New York Estate Planning & Elder Law Blog
One of the most confusing aspects of the Medicaid program is the look back period for asset transfers and how it can affect the eligibility for applicants to the program. The Medicaid program is different than the Medicare program, although people often think of the two terms as interchangeable. Medicare is an entitlement program paid for through withholdings in paychecks. Medicaid is a social welfare program designed for people who need medical care and cannot afford it. Medicaid is administered by each state, which means that the rules and benefits can vary from place to place.
Medicaid Qualification
The Medicaid program goes into effect once a person no longer has the money to pay for medical care on their own. This means that as long as you have assets that you can sell you are not eligible for the Medicaid program. Long-term planning can protect some portion of savings and assets for a spouse or children while still allowing you to qualify for Medicaid coverage. One way to keep assets and still qualify is to transfer assets to family before applying to the Medicaid program, but you must beware of the Medicaid look back period.
Medicaid Look Back Period
When you apply for Medicaid, the program looks back five years (sixty months) from the date of the application for any transfers of gifts or assets. Any gifts or transfers made within the five year window are subject to penalties under the Medicaid program, but any transfers made outside of that window are safe.
For example, if you made gifts of a few thousand dollars to your child over the last three years each gift would be subject to a penalty under Medicaid. This is why long-term planning for Medicaid is so important and should be done long before the need to apply for Medicaid arises.
Consequences of the Look Back Period
The penalty for transferring assets within the five year window can be very harsh. Typically, a person is barred from the Medicaid program for the amount of time that the assets transferred would have paid for care. The penalty period is measured by dividing the value of the asset transferred by what Medicaid determines to be the average cost of care for a private nursing home in your state. There is no set limit for how long a person can be barred from Medicaid coverage due to gift or asset transfers.
The rules do allow for an escape hatch from the penalties incurred by transferring assets within the five year look back period. The penalty is considered “cured” if the transferred asset is returned in its entirety. Some states will also allow a partial reduction in penalties if part of the asset is returned; however, not all states allow partial returns and your state’s rules should be examined first.
Exceptions to the Look Back Period Rules
Certain assets and gifts do not apply for the Medicaid look back period rules. Therefore, if transfers are made to these people within the five year window you are still eligible for the Medicaid program. These exceptions include the following:
· A spouse (or for a spouse’s benefit)
· A blind or disabled child · Trust for the benefit of a blind or disabled child · Trust for the sole benefit of a disabled person under the age of 65
Special exceptions also apply for the transfer of an applicant’s home within the window, but the transfer can only be to specific people within the family. These people include the spouse, disabled child, a trust for a disabled child, a sibling, or a caretaker child who meets certain qualifications for the role.