If someone you love is in need of senior care or long-term care, and you’re helping them apply for Medicaid eligibility, then you’ll likely come across the term “lookback period”. The lookback period is an extremely important term that can help you understand how to avoid steep financial penalties.
The Medicaid lookback period is the previous five years before someone applies to Medicaid. Medicaid will look back on this time period to see if the applicant has given away or sold assets for less than fair market value.
When an aging adult applies for Medicaid, all non-exempt assets will need to be counted to make sure the applicant does not have more assets than allowed. If they do, they will need to either spend down their assets or start paying for their care up until they are within the asset limits for Medicaid.
Example of the Lookback Period
If someone applied for Medicaid benefits on January 1, 2021, Medicaid would then look back all the way to December 31, 2015. Any and all financial transactions that occurred over these five years will be reviewed by Medicaid to see if any assets were given away for less than fair market price.
The penalty period is the amount of time a Medicaid applicant will have to pay for their own care and be ineligible for Medicaid benefits. The penalty period is calculated based on the assets that were given away for less than the fair market value during the lookback period.
If the penalty period was calculated to be one year and this person started receiving care on May 1, 2021, they would have to pay for their own care up until May 1, 2022. This is where the lookback period becomes extremely important when planning for Medicaid so your aging loved one doesn’t deplete their nest egg paying for care.
Varies by State
The lookback period in almost every state is 5 years. California, however, only has a lookback period of 2.5 years. Additionally, how the penalty period is calculated will vary based on which state you apply in because the figure used to calculate the penalty period is related to the average cost of nursing home costs in that state.
Any violation in the lookback period can be bad, there are a few common ones to watch out for or bring up when you start talking to a Medicaid planner. These include:
Fortunately, you can spend down countable assets without incurring a penalty period of ineligibility. That's where Medicaid planning comes in.
This guide takes a deep dive into the landscape of long-term care and how to pay for it without going broke, including the answers to your top questions surrounding Medicaid.GET MY COPY