Medicaid’s Look-Back Period: Rules, Exceptions & Penalties
When one applies for Medicaid Long Term Care to pay for care services in a nursing home, at home or in an assisted living community, their financial assets must be under a specific limit. To make sure an applicant is truly in need of the program’s benefits, Medicaid officials will check their finances over a specified amount of time (usually going back 5 years) to see if there are any violations of the program’s rules such as having given away money in order to qualify. This is called the Medicaid Look-Back Period, and it can be a complicated process, with many factors coming into play.
What is the Look-Back Period for Medicaid Long Term Care?
Meeting financial criteria—providing documents that demonstrate one has limited income and assets—is one of the steps in qualifying for Medicaid programs that pay for in-home or nursing home care. In order to prevent applicants from simply selling off assets or giving away money to get below the qualifying threshold, Medicaid has a look-back period that makes sure applicants follow their state’s (often complicated) financial eligibility rules. During the look-back period, Medicaid will review all the applicant’s relevant past financial transactions.
Look-back periods are for a specific amount of time. The look-back period in most states is 60 months, or 5 years. The exceptions are New York and California, which both have look-back periods that are half as long, at 30 months or 2.5 years. (New York is complicated, as there is a community Medicaid program that’s different from other states’, and the 30-month limit is being phased in over time.)
Why does the look-back period exist? Because Medicaid is intended for low-income Americans who can’t afford care on their own, and someone who gives away money or high-value items like a house or vehicle might have been able to use those assets to pay for care instead of going on Medicaid.
Does the Look-Back Period Apply for All Types of Medicaid Long Term Care?
The look-back period is not applicable for every type of Medicaid program. For Medicaid programs that benefit pregnant women, for example, there is not a look-back period. Look-back periods are applicable for Medicaid Long Term Care, however, especially the three Medicaid programs for people who are older, disabled, or have a chronic illness like Alzheimer’s or Parkinson’s disease: Nursing Home Medicaid, Medicaid Waivers, and Aged, Blind, and Disabled Medicaid.
Nursing Home / Institutional Medicaid
If one needs a Nursing Facility Level of Care (NFLOC) at a level that requires actually moving into a nursing home, Medicaid will pay for nursing home costs as long as the applicant is financially qualified. Applicants for Nursing Home Medicaid in every state must demonstrate to the Medicaid offices that they have not violated the look-back period as part of qualifying for benefits.
Home and Community Based Services Waivers
Every state offers some version of HCBS waivers for people who, because of age or chronic illness, have lost some independence and need medical or care services, including help with activities of daily living (ADLs) like eating and bathing. Often, recipients of HCBS waivers need a Nursing Facility Level of Care (NFLOC) but can remain in their home or preferred assisted living community with the help of benefits provided by Medicaid. If one applies for HCBS waivers, the state Medicaid office will look at the applicant’s finances to see if the look-back period has been violated. If so, a penalty will be assessed.
Aged, Blind and Disabled / Regular Medicaid
Another type of Medicaid that pays for services for people who are elderly or have chronic illness is called Aged, Blind, and Disabled (ABD) Medicaid, or “Regular Medicaid.” ABD Medicaid enrollees do not have to meet the physical eligibility requirements of other Medicaid benefits programs for older Americans (waivers and nursing home Medicaid, described above), but financial limits still apply. For this reason, an applicant for ABD Medicaid must still follow the financial rules and may not gift or transfer funds in a way that violates the look-back period.
What Financial Transactions Violate Medicaid’s Look-Back Rules?
The following are examples of financial transactions that may be look-back violations. Anyone who applies for Medicaid and has done any of these things over the previous five years is in danger of being denied benefits:
– Giving large sums of money as a gift (including educational gifts to grandchildren)
– Transferring ownership of a home
– Donating a vehicle
– Selling items for less than market value
– Any of the above activity by the applicant’s spouse
These are some of the most common ways applicants for Medicaid Long Term Care have been ruled in violation of Medicaid’s look-back rules. Remember that because look-back rules are complicated, applicants are encouraged to seek the help of a certified Medicaid planner.
Large Gifts: The IRS allows a person to gift as much as $15,000 to someone else without being taxed on that gift. However, just because it’s not taxed does not mean the sum isn’t violating the look-back rule. Even cash that’s meant as a present for something like a graduation can be a look-back rule violation that will result in denial of Medicaid benefits.
