Covering 1 out of every 5 Americans, Medicaid is our nation’s public health insurance program for those of low income. Importantly, it provides long-term care coverage for most Americans.
But as with most things in life, there’s a catch.
And the major catch for Medicaid long-term care coverage (in Florida) is the “5-year look-back.”
What exactly is the 5-year look-back and how might it affect your estate planning?
Before we get into the details of the “look-back,” however, it may be best to start with a quick overview of Medicaid.
A federal program, Medicaid provides public health insurance for low-income individuals.
Each state in the union administers the program following the federal guidelines. Nevertheless, there is some flexibility in the law’s requirements. Thus, the states are free to change things so long as they operate within the law’s general parameters. As a result, not all states have the exact same rules. This means that the “look-back” period as well as other details may vary from state to state.
Medicaid is jointly funded by the federal and state governments and is the primary source of funding for states to provide health and long-term care coverage for their low-income residents.
For those who qualify, Medicaid covers a broad range of services.
Of most relevance to individuals thinking about estate planning, will be Medicaid’s coverage of long-term health care.
As we age, and as part of one’s estate plan, we need to consider long-term health care.
Nursing homes are expensive.
In Florida, for example, you can expect to pay an average of $300 per day. Depending on whether you have a private or semi-private room and where you live in the state, the monthly costs can be $8,000 and up.
If you qualify for Medicaid, you may be able to get your nursing home costs covered by the government. In some situations, the government may pay the full cost for nursing home care, or the partial cost of an assisted living facility.
But, as we said in the beginning, there’s a catch.
One catch is that you must financially qualify for Medicaid.
The other major catch is…
The 5-Year Look-back
As noted above, Medicaid has financial limits that you must meet to be eligible for assistance. If you are applying for assistance to pay for nursing home or assisted living facility (ALF) costs, your assets cannot be greater than Medicaid’s asset limit.
To prevent people from getting around this asset limit by transferring, gifting, or selling property under market value in order to qualify for Medicaid, the government uses a “look-back” procedure.
The “look-back” procedure is part of the Social Security Code. It is used to determine whether an applicant has personal assets and resources that can be used to pay for long-term care. It also establishes ways of recovering funds that may have been improperly paid out to recipients who actually could afford long-term care.
Simply put, if you live in Florida, Medicaid will “look back” at all asset transfers made for the 5 years preceding your application. The look-back begins as of the date of the Medicaid application. Medicaid is looking to see whether within that time period you gave away, transferred, or sold (under market value) any assets that could have been used to pay for your long-term care.
And if you did?
Then a “penalty period” will follow.
The penalty is calculated based on the total amount of ineligible transfers divided by what is known as the “penalty divisor”—which is the average private patient rate for nursing home care in your state. Essentially, this will result in a calculation of a number of months that Medicaid will not pay for your long-term care.
But do you really have to worry about all of this?
Not if you work with an experienced estate and probate attorney because…
There Are Exceptions and Loopholes and Proper Ways to Restructure Your Assets
Applying for Medicaid and receiving long-term care payments is complicated. As you can see, there are plenty of rules and penalties even for inadvertent improper transfers.
But that does not mean that all is lost.
The law has loopholes and exceptions. Which means that certain transfers can be made without incurring a penalty or violating Medicaid’s look-back period.
But they must be done correctly.
What you can do during the 5-year period is properly restructure your assets with an experienced attorney. If you do things right, the 5-year look-back doesn’t apply.
Estate Planning for Peace of Mind
At SJF Law Group, you get more than just an estate plan: you get peace of mind. We work hard to ensure that your wishes will be followed, and your loved ones taken care of when you are gone. Connect with us on Facebook or Instagram or email us at: [email protected] today.