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

For an elderly person to be eligible for nursing home care, assisted living, adult foster care, or in-home care from Medicaid, they must have limited income and low assets. To prevent applicants from giving their wealth away to relatives or friends in order to qualify for Medicaid, there is a “look-back period.” This is a set period of time prior to the individual’s application during which the Medicaid administering agency reviews all the financial transactions that the applicant has made.

If someone violates 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.

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.

Like the majority of states, New York has a look-back period of five years (60 months) for Medicaid eligibility. 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. These exceptions allow applicants to transfer their assets and employ specific spend-down strategies without incurring a penalty.

Consult With an Elder Law Professional

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 and will be applying for Medicaid soon, we may still be able to protect a portion of your nest egg. Don’t allow misinformation to prevent you from seeking financial support in getting the care you need and deserve.