Part 1 of this Medicaid blog series generally discussed the Medicaid program and its eligibility requirements.  Part 2 discussed the Assisted Living Waiver program, and Part 3 addressed the PASSPORT program.  This post will refer to all three programs collectively as “long-term care” Medicaid.

While each of these programs has a specific set of eligibility criteria, some criteria apply to all three programs, including the five-year lookback period and transfer penalties.

Five-Year Lookback Period

An individual or couple’s eligibility for Medicaid can be adversely affected when the individual or the spouse transfers assets for less than fair market value during a certain period known as the “look-back period.”  The lookback period is five years and begins on the date that a Medicaid application is filed.

 

When a Medicaid application is filed, any gifts or transfers made within the prior five years must be disclosed to the caseworker.

Transfers for less than fair market value made during the five-year lookback period will result in the applicant being ineligible for Medicaid beginning the month that an application is filed, assuming he or is otherwise eligible at that time.  In 2018, for every $6,500 transferred, the applicant would be ineligible for Medicaid benefits for one month.

For example, if a Medicaid applicant applied for benefits in March 2018, but he gave away a total of $65,000 during the five-year lookback period, he would be ineligible for Medicaid benefits for 10 months ($65,000 ÷ $6,500).  For the nursing home Medicaid program, the 10-month penalty period would begin in the month of application, regardless of when the actual eligibility determination is made.  The penalty period would begin in March 2018 and run through December 2018.  The individual could then qualify for Medicaid benefits in January 2019.

In the Assisted Living Waiver or PASSPORT programs, the 10-month penalty period would not start until the eligibility determination is made.  Many times, the start date of the penalty period is delayed in the Assisted Living Waiver and PASSPORT programs.  If the individual applies in March 2018 but the eligibility process is not completed until May 2018, the penalty period would run from May 2018 through February 2019, with Medicaid benefits starting in March 2019.

Any gifts or transfers made outside of the five-year lookback period (more than five years before the application), which are represented by the “Z” in the above drawing, do not have to be disclosed and do not affect the applicant’s eligibility for Medicaid at the time of application.

Exempt Transfers

Under Ohio Medicaid law, some transfers to spouses and children may be exempt.  This could include transfers to disabled children or to children who provided care to the Medicaid applicant.  The rules regarding exempt asset transfers are very specific and require certain procedures be followed.  Before making a transfer to a spouse or child, you should consult an elder law attorney who is familiar with the nuances of exempt transfers for Medicaid eligibility.

Five-Year Lookback Period During the Medicaid Application Process

Because of the five-year lookback period, the Medicaid caseworker processing the Medicaid application has the authority to request five years of bank statements and other financial records.  Throughout Ohio, each county varies with their typical request for bank statements; some counties request five years of records at the outset, while other counties may request only one year at the start of the application and request additional years as needed.  While we do not advise every Medicaid client to obtain five years of bank records before they apply for Medicaid, the applicant should be prepared to gather those statements if requested.

Any transfer of assets disclosed during the Medicaid application process can be subject to a penalty period.  If the transfer was made for less than fair market value, the caseworker will presume that the transfer was improper.  The caseworker will calculate the penalty period based on the total amount of assets transferred.

The applicant may rebut the presumption of the improper transfer by proving to the caseworker that the individual did not make the transfers for the purposes of qualifying for Medicaid.  Depending on the circumstances of the transfer, the caseworker may agree with the applicant and remove the penalty period.  Alternatively, the caseworker could still impose the penalty on the transfer.  The Medicaid applicant is afforded certain appeal rights if he or she feels the caseworker’s determination was not correct.

Undue Hardship

If a penalty period is assessed on a Medicaid applicant, he or she may be able to file for an undue hardship waiver.  An undue hardship exists if the application of the penalty period would deprive the individual of medical care so as to endanger the health or life of the applicant, or if the penalty period would deprive the individual of food, clothing, shelter, or other life necessities.

As with exempt transfers, the undue hardship process requires specific procedures.  Undue hardship waivers are very difficult to obtain, and relatively few undue hardship requests are granted.

Planning Before and During the Five-Year Lookback Period

Despite the rules governing the five-year lookback period and transfer penalties, some individuals and couples may be able to implement planning before or during the five-year lookback period.  The planning options available to an individual or couple depend heavily on the exact circumstances involved.  See Parts 10 and 11 for more information regarding long-term and crisis planning.  You can also contact an elder law attorney who is familiar with and understands the planning options and the effects on future long-term care.