If you are an older adult who anticipates that you might need long-term care in the future or are caring for an elderly loved one who might need care, it is important for you to understand Medicaid planning and the Medicaid look back period. Long-term care can be prohibitively expensive, and some people may need to qualify for Medicaid to pay for the care. However, there is a look-back period when people apply for Medicaid of five years. The professionals at Elder Care Direction can help you to understand the look-back period and how you might qualify for Medicaid for your long-term care needs.
What is the Medicaid look-back period?
People who need Medicaid to help to pay for nursing home care must meet the limited income and asset requirements to qualify for it. Medicaid is considered to be a lost resort for paying for long-term care costs. It requires that people must first exhaust other means to pay for their care before it will start.
Medicaid looks back to make certain that people have not transferred assets and money in order to avoid paying for their care when they have sufficient resources to pay at least a portion of their long-term care costs. It uses the look-back period to check whether there have been any violations of the transfer rules.
Medicaid takes a look at the prior five years to determine if a nursing home applicant sold any assets for less than their true value or have transferred assets or given them away to others during the same time period.
How the look-back period works
When people apply for Medicaid to pay for their long-term care needs, the eligibility workers at Medicaid will ask the applicants if they gave away assets such as money or vehicles. The workers will also ask if any property was sold by the applicants for less than fair market value during the past five years.
If assets have been transferred, it will normally result in a penalty. this means that the applicants who are seeking Medicaid to pay for nursing home care will be ineligible for Medicaid for a period of time that equals the value that the asset could have been used to pay for the care.
For example, if an applicant’s nursing home care costs $6,000 per month, and he or she transferred $24,000 in assets during the last five years, he or she will be ineligible to receive Medicaid for four months. The penalty starts during the month that the person applied for Medicaid and not the month that the person completed the transfer.
After the penalty period ends, the applicant may then qualify for Medicaid benefits. However, the person cannot transfer any assets during the penalty period.
The Deficit Reduction Act of 2005 and the Medicaid look-back period
Before 2005, the Medicaid look-back period was three years instead of five in a majority of states. The Deficit Reduction Act was passed in 2005, and the regulations under the Act became effective in Feb. 2006.
Several changes were made to the look-back period under the DRA. However, California still follows the 30-month look-back period, but it is the only state that did not extend the period to five years. Another change is that the look-back period used to start from the day that you completed an assets transfer. Now, the look-back period begins five years from the date that you apply for Medicaid.
There are a few exceptions to look-back penalties for asset transfers. If you transferred a home to your spouse’s name, you will not face a penalty. Elderly adults who had a child living with them for a minimum of two years before they enter nursing homes may also avoid the penalty if the child provided care so that the elderly adults could remain at home. An elderly adult who has a child who is under age 21 and who is permanently disabled or blind will also not face a penalty. Finally, people who transfer homes to their siblings who have equity interests in the home and who have lived in the home for at least a year will not face penalties.
There are certain types of exempt assets, including the following:
- Prepaid funeral plans
- One vehicle
- Personal effects
- Household goods
Contact Elder Care Direction
If you believe that you or your loved one will need nursing home care, it is important that you understand the transfer rules and the look-back period so that you can avoid the penalty. To learn more, contact Elder Care Direction to schedule a consultation.