Table of Contents

When applying for Medicaid, the look-back period is often the most complex part of the process.  There are plenty of misconceptions and a great deal of confusion about Medicaid’s five-year look-back period, especially when it comes to long-term care in New Jersey.

This article aims to explain this complex topic to those who are navigating these waters either for themselves or their loved ones. We must caution though that Medicaid planning is not a do-it-yourself process.

What Is The Five-Year Look-Back Period?

The five-year look-back period is an important concept in Medicaid planning. It refers to the period of time that Medicaid reviews when an individual applies for assistance with long-term institutional care or home and community-based services. In New Jersey, this period is five years (or 60 months) prior to the date of the Medicaid application.

Why Does It Matter?

The primary purpose of this look-back is to ensure that applicants have not transferred assets below market value to qualify for Medicaid. If such transfers are found, they can lead to a penalty period, during which the individual is ineligible for Medicaid benefits and must pay for care out of their own pocket until the penalty period is over. These payments can be very significant.

Costs Of Care

Understanding the costs of institutional or home-based care is essential when considering Medicaid planning:

Institutional Care: This typically includes nursing home care. In New Jersey, the cost can be significant, often exceeding $10,000 per month.

Home And Community-Based Services: These services are intended to help individuals stay in their homes. While generally more affordable than institutional care, they can still be substantial.

What Assets Count?

Exempt And Non-Countable Assets

Not all assets are considered in determining Medicaid eligibility. In New Jersey, certain assets are exempt or non-countable. Below are a few assets which are considered “non-countable.”

Primary Residence: Up to a certain equity limit (New Jersey is $1,033,000), if the applicant intends to return or if a spouse or dependent relative lives there.

One Vehicle: Used for transportation of the applicant or a family member.

Personal Belongings And Household Effects: These are typically exempt.

Prepaid Funeral And Burial Expenses: If certain conditions are met.

Certain Types Of Trusts: Depending on their structure and terms.

Countable Asset Limits

When applying for Medicaid, the applicant’s countable assets must be below a certain threshold. As of the time of writing, an individual applicant in New Jersey is allowed to have $2,000 in countable assets. It’s important to note that these figures can change and vary depending on specific circumstances, such as if the applicant is married.

Strategies Used To Qualify

Elder law attorneys use various strategies