Understanding the five year Medicaid look back


By Cathleen Summers

After acquiring a lifetime of assets, many seniors wish to transfer these assets to loved ones. Before doing so, it is well worth the time and effort to understand the basics of Medicaid (also called MassHealth here in Massachusetts) and the five-year look-back rule, which can be especially confusing.

MassHealth is a government program that covers health and custodial care for the indigent. MassHealth now has a five-year look-back period that penalizes transfers of money or assets when people apply for coverage. The look-back period is designed to discourage people from artificially impoverishing themselves by transferring assets to others so that they can qualify for MassHealth, thus having the government pay for their long-term care.

MassHealth looks carefully at the applicant’s financial records, including current income and assets and any funds spent or property transferred out of the applicant’s name within the previous five years from the date of application for assistance. Any amount that MassHealth determines was given away or transferred to another (including a trust) for less than fair value may be considered by MassHealth as still belonging to the applicant.

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 amount of the gift by the transfer divisor, which is currently set at $8,220.00 per month.

For example, if someone gave away $82,200 within five years of the date of application, he or she can’t qualify for MassHealth for 10 months.

Additionally, the disqualification period that is caused by the gift does not begin to toll until the applicant has no more than $2,000 in assets and requires long-term care.

The five-year look-back rule and penalty calculation don’t necessarily apply to every gift. Small gifts — to grandchildren, for example — are not normally considered in this calculation. MassHealth certainly looks at any transaction larger than $1,000, but there is no minimum amount rule preventing it from looking at smaller gifts or transactions. This is especially true when there appears to be a pattern of smaller transactions that total up to large amounts.

The good news is that you may be eligible for certain exemptions such as the adult child caregiver exemption, which protects your family home. According to this rule, if your adult child lives in the home and has taken care of you for the past two years, thus keeping you out of a nursing home, you can transfer your home to that child without penalty. You can keep the home in the family and it cannot be attached by MassHealth to pay for nursing home expenses.

Additionally, there are exceptions with respect to an applicant’s primary home if he or she lives with a sibling or has a disabled child.

Five years is a long time. It is difficult to predict exactly what your needs are going to be. Having to repay a MassHealth lien can be onerous for a family, especially if your children have already spent their gifts on such things as home improvements for themselves. It is now more important than ever to do early planning to protect your hard earned assets in the event that nursing home care cannot be avoided.

Cathleen H. Summers is a founding partner of Summers, Summers & Associates, P.C., an elder law, estate and life planning law firm located in Acton. She may be reached at www.summersatlaw.com or by calling 978-263-0006. Archives of articles from previous issues can be read at www.fiftyplusadvocate.com.