Medicaid is a wonderful government program that helps low-income seniors with limited assets to afford healthcare and long-term nursing care. Applicants must meet certain medical criteria, and there are strict financial eligibility requirements that must be met when applying for Medicaid, and while already qualified.
Many seniors find that their countable assets and/or income exceed their state’s Medicaid limits. To meet the financial requirements for Medicaid qualification, they must carefully minimize—or spend down—excess funds. Funds may be spent down on things like medical expenses, home improvements, and prepaid funerals, etc. Gifting assets to children and grandchildren, friends, and loved ones may sound like a smart way to spend down assets, however, this can cause the applicant to become disqualified for Medicaid.
To prevent applicants from simply giving away their money or resources in order to qualify for Medicaid, the federal government implemented a “look-back period.” This is a set period of time prior to the individual’s application during which the Medicaid administering agency can review the financial transactions that a senior has made. If a transaction is found to be in violation, the applicant will be assessed a penalty.
Each state’s Medicaid program uses slightly different eligibility rules, but most states examine all of a senior’s financial transactions dating back five years from the date of their application. If a senior is found to have gifted assets during this look-back period, they will be disqualified from receiving benefits for a certain number of months. The length of the penalty depends on the total amount of assets the applicant gifted, and their state’s penalty divisor.
When it comes to the length of the penalty period, there really is no limit. Many find themselves wondering what will happen if a senior needs care, but has spent all their assets in a way that makes them ineligible for Medicaid coverage. Unfortunately, if a senior has gifted their assets during the look-back period and requires nursing home care, the cost of care will have to be paid out of pocket until the penalty period runs out, and they become eligible for Medicaid.
Fortunately, there are exceptions to the rules and exemptions made for families who find themselves in difficult situations. Under these exceptions, applicants are permitted to transfer assets—to certain parties—during the look-back period, without incurring a penalty. Additionally, a penalty can be “cured” if transferred assets are returned in their entirety, or reduced if the transferred assets are partially returned. In order for this to work, the person who returns the assets needs to be the same person who received the gift.
Less fortunately, these exceptions and exemptions are often confusing and difficult to take advantage of without the expertise of an elder law attorney. Reaching out to an attorney is the best way to navigate Medicaid’s complicated rules and application process. The best time to start planning for the cost of long-term care is well before you or your loved one’s need it.
We encourage you to call attorney Bill Miller to discuss how to best preserve your assets and avoid going broke paying for long-term nursing care. You can reach Miller Estate and Elder Law at (256) 251-2137 or by emailing info@millerestateandelderlaw.com.
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