Understanding the Medicaid Look-Back Period and Penalty Period

If you need help with paying for healthcare costs and have low-income and limited resources, you might qualify for Medicaid. Medicaid is a federal and state program that offers medical and health coverage for people with low incomes and limited assets who otherwise cannot afford paying for health care. In order to be eligible you must meet strict financial eligibility requirements both during the application process and after you have qualified.

medicaid look back penalty period

Financial Eligibility Requirements for Long-Term Care Medicaid 

Many low-income seniors find that their countable assets and/or income exceed the Medicaid restrictions in their state. They must carefully reduce or "spend down" extra funds on things like medical expenditures, house improvements, a prepaid funeral plan, and so on in order to meet the financial requirements. Gifting—giving away money or assets for less than market value—is not permitted as part of a Medicaid spend-down strategy.

The Centers for Medicare and Medicaid Services (CMS) devised a system for analyzing all applicants' financial histories to prevent seniors from simply giving away all of their assets to family and friends and then depending on Medicaid to pay for their long-term care. The following sections review the ins and outs of the Medicaid look-back period, as well as what happens when a senior decides to transfer assets.

The Medicaid Look-Back Period

Medicaid only looks at applicants' previous financial information for a limited period of time. This is known as the Medicaid Look-Back Period. Each state's Medicaid program has slightly different eligibility standards, but most states look at all of a person's financial transactions five years back (60 months) from the date of their qualifying application for long-term care Medicaid benefits. (This timeframe is only 30 months in California.)

There is no difference between the number of gifts an applicant made and to whom the gifts were given during the Medicaid Look-Back Period—barring a few exceptions, which will be discussed later on. If a senior's money or assets changed hands for less than FMV in the five years leading up to their application date, they will incur a penalty period during which they are ineligible for Medicaid.

The Medicaid Penalty Period

If a senior files for Medicaid and is found to be otherwise eligible, but has gifted assets within the five-year look-back period, they will be prohibited from receiving benefits for a specified amount of months. This is known as the Medicaid Penalty Period and there is no limit to how long a penalty period can be. 

For example, if you write a check to a family member for $14,000 and apply for Medicaid long-term care within five years of the date on the check, then Medicaid will delay covering the cost of your care because you could have used that money to pay for it yourself. The penalty period begins running on the date a senior applies for Medicaid coverage, not the date on which they gifted the money.

The length of the penalty period is determined by the total amount of assets gifted by the applicant and their state's specific "penalty divisor," which is the average monthly cost of a long-term care facility in that state. (The divisors may be the averaged daily expenses in some jurisdictions, and several states even employ divisors that are particular to nursing home costs in individual counties.) These figures are published annually by each state’s Medicaid program.

Who Pays During Medicaid Penalty Periods?

When a senior requires care but has spent down all of their assets (inadvertently) and is no longer covered, one might wonder who pays for their care. If a senior has gifted countable assets during the look-back period and needs nursing home care, they will have to pay for it out of pocket until the look-back period is over and the senior can apply for Medicaid without difficulty, or until the penalty period expires and they are eligible for coverage.

Exemptions and Exceptions to Medicaid Gifting Rules 

Medicaid penalties do not apply to all gifts.

One exemption you may receive is a “child caregiver exemption” for transferring assets to a child who has taken care of you for at least two full years. For example, if your daughter's care allowed you to put off moving into a nursing home, then transferring your home into her name for less than fair market value would not be penalized. Even if a senior applies for Medicaid within five years after the transfer, the "child caregiver exemption" still applies.

Another exception to the rule is a gift (or the creation and funding of a trust) for a kid who is blind or disabled under the Social Security Administration's standards. No penalty will be imposed on such a gift, regardless of its size.

Finally, gifts between spouses are never subject to any penalties. There is no need to impose a penalty on such transactions because both spouses' entire assets are counted when one spouse applies for long-term care Medicaid.

Successfully applying for Medicaid is a complicated and difficult process, and is rarely something you do on your own. Mistakes can have long-term financial consequences for a family. If you or someone you know plans to apply for long-term care Medicaid, please contact the best elder lawyer who can guide you through the application process at the Law Office of Inna Fershteyn at (718) 333-1233. 

Can You Transfer Your Medicare and Medicaid Plans When You Move to Another State?

Life is a mystery filled with the unknown, you may have lived in a certain state for almost the entirety of your life and now decided to move to a new state. Regardless of the reasoning behind your residence movement, whether it be required by your job, to be closer to your family members, or just to try out a new location, you should consider the necessary steps of transferring your healthcare plans to your new residence. Depending on which medical insurance plan you have, there are different actions that can be taken to ensure that you have access and coverage to insurance when you relocate.Your ability to take your insurance with you depends on the type of insurance you have, whether it is Medicaid, Medicare, or Medicare Advantage. An esteemed attorney can assist you in discovering if you can bring your insurance with you by providing guidance on the best plan of action to take in relation to your specific situation.

Transferring healthcare insurance plans when you move to another state

In the case of Medicaid it is important to note that Medicaid has its own eligibility qualifications in each state. That being said, just because you are eligible for Medicaid in NY does not automatically guarantee that you will remain eligible for Medicaid in another state, such as Florida or Texas. Unfortunately, you will not be able to keep your Medicaid plan upon relocating to a new state. This is not devastational and does not bar you from having Medicaid coverage. It simply means that you will have to apply for Medicaid in whichever state you move to. An attorney can assist you in the process of reapplying for Medicaid by first calling the Medicaid office located in the state you are planning on moving to and then filling out all of the appropriate forms and applications. Prior to applying for benefits in the new state, you must first cancel the benefits you are receiving from the previous state you lived in. You are encouraged to complete your Medicaid applications for the new state as soon as possible in order to avoid paying for health insurance out of pocket. Even in the case that you have to pay out of pocket for a short period of time, Medicaid will reimburse you as long as you have a detailed and accurate record or receipts of all health care service costs.

If you have the original Medicare provider, then you have much less to worry about when it comes to relocating to a different state. Plans A and B ensure that you will remain covered regardless of which state you move to. This is due to the fact that Medicare is a federal program that is run by the government. As long as your medical provider accepts your Medicare insurance plan, you are all set for healthcare coverage. The only drastic difference that may impact your coverage would be the cost of your premiums, as they may increase or decrease depending on the state you move from and the new state you are moving to. Additionally, your Medigap plan is expected to cover your healthcare costs even if you move across the country. The only exception to the Medigap coverage would be if you moved to the specific states of Massechusttes, Minnesota, or Wisconsin because these states have their own individual Medigap plans. If you have any questions or concerns regarding transferring your original Medicare Plan A or B to a new state, you should contact an attorney to answer any of your inquiries.

Medicare Advantage and Part D of Medicare are a different story than the original Medicare plan. This is because these plans have a specified service area, which means that there is no guarantee that it will provide coverage for more than one state. You may contact an attorney to help you determine if your new state falls within the specified service location of the Medicare Advantage and Part D plans. Moving into a new specified area may be complex due to the fact that you have a limited enrollment period during which you may change plans outside of the typical annual enrollment period. The annual enrollment date is between October 25th and December 7th. You should make your current plan aware of your intention to move to a new state. This will allow your special enrollment period to begin the month prior to your move and continue for a two month period after you move. However, if you make your plan aware of your relocation after you move, then your opportunity to switch plans begins the month that the plan becomes aware of your relocation. Afterwards, you will have two full months as part of the special enrollment period. 

For further healthcare eligibility information please contact the Law Office of Inna Fershteyn at 718-333-2394 to effectively maintain coverage even when you move to a new state.