What is the five year Medicaid look back rule?


By Cathleen Summers

When you apply for Medicaid (known as MassHealth in Massachusetts) to pay for nursing home costs for a parent or spouse, the state will look back to see if your loved one gave away any assets in the past five years. If no assets have been transferred, and the person otherwise qualifies for assistance, then they may immediately qualify for MassHealth and the state will pay for nursing home care.

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 state pay for their long-term care. However, with nursing home care costing as much as $13,000 per month, many seniors simply do not have the means to privately pay.

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.

What happens if the applicant made a gift or transfer within the past five years, and if so, does that mean the money has to be returned? Not necessary. MassHealth will first look at the circumstances surrounding the gift to see if the gift is exempt from any penalty. There are a number of exemptions. For example, if the gift was to a disabled child, this may not implicate the five year look back rule and the person may qualify immediately. MassHealth also provides for an adult child caregiver exemption that 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.

What if no exemption applies? If someone who is applying for assistance has made gifts within the past five years, a penalty period is triggered during which that individual is ineligible for state 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 $65,760 within five years of the date of application, he or she can’t qualify for MassHealth for eight months. Additionally, the “disqualification period” that is caused by the gift does not begin to toll until the applicant has no more than $2,000.00 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, which total up to large amounts.

Of course, transfers falling within the five year look back rule are not the only factors affecting eligibility for MassHealth. The most dependable and cost-effective way to guarantee you are prepared to apply is to consult an experienced Massachusetts Medicaid attorney.

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, MA. 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.