By Ronald Fatoullah and Stacey Meshnick
Many people have heard of the five-year “look-back” for Medicaid benefits. However, there is a lot of misinformation and confusion about what this means for becoming Medicaid eligible. When applying for nursing home Medicaid benefits, an applicant must submit all financial documentation dating back five years from the date that Medicaid is requested. For example, if one wants nursing home Medicaid to begin on July 1, 2024, one must submit documents dating back to July 1, 2019.
During the five-year look-back, Medicaid will review the applicant and the applicant’s spouse’s financial documentation in order to determine if any gifts of assets and/or gifts of income were made. These gifts, commonly referred to as ‘transfers’, made within the five-year look-back, will likely create a ‘penalty period’, or a period of time that Medicaid will not pay for services, unless the transfers were ‘exempt’ under the law. Transfers to a spouse, a disabled or blind child, are just some of the transfers that Medicaid considers ‘exempt’. The mere requirement for five years of documentation does not necessarily result in a period of ineligibility for Medicaid.
If a transfer was made prior to the five-year look-back period, it will have no effect on eligibility. For example, if a Medicaid applicant who transferred $600,000 to an irrevocable trust on January 5, 2017 applies for nursing home Medicaid on July 1, 2024, Medicaid will not see the transfer, as it is not within the five-year look-back period. In that example, the applicant would have been eligible beginning February, 2022- the month after the five years.
For non-exempt transfers within the five years prior to application, the Medicaid agencies use a formula to determine a period of ineligibility. The formula divides the value of transferred assets by the average cost of a nursing home in the region for one month. For 2024, the regional monthly rate for New York City is $14,273. Hence, if a NYC Medicaid applicant transfers $142,730 and applies for NYC Medicaid within the five-year look-back, he or she will be ineligible for 10 months ($142,730/$14,273).
It is important to note that an applicant can still protect approximately one-half of assets even if the applicant transferred assets within the penalty period. So, for instance, using the same example as above, the individual who has $142,730 in assets can transfer/gift $71,365, even immediately prior to entering the nursing home. The transfer will result in a five month period of ineligibility from the application date. The applicant will simultaneously loan the other $71,365 and the borrower will pay the applicant back monthly for five months. The loan has to be structured in a special way so that it will not be deemed an ‘asset’ of the applicant. The applicant will use the monthly loan repayments of ‘income’ to pay the nursing home privately until Medicaid begins to cover the nursing home cost on the sixth month.
Note that there will likely be a 30-month look-back for community Medicaid benefits such as home care, but implementation of this 30-month look-back has yet to be approved by CMS, and continues to be delayed until the beginning of 2025 at the earliest.
There are many ways to maximize the amount of assets protected, and individuals should seek the advice from a qualified attorney so that they can protect as much of their assets as possible.
This blog posting is for informational and educational purposes only. It is general in nature and not person or circumstance specific. This blog posting is not intended nor should it be construed as rendering independent investment, legal or tax advice. It may but does not necessarily constitute attorney advertising.