Like many people, you may make it to your retirement years without ever giving the need to qualify for Medicaid a second thought because you were fortunate enough to be covered by employer-sponsored or privately purchased health insurance. As a senior, however, the likelihood that you will need to qualify for Medicaid increases substantially as a result of the high cost of long-term care. Consequently, it is wise to plan for the possibility by learning more about the Medicaid eligibility requirements. Among the most important of those requirements to understand is the Medicaid look-back period which is what causes many seniors trouble if they failed to plan ahead by including Medicaid planning in their estate plan.
Why Might I Need to Qualify for Medicaid as a Senior?
If you have never before needed to rely on Medicaid, why would you as a senior? The answer can be found in the very real possibility that you will need long-term care (LTC) at some point during your retirement years. When you reach retirement age, around age 65, you will already stand more than a 50 percent chance of needing some type of LTC services before the end of your life. Every year, those odds increase, and your spouse shares the same odds if you are married. If either of you ends up in LTC, the cost of that care will be steep. The nationwide average for a year in LTC for 2018 was about $100,000. If you are a New York resident, however, you can expect to pay considerably more. For 2018, the typical yearly cost of LTC in the Rochester, New York area was closer to $177,000 – and the cost will continue to rise in the years to come. Given that the average time spent using LTC services is three years, it becomes easy to see how you could deplete entire retirement nest egg if required to pay out of pocket for LTC.
Won’t My Insurance Cover LTC?
The short answer is “probably not.” As a senior, you will likely rely on Medicare for most of your health care expenses. Medicare, however, will not cover LTC expenses nor will most private health insurance plans. In fact, unless you purchased a separate long-term care insurance policy at an additional cost, you will probably be faced with covering your LTC expenses out of pocket. This is why over half of all seniors in LTC turn to Medicaid, because Medicaid does cover LTC expenses. First, however, you will need to qualify for Medicaid.
How Does the Medicaid Look-Back Rule Work?
Because Medicaid is a “needs based” program, Medicaid uses both an income and a “countable resources” limit when determining eligibility. Although some assets, such as a primary residence and a vehicle, are sometimes exempt from consideration, it is still easy for a retiree to have non-exempt assets that exceed the countable resources limit. If that is the case, your application will be denied. To prevent applicants from transferring assets out of their name in anticipation of applying for benefits, Medicaid imposed the “look-back” period. The look-back period in almost all states, including New York, is 60 months. The look-back rule allows Medicaid to review your finances for the 60 month period preceding your application for asset transfers made for less than fair market value. If any are uncovered it may trigger a penalty period during which you will be responsible for covering your LTC expenses.
The length of the penalty period is calculated using the value of the assets you transferred and the average monthly cost of LTC in your area. By way of illustration, imagine that you gifted assets valued at $300,000 to an adult child during the look-back period. Using the average monthly cost of LTC in Rochester, New York for 2019 of $12,342, the length of the penalty period imposed by Medicaid is determined by dividing your excess assets by the average monthly cost of LTC. Using the above figures, you would incur a penalty period of 24.3 months ($300,000/$12,342 = 23.43). You would be responsible for paying your LTC expenses for the duration of the waiting period, after which Medicaid would begin paying for your care.
To avoid putting your assets at risk, include Medicaid planning in your overall estate plan well ahead of the time you are likely to need long-term care.
Contact Rochester Medicaid Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about the Medicaid look-back period, contact the Rochester Medicaid attorneys at the Law Office of Michael Robinson, P.C. by calling (585) 546-1734 to schedule an appointment.