose in America. That freedom needs to be accompanied by responsibility and wise decision making, especially when the fate of our elderly loved ones is at stake.
This column is one in a series of articles concerning Medicaid eligibility issues. Marlan Golden is an intern with Healthcare Compensation Solutions. Contributing author Liz Hammond is a Medicaid Eligibility Consultant with Healthcare Compensation Solutions. The employees of HCS are not attorneys. The information contained in this article is presented as a public service. 

The information is provided for educational purposes only and should not be misconstrued as legal advice. Readers who have additional questions concerning the interpretation or application of the law are encouraged to seek experienced legal counsel.   HCS is a private consulting firm that specializes in all areas of Alabama Medicaid Reimbursement and is comprised of a team of retired eligibility employees who bring over a century of combined years of experience in Medicaid eligibility, Social Security, Veterans’ Affairs, and the Department of Human Resources. Please feel free to send in a personal experience regarding Medicaid issues to: HCS, Attn: Senior Solutions, P.O. Box 240515, Montgomery, AL, 36124.