When you or a loved one applies to receive Medicaid long-term care in your home, an assisted living residence or a nursing home, an asset (resource) limit is used to determine your eligibility. Medicaid conducts a review to ensure that your assets do not exceed the allowable limit. The Medicaid look-back period is designed to prevent Medicaid applicants from giving away assets or selling them for less than fair market value so they can meet the Medicaid asset limit.
The Medicaid look-back period starts on the date the Medicaid application is submitted and extends 60 months (30 months for Medi-Cal) back from that date. If a Medicaid applicant is found to have gifted assets within the look-back period, they will be disqualified from receiving Medicaid benefits for a certain amount of time. The length of this penalty is determined by the value of the assets an applicant transferred and a “penalty divisor.” The penalty divisor is the average monthly cost of a nursing home in a particular state.
There are ways you can spend down excess assets without violating the Medicaid look-back period, but they can be very complicated. Therefore, it is recommended you work with a Medicaid financial planner well in advance of when you think you or your loved one may apply for Medicaid to avoid any look-back penalties.