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The Medicaid Look Back Period: What You Need to Know

Reviewed and Updated by Kelsey Davis,

What is the Medicaid look back period?

Medicaid is designed to provide health care to those with low income or limited assets and is administered through each state. When applying for Medicaid, the state social security office is responsible for confirming you have limited income and assets. The Medicaid look back period is a period of time the office will review to see if you sold, donated, transferred, or gifted any of your assets. The period is 5 years for every state except California where it is 2.5 years. This period starts on the date you apply for Medicaid.

Is there a penalty?

Yes, there is! If the social security agency finds that you sold, donated, transferred, or gifted any of your assets beyond the granted exemptions, you will have a penalty. The penalty is a length of time that you will be ineligible for Medicaid. This is called the penalty period, and there is no limit on the amount of time you can be penalized for.

The penalty is based on the dollar amount of sold, donated, transferred, or gifted assets divided by the monthly private patient rate of care in a nursing home. For example, if you gifted $60,000 during the look back period and the average monthly cost of nursing home care is $4,000, your penalty would be 15 months of Medicaid ineligibility ($60,000 gift/$4,000 average month cost = 15 months).

 Can you avoid the penalty?

Planning is key in an attempt to avoid the penalty. Did you know you can gift up to $15,000 a year without paying a gift tax? This is a great option if you’re wanting to leave a certain amount of your savings to a child or loved one. If you want to gift $60,000 it will take 4 years to avoid taxation. This means that you would need to start gifting 9 years before applying for Medicaid to avoid the look back penalty.

Are there exemptions?

Fortunately, there are exceptions that allow applicants to transfer assets without a penalty. The exceptions include:

  • Spouses

Medicaid applicants can transfer a certain amount of their assets to their spouse. The spouse cannot be in the Medicaid application process and must plan to live independently in the community. The total amount of assets able to be transferred will change annually, but in 2018 the limit is $123,600.

  • Disabled Children

Applicants can transfer their assets or establish trust funds for disabled children who are under the age of 21, including children who are legally blind.

  • Siblings

A home can be transferred to a sibling who has equity in the home and resided in the home for a minimum of one year prior to a nursing home placement.

  • Caregivers

Applicants can transfer their home to their adult children if they lived in the home for a minimum of two years before the Medicaid application was started. The child must be the primary caregiver.

  • Debt

Applicants can pay off their debt without a penalty.

If you’re interested in learning more Medicaid information that is specific to your state, visit our Medicaid by State page. Plus, you may be eligible for both Medicare and Medicaid! Our licensed agents can help answer any questions you may have and help you sort through your health care options. To get started, fill out this form or call us at 833-438-3676.

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