QMC

Understanding the Medicaid Look-Back Period

What is the Medicaid Look-Back Period?

Clients often ask: What is the Medicaid Look-Back Period I have heard about?

The Medicaid Look-Back Period is the amount of time, previous to a Medicaid application, during which the Medicaid applicant cannot make any gifts to others. The Medicaid authority does not allow a Medicaid recipient to “give away” his or her property in order to lessen their assets for the purpose of qualifying to qualify for Medicaid benefits. For all states, the current Look-Back Period is Five Years, meaning that, under best case scenario, any Medicaid applicant would not have made any significant transfers (other than smaller Christmas gift type transfers) within the 5 years before the Medicaid application.

This raises two significant discussion points: Doesn’t this Look-Period direct the smart client to attempt to plan five years in advance for the possibility of Medicaid benefits? The answer is an unequivocal YES. For families that plan well ahead, or have an indication that, because of rise in need for healthcare, long-term care will be necessary within the following 5 years or so, advance gifting assets to address this issue is vital. Irrevocable trust, and other structured gifting to a family member can help the family that plans ahead to preserve a great deal of assets.

The second issue that the Look-Back Period raises is this? What if, because of unawareness of the applicable Medicaid rules and for no asset protection purposes, a person that needs care and needs Medicaid to pay for that care, has made a previous gift within the 5 year window? In those cases, the size of the gift determines the Medicaid penalty period – the term of time that the Medicaid applicant will be ineligible for Medicaid assistance. While undue hardship waivers can be granted, they are rare and should not be relied upon.

Medicaid Penalty Period

Medicaid penalty periods can be assessed to a Medicaid applicant if there has been a non-compensated transfer of assets (i.e. for less than fair market value) within five years prior to the date of the Medicaid application. This retrospective five year window is referred to as the Medicaid Lookback Period. If a prospective nursing home care resident has transferred assets within that time frame, Medicaid eligibility will likely be delayed, with the delay based on the value of the assets gifted.

Each state (including Missouri) has a Penalty Divisor to determine the transfer penalty. The value of the asset gifted is divided by this Penalty Divisor to determine the number of months of the ineligibility. For example, the Penalty Divisor in Missouri is currently roughly $7500; if a prospective applicant to the Medicaid program made a transfer of $75,000 within the 5 year lookback period to the Medicaid coverage application, then that applicant will incur a 10 month penalty before nursing home Medicaid coverage will begin.

Solutions and Exemptions

Can the transfer be reversed if Medicaid nursing facility coverage is absolutely necessary? YES! The transaction can always be unwound and the gifted assets used for care costs. And there are a variety of other strategies to soften or eliminate the harsh consequences of previous penalty-inducing gifts by the loved one. As always, addressing these issues early is the key.

It is also important to remember that some transfers carry and exemption from the Lookback Rule, allowing transfers while still qualifying under the Medicaid rules. A transfer of otherwise countable assets to a blind or disabled child under an irrevocable trust is exempt from the Lookback rule and does not invoke a penalty for any number of months. In fact, this type of transaction is desired and can be an important component to Medicaid planning and/or estate planning that can preserve family funds for the disabled child while also paying for nursing home costs for the long-term care recipient.

And other exemptions exist. Another example: qualifying caregiver child can receive a gift of the home with no penalty for any period of time. And each situation is different. It is important to work with qualified professionals (such as the QMC team) to ensure that your family takes advantage of all strategies to preserve funds and achieve best-case-scenario.

Additionally, for Medicaid applicants that hold assets when care begins, Medicaid Compliant Annuities can be employed to allow families to gift assets within the Medicaid look-back rule, while still qualifying for Medicaid care benefits with no violation of the look-back period. Keep in mind, these rules and eligibility requirements are very complicated, and working with trained elder care professionals (such as QMC) is necessary.

Shopping cart close