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. 

When POA Isn’t Enough: Authorizations Needed to Act on A Loved One’s Behalf

Family caregivers are often given the responsibility to access private documents/information regarding their loved ones due to the large amount of paperwork that might arise pertaining to their personal care. Caregivers often feel bombarded with signing, filing, mailing, or faxing such documents, which is where Power of Attorney documents (POAs) come at hand, saving time and stress. In some cases, a few organizations require their own documentation to approve contributions in one's affairs. An individual should never take on this lengthy process by themself. To minimize the risk of making a mistake that may cause dire consequences down the road, the best approach is to hire an elder care attorney.

POA May Not Be Enough

Hiring a Power of Attorney is Crucial for Seniors and their Caregivers 

Elder law attorneys specialize in legal concerns that affect older individuals, their spouses, and their children—specifically the medical and financial aspects of them. A Power of Attorney document allows certain individuals who are identified as “the agent” to legally make decisions on behalf of another person who is identified as “the principal.” The individual is then granted power upon the principal’s personal matters. It is evident that such preparations cannot be legally processed without such documents being authorized. 

However, POAs are not always apodictic. The actions an agent can or cannot take on behalf of a principal, as well as when their powers commence and stop, might differ depending on how these papers are written. Caregivers may run into issues when attempting to utilize POA forms for healthcare and money to oversee the care of seniors if they are not correctly prepared or interpreted. Long before incapacitation becomes a concern, families should prepare these legal documents. When a loved one is unexpectedly disabled due to an accident or sickness, POA paperwork can allow agents to step in and help handle the situation—provided those documents are prepared appropriately.

Some Entities Do Not Accept Power of Attorney 

As useful as POA’s are, third parties such as banks are reluctant to approve such financial documents due to the possibility of fraud, in which case they may be held responsible for any harm that results. 

Such banks take an extended period of time to verify the legitimacy of a financial Power of Attorney and may even want to speak with the attorney who finalized it. In addition, they might also require that the agent and/or future POA sign a written statement declaring that they are operating legally, therefore absolving the other party of all liability. Nonetheless, there should be no issues arising besides the time-consuming process of being approved as a POA. 

Authorizations Needed to Manage a Senior’s Care

A SSA Authorized Representative

Helping a loved one or assigned senior with Social Security applications is possible with the correct documentations, one can apply to be their authorized representative by completing the SSA-1696 Appointment of Representative Form. 

SSA Representative Payee

You must apply to become a representative payee if you want to actively help a Social Security recipient manage their retirement payments and/or Supplemental Security Income (SSI). All beneficiaries who are unable to manage their own payments must have a representative payee according to the Social Security Administration.

While this may be the authority you're searching for, it's important to note that it comes with a lot of responsibility. This work necessitates a thorough recording of all a beneficiary's benefits and how they are utilized, requiring attentive and responsible individuals. If there is no family member or acquaintance available to hold the “rep payee” title, the SSA will designate another qualified beneficiary to hold such recipient benefits. 

VA Fiduciary Designation

Administering veteran benefits also requires its own process. Obtaining POA authority is not a satisfactory requirement for the U.S Department of Veterans Affairs (VA). The VA will request the appointment of a fiduciary if a physician or a court of law determines that a veteran (or surviving spouse) is incapable of handling his or her money. A close friend or relative is readily available to fulfill such a position as long as the VA successfully and thoroughly conducts a close investigation of such individuals’ competence. If there is no family member or acquaintance available to hold responsibility for the veteran, the VA will designate another qualified beneficiary to hold such recipient benefits. 

Medicare Authorization 

It is important to note that Medicare will not provide disclosed health information to an assigned caregiver regardless of relationship to the agent. There must be a written authorization already submitted and approved by the Centers for Medicare and Medicaid Services; verbal permission is also an accepted option. Medicare enrollees may be able to speak and answer simple questions over the phone, giving their caregivers permission to disclose coverage data. If you and your loved one are unable to speak on the phone together, consider attempting to “include them” using your cellphone or other three-way calling device to keep all parties on the same page.

The "1-800-MEDICARE Authorization" Form can be filled out and mailed in or done over the phone with the help of a customer service professional. Please note that certain private insurance companies frequently have their own processes for these documents, so make sure to ask about their unique permission needs.

Be Proactive About Caregiver Documentation

Keep in mind that many problems may be addressed with a combination of goodwill, clear explanations, and reasonable inquiries asked of the appropriate individuals when advocating for your loved one or assigned “agent.” If you're unsure, ask to talk with a supervisor. If no one is available, or if no amount of logical conversation appears to be working, you have the right to consult with legal counsel. 

If you are in need of highly qualified and experienced help regarding a Power of Attorney issue, please contact the Law Office of Inna Fershteyn at (718) 333-2394 to have all of your authorization questions answered.