Understanding Medicaid’s Look-Back Penalties, Exemptions and Exceptions

If someone made a gift or transfer of their assets during the Medicaid look-back period, he or she will be penalized by becoming ineligible for Medicaid for a certain period of time. This period is known as the penalty period and is calculated by dividing the dollar value of the transferred assets by either the average monthly or daily private patient rate of nursing home care in the state where the person resides. This calculation uses a penalty divisor or private pay rate that increases annually in accordance with the rising cost of nursing home care. 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.

Essentially, if a person who is applying for Medicaid has given away, transferred, or sold their assets, such as money, homes, cars, artwork, etc. for less than the actual market value, they will face penalties. Even if they have made informal payments to a caregiver without a written agreement, it can still be considered a violation during the look-back period. Additionally, if the applicant’s spouse has transferred assets, it can also result in a Medicaid penalty for the applicant. The penalty period is imposed because these assets could have been used to pay for long-term care expenses, but were instead given away or transferred.

The majority of states, 49 out of 50, have a look-back period of 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 when the applicant applies for Medicaid. For instance, if a person submits their Medicaid application on July 15, 2022, the look-back period would begin on that day and extend back five years to July 15, 2017 (or in California, 30 months back to January 15, 2020).  All financial transactions between these dates would be subject to review.

Thankfully, there are several exceptions and exemptions to the Medicaid eligibility rules that can benefit families facing challenging circumstances or a Medicaid Crisis. These exceptions allow applicants to transfer assets to certain parties and to employ specific spend-down strategies without incurring a penalty.

Navigating your long-term care planning options can be complicated, but with proper planning it is possible to protect your assets against the transfer penalty. Even if you have already made asset transfers in the last five years (or 30 months in California) and will be applying for Medicaid soon, we may still be able to protect a portion of your life savings. Contact Haimo Law for additional guidance to help you navigate your Medicaid qualification options. 

At Haimo Law, we pride ourselves on our holistic approach to representation, which sets us apart. First, we build personal relationships with our clients, taking the time to understand them on a deeper level. Second, we collaborate with other professionals, such as CPAs, financial advisors, realtors, other attorneys and more, to achieve our clients’ goals. We view planning as a team effort. Third, we consider our client’s emotional, mental, familial, and spiritual needs, recognizing that various circumstances and factors influence their behavior, with legal matters being just one aspect. Our distinctive and refreshing approach ensures that we consider all these elements in every client engagement. Offices in Fort Lauderdale, Florida and Port Jefferson, New York.

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