How is the Five-Year Look-Back Period for Medicaid for Long-Term Care Calculated?

Regulations exist to prevent people from transferring assets that could be used to pay their long-term care expenses. This eliminates, or at least postpones, the possibility of the government having to finance their long-term care through the Medicaid program. The look-back period for asset transfers with respect to an application for Medicaid is currently five years. Government officials can look at any gifts made as long as five years before the date that an application for assistance is made.

If someone who is applying for assistance has made gifts within the look-back period, a penalty period is triggered during which that individual is ineligible for government aid. The penalty period is calculated by dividing the average cost of nursing home care in the area where the individual lives into the amount given away. For example, if someone gave away $75,000 within five years of the date of application and area nursing homes cost $7,500 a month, he or she can’t qualify for Medicaid for 10 months.

One strategy that is often used in Medicaid planning is to purchase long-term care insurance to cover long-term care expenses for at least the duration of the look-back period. With insurance benefits paying for at least part of the cost of care, someone may be able to postpone the date of Medicaid application beyond the look-back period and not trigger a penalty period.

Professional assistance by an elder law attorney who specializes in Medicaid planning is recommended for estate planning strategies related to the look-back period. Specific Medicaid regulations vary somewhat from state to state, so it is important to be aware of the rules that apply in the area where the elderly person who might require care lives.

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