Understanding the Medicaid Look-Back: Penalties, Exemptions, & Exceptions

For a disabled individual or someone 65 or older to be eligible for Medicaid to assist in paying for nursing home care, assisted living or in-home care, they must have both limited income and assets. Medicaid has a policy which penalizes applicants for giving away their resources to relatives or friends in order to qualify for Medicaid.  This policy is called the “look-back period” and allows Medicaid to “look back” at an applicant’s (and their spouse’s) resources for 5 years prior to the date of application to determine if any “improper transfers” have occurred.   

If someone makes an improper transfer during the look-back period, he or she will be penalized by becoming ineligible for Medicaid for a certain length of time. This period is known as the “penalty period” or restricted Medicaid coverage period and is calculated via a specific formula that takes into account the amount of the gift and the average cost of care in Ohio.  It is important to note that there is no maximum limit to the penalty period.

What happens if you are subject to the look-back period?

The answer can be rather complex.

If a Medicaid applicant has given away, transferred, or sold their assets (money, homes, cars, etc.) for less than fair market value, Medicaid will penalize the applicant for a period of time by not providing coverage for their care. Other things such as informal payments to a caregiver without a written agreement could also be considered gifts if made during the look-back period. Additionally, if the applicant’s spouse has transferred assets, it may also result in a Medicaid penalty for the applicant. The penalty period is imposed because these assets could have been used to pay for the applicant’s care, but instead were given away or transferred without compensation. Note that a “sale” of an asset at a discount will be penalized.

In 49 out of the 50 states, the look-back period is five years (60 months) for Medicaid eligibility. California is an exception with a 2.5 year (30 month) look-back period. The look-back period starts from the date the application is filed. For instance, in Ohio, if a person submits their Medicaid application on September 29, 2023, the look-back period would begin on that day and extend back five years to September 29, 2018.  All financial transactions and property transfers between these dates would be subject to scrutiny.  Medicaid will presume any transfer for less than fair market value was “improper” unless the applicant can provide evidence to demonstrate otherwise. Good record keeping is critical.

But not every disposition of an asset within the look-back period gets negative treatment. For example, paying off debt, home improvements, purchasing funeral/burial services, or fixing a car will generally not be penalized.

And there are other strategies available that constitute a proper “spend down” without penalty. While navigating long-term care planning options is complicated, proper planning is possible to protect your assets against the transfer penalty. Even if you have already made “improper” transfers in the last five years and will or may be applying for Medicaid soon, it remains possible to protect a portion of your life savings.  Consulting with a Certified Elder Law Attorney to help further explain these strategies or help resolve any “gifting” issues is essential.

If you’d like to speak with a Certified Elder Law Attorney about a nursing home or Medicaid crisis, or if you’re not sure if you or your loved one will be penalized if filing for Medicaid, please reach out to us. Let’s Talk!

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