A Guide to Medicaid Look-Back Rules

You may have heard of Medicaid “look-back” rules without necessarily grasping what this term means. If so, this article is for you; knowledge of the look-back period is extremely important when considering an application for Medicaid, now or in the future.  

In this article, we’ll define Medicaid look-back, and take a quick look at the very important difference between Medicare and Medicaid. Then, we’ll focus on how Medicaid look-back rules can vary from state to state, potential Medicaid look-back penalties, how Medicaid calculates those penalties, and where to seek further specialized guidance to better understand Medicaid look-back rules and how they apply to you. 

What is Medicaid Look-Back? 

In short, Medicaid "looks back” on your financial history over a specific period of time to ensure you qualify. This process is designed to ensure that individuals don’t give away all or most of their assets simply to qualify for Medicaid.  

Medicare vs Medicaid 

It's important to bear in mind that the terms “Medicare” and “Medicaid” are sometimes used interchangeably, when in fact they are very different. Even if you don’t qualify for Medicaid, Medicare may be a great option for you; the look-back period applies to Medicaid only. 

Here’s a quick refresher on the difference between Medicare and Medicaid: 

• Medicare is an entitlement program paid through payroll withholding. Medicare is managed by the federal government and is primarily based on age. 
• Medicaid is a type of social welfare designed to help those in need. It is managed by the individual states and is primarily based on income and assets. 

The purpose of Medicaid is to pay for long-term care if and when the individual can no longer afford such care. For example, if you have $100,000 in assets, you are expected to use those holdings to pay for your personal care. Once those assets are gone, you would be eligible for Medicaid.  

You can learn more about Medicare as an alternative solution in our article, “What Does Medicare Cover for Seniors.” 

Does the Medicaid Look-Back Period Differ by State? 

 In 49 states and Washington D.C., the look-back period is five years. In California, it’s 30 months.  

Therefore, in the majority of states, when you apply for Medicaid, any gifts or transfers of cash, property, etc., made within the previous 60 months (five years) fall under the Medicaid look-back guidelines. 

The Medicaid Look-Back Penalty 

The government doesn’t want you to divest yourself of all assets on Friday just so you’ll be eligible for Medicaid on Monday. Therefore, they look into your financial history during the look-back period leading up to your application for Medicaid.  

Here are some of the most common transactions that could result in a Medicaid look-back penalty: 

• Transferring ownership of a house or apartment to a relative. 
• Gifting a child or a grandchild with a cash sum for graduation or some other personal milestone. 
• Donating vehicles to your local church or other charities. 
• Selling collectors’ coins, stamps, cards or other souvenir valuables for less than market value. In this day and age, selling assets such as NFTs and Bitcoin would also subject one to a look-back penalty. 

In short, the Medicaid look-back rules are in place so that people don’t try to “game the system,” e.g., transferring the title of a house or appearing to give away large sums of money just to be able to receive free medical care that is intended for those who are legitimately in financial need. 

How Medicaid Calculates the Penalty Period for Look-Back Violations 

If the state determines that a Medicaid applicant gave away assets or made a transfer for less than fair market value during the look-back period, it will impose a penalty period. 

Let’s say you apply for Medicaid on Jan. 1, 2023. This would mean your look-back period would extend back 60 months, to Dec. 31st, 2017. All financial transactions you made during that time will be subject to review. 

Each state has its own “penalty divisor,” i.e., method of calculating look-back penalties. The length of the penalty period will be determined by dividing the amount transferred during the look-back period by the average private pay cost of nursing care in your state.  

For example, if you gave away $12,000 in assets during the look-back period and it’s $1,000 a month for nursing care where you live, you would be ineligible for Medicaid for a period of 12 months, or one year. 

The American Council on Aging is a great source for information and details the cost of penalties by state.  

What to Do When You’ve Violated Medicaid’s Look-Back Rules 

Depending on the length of your penalty period, you may still be eligible for Medicaid eventually.  

You won't be fined or find yourself in legal trouble; the penalty is that you’ll be ineligible for Medicaid for a designated period of time, based on those “penalty divisors” we talked about earlier.  

Medicaid Look-Back Exemptions 

There are several exemptions or exceptions from Medicaid look-back rules that allow individuals, especially those handling tough circumstances, to transfer assets.  

Some of these exemptions include the following:  

• If a spouse is not also applying for Medicaid, they can retain up to a certain annual amount (which fluctuates each year) in Community Spouse Resource Allowance (CSRA).  
• You may transfer a home or dwelling to a direct sibling who also has equity in a portion of the home and has resided there for a period of at least one year.  
• If an adult child serves as caregiver to the Medicaid applicant for at least two years, they are also able to receive the transfer of a home.  
• You may pay off debt without penalty. 
• Assets may be transferred to disabled or blind children under the age of 21. 

When considering Medicaid or long-term care insurance plans, it is important to understand the differences and the regulations for all options. Navigating exemptions and Medicaid look-back rules in general or can be complicated, and you might want to consider enlisting the help of an attorney who specializes in these matters and others. To learn more about receiving professional legal advice, view our article “How to Find a Good Elder Law Attorney.” 

Find a Senior Living Community Near You

It’s worth bearing Medicaid look-back rules in mind well before you or your loved one are actually going to start the application process. It may also be beneficial to start thinking about long-term living solutions where care and support are provided, sooner rather than later. Assisted Living Communities, for example, offer expert care and extra help with daily tasks and the activities of daily living. Referah Family Connection Agents can help you find a new home that meets your exact needs. Talk with us and find a senior living community near you, today!