Not Getting a Receipt or Bill of Sale: Medicaid offices use look-back periods to make sure assets have not been sold for less than they’re worth, so assets sold for fair market value during the look-back period are usually not in violation of look-back rules. However, if the applicant failed to properly document the sale during the look-back period, especially for something that must be registered like a vehicle, this would probably be considered a violation that might cause a denial of benefits.
Medicaid Qualifying Trusts: The name suggests these trusts would be allowable during the Medicaid look-back period, but they are actually considered a gift and would be in violation of state rules. Medicaid Qualifying Trusts, or Irrevocable Trusts, transfer assets including stocks, property, cash, annuities and/or certificates of deposit from an individual to a third-party trustee for holding. These trusts must be made before the look-back period begins, however, in order to be allowable under Medicaid rules.
Paid Caregiving from a Family Member: If a family member is providing paid caregiver support, the payments must be properly documented, or this would put an applicant in violation of Medicaid’s look-back rules.
One can violate Medicaid’s look-back rules if they come into money after being approved for Medicaid benefits. If one inherits money and then gives it away, for example, it may violate state Medicaid rules and they risk losing benefits. In this situation, it is recommended one consult with Medicaid offices or a Medicaid planner to make sure they aren’t violating the program’s rules.
What is the Penalty for Violating Medicaid’s Look-Back Period Rules?
If you apply for Medicaid long term care and are found to have violated the look-back period rules, a penalty is applied to the applicant as a certain number of months, or years, of Medicaid ineligibility. This means that the punishment for violating the look-back period is a longer amount of time one must wait before being approved and receiving Medicaid benefits.
How that penalty is assessed is called the state Medicaid office’s “penalty divisor,” and varies depending on the state. It can be a little bit complicated. Remember first that the look-back period begins on the date an application is submitted. So, if the look-back period is five years, that means Medicaid offices may review finances going back five years from the date one applies for benefits.
If Medicaid determines that an applicant has violated the look-back period, the penalty is usually calculated by taking the dollar amount of the assets the applicant spent or gave away that broke the rules and dividing it by the average monthly cost of care in that state. This is just an example of how the penalty divisor is figured out, however, and the complexity and nuance of Medicaid rules make it best for one to consult with a professional Medicaid planner who can provide clear and specific details on look-back period rules in their specific state.
Are There Financial Transactions Which Are Exempt to Medicaid’s Look-Back Period?
There are a few ways to transfer assets that will get an applicant under Medicaid financial limits without breaking the look-back rules. Before doing this, however, consult with a Medicaid planner or elder law attorney who understands the nuances of rules, particularly in one’s state of residence.
Community Spouse Resource Allowance (CSRA): For married Medicaid applicants, a portion of the couple’s assets can be transferred to the well spouse, or even all assets as long as they come in under the state CSRA limit (which can be more than $132,000 in some states). CSRA rules are complicated and can be very different from state to state.
Transfer of a Home: Ownership of a home may be transferred from the Medicaid applicant to a sibling in order to get under the asset limit, but only if the sibling has lived in that home for one year prior to the applicant moving into a nursing home. A home may also be transferred to a grown child who worked as the applicant’s caregiver (the Caregiver Child Exception), but the child must have lived with the parent for at least two years before the move into full-time nursing care.
Can One Get on Medicaid if the Applicant has Violated Look-Back Rules?
If one has income or assets above the Medicaid limits or knows they have violated the look-back period and will face a penalty, it is still possible to be approved for Medicaid Long Term Care benefits, including Nursing Home Medicaid and HCBS waivers. Firstly, consult a certified Medicaid planner, who will know exactly which steps to take depending on nuances in certain states’ rules.
Asset Recuperation: If the applicant has sold something for under fair market value within five years of applying for Medicaid (or within the look-back period) it is possible to recover the asset to avoid a penalization period. Some states allow for partial recuperation resulting in a shorter penalty.
Undue Hardship: Someone who has violated the look-back period and cannot recuperate assets may still appeal to state Medicaid officials (depending on the state) and claim that without Medicaid they will not be able to live with adequate food, clothing or housing. Undue hardship waivers are rare, and it must be clear and certain that without Medicaid the applicant will not be adequately cared for.