Frequently Asked Question #2:
Medicaid: What is the 5 year look back and how does the penalty period get calculated?
It is not uncommon for me to canvas a group of people and find out that the majority of the group has heard of the 5 year look back when it comes to applying for Medicaid in a nursing home. I, however, regularly receive follow up questions regarding the details of how the 5 year look back and penalty period works.
The 5 Year Look Back
The look-back period for all transfers made is 60 months (5 years) for New York State nursing home Medicaid applications filed. This means that when an individual applies for Medicaid coverage in a nursing home, the local Medicaid agency will review the applicant’s transfer history for both real estate and finances to see if any uncompensated, non-exempt transfers (gifts) were made within the 5 year look back. If the agency determines that there were such transfers within the 5 year look back, a penalty will be assessed and the applicant will be ineligible for Medicaid for a period a time and therefore will have to pay privately for the nursing home care provided during that period of ineligibility. This can be very costly given the cost of care in a nursing home. For example: If the nursing home costs $15,000 per month and the applicant is penalized for 5 months, this will result in the applicant having to pay $75,000 to the nursing home before the applicant’s care is covered by Medicaid.
The Calculation of the Penalty Period
If the local Medicaid agency determines that there was gift within the 5 year look back subject to a penalty, the agency will determine the length of time the applicant is penalized by dividing the value of the transfer by a regional rate determined by Medicaid (in essence, that average monthly cost of a nursing home in that region) for the County that the applicant is applying in. For example, if a Nassau County applicant made a gift within the 5 year look back in the amount of $130,000, Medicaid would assess the penalty period as follows:
$130,000 (value of the transfer)/$13,053 (the regional rate for Nassau County for 2018) = 9.95 months (the amount of time the applicant is ineligible for Medicaid).
In the example above, the penalty period is almost 10 months. This will result in a significant private pay bill to the nursing home.
It is very important to anticipate and plan for a situation such as this when applying for Medicaid nursing home care and to consult with an experienced elder law attorney.