What's up with the Medicaid 5 YEAR LOOK-BACK RULE?

One of the most frequent questions asked of an Elder Law attorneys is: 

Q. What is the 5 year look-back rule for Medicaid?

A. There is no 5 year look-back rule yet. The Deficit Reduction Act of 2005 which increased look-back from 3 years to 5 years will not be fully implemented until February, 2011.

Huh? Talk about a brain twister. Let's start from the beginning.

The Medicaid Program

Medicaid is a jointly funded (federal and state government) program intended to provide health care for the poor that has also become the major source of financing for nursing home care. Nursing-home residents must spend virtually all of their assets, down to as little as $2,000, before they may qualify. Married couples have higher asset allowances when one spouse is healthy enough to remain at home.

Medicaid planning, always a sensitive subject, became even more sensitive when  Congress enacted new rules to restrict planning strategies when it passed the Deficit Reduction Act of 2005, made into law on February 8, 2006.

Medicaid planning occurs when individuals use a very arcane set of Medicaid laws to protect their assets in order to reduce them to the $2,000 level and qualify for Medicaid help sooner.

The "DRA of 2005"

The DRA changed the period of time that Medicaid "looks back" to see whether the applicant has given away assets from three (3) years to five (5) years. But because the DRA grandfathered all gifts made prior to its' enactment date (February, 2006) the effect was that the 3 year look back period remained for the 3 years following  passage, which leads us, coincidently, to this very month, February, 2009.  Starting this month, February 2009,  the look-back period will extend 1 month further each successive month until February, 2011. For example, next month, March 2009, the period of time that may be reviewed to see if gifts have been made will be 37 months. In April it will be 38 months, and so on every month, until February 2011 when the look-back period stops at 60 months.

The look back period is simply a period of time that a Medicaid office can review an applicant's finances. It does NOT mean that every gift or transfer of asset impacts eligibility in a negative way. There are many exceptions. People make gifts during the look back period for purposes other than sheltering assets- those gifts cannot be penalized. Gifts to disabled children is another example of permissable gifting. Payment to children for their services of being caregivers is also allowed. There are many other exceptions.

A gift made within the look-back period does NOT permanantly disqualify the applicant. It just means that a penalty period of ineligibility must be assessed. If your application reveals a $10,000 gift made 35 months ago, Medicaid will be denied for close to 2 months.

Case Samples

Here are some scenarios to explain the differences:

Case 1.   Sam transferred $100,000 to his son January 6, 2006. Sam just suffered a severe heart attack that left him seriously disabled. His physician recommends immediate nursing home placement. Sam has less than $2,000 and he applies for Medicaid in February, 2009. Sam is immediately eligible for Medicaid. His $100,000 gift was more than 36 months ago and the 3 year look-back period still applies.

Case 2.  Mary transferred $100,000 to her daughter in  March, 2006. Immediately after that gift, Mary became ill and was admitted to a nursing home where. She has spent all of her remaining assets (over $170,000) on nusring home care since her admission. Mary applies for Medicaid in February, 2009. She is not eligible becuase the $100,000 was within the last 3 years. She will be penalized by a denial of Medicaid insurance for 20 months from February, 2009. Hopefully, Mary's daughter still has the gifted assets to use for Mary's care.

Case 3.  Bill transferred $100,000 in April 2006.  Bill needs nursing home care in June, 2009.  In June, 2009 the maximum look-back period has increased to 40 months which includes April, 2006. The $100,000 gift will have to be reported in his application and will be penalized.

Don't go it alone- seek advice

Anyone contemplating gifts or transfers of assets with hopes of making themselves eventually eligible for Medicaid ought NOT attempt such planning on their own. A consultation with a qualified South Carolina Elder Law attorney is strongly recommended. Don't expect the Elder Law attorney to work some vodoo magic that will make assets disappear overnight. He will definitely explain what your rights are under Medicaid; he may also be able to help if you have engaged in some some unwise gifting startegies on your own.