How Medicaid’s look-back period works
Medicaid’s look-back period can be confusing, but it’s important because it can have a very significant effect on your ability to pay for long-term care.
Q: Why is the government concerned for Medicaid?A: Unlike Medicare, Medicaid is a system that's available only to people who have very few assets. As a result, the government is concerned that people will "game the system" by giving away all their assets to family members and then applying for Medicaid shortly afterward. That's obviously not fair to the taxpayers who support the system.
Q: What is the government doing to help lessen this concern?A: Medicaid imposes a penalty on people who transfer assets without receiving fair value in return.
Q: How is the government auditing their Medicaid applicants?A: Typically, states require a person applying for Medicaid to disclose all financial transactions during the past five years. This five-year period is known as the "look-back period." The state Medicaid agency then determines whether the applicant transferred any assets for less than fair market value during this time.
Q: What is the outcome for somebody that "games the system?"A: If Medicaid decides that an applicant made such a transfer, it will impose a penalty period - a period of time during which the person will be ineligible for benefits.
Q: How long is the penalty period?A: This period is determined by dividing the amount transferred by the average private-pay nursing home cost in the state.
Q: What type of transfer may impose a penalty period?A: Any transfer can be scrutinized, no matter how small. There is no exception for charitable donations or gifts to grandchildren. Informal payments to a caregiver may be considered an improper transfer if they weren't made according to a written agreement. Similarly, loans to family members can trigger a penalty period if there is no written documentation. The burden of proof is on the Medicaid applicant to show that the transfer wasn't made in order to qualify for Medicaid.
Q: What are some types of asset transfers that won't trigger a penalty period?o A spouse (or to anyone else for the spouse's benefit),
o A blind or disabled child,
o A trust for the benefit of a blind or disabled child, and
o A trust for the sole benefit of a disabled person under age 65 (even a trust for the benefit of the Medicaid applicant, under certain circumstances).
Q: Who can Medicaid applicants transfer his or her home to without a penalty?o A spouse,
o A child who is under age 21 or who is blind or disabled,
o A trust for the sole benefit of a disabled person under age 65 (again, even a trust for the benefit of the Medicaid applicant, under certain circumstances),
o A sibling who has lived in the home during the past year and already has an equity interest in the home, or
o A child who lived in the home for at least the past two years and provided care that allowed the applicant to avoid a nursing home stay.
Q: What should I do if I want to apply for Medicaid?A: As you can see, the rules are complex, and if you're thinking of applying for Medicaid - even if you're thinking of applying for it five years from now - you'll want to speak with an expert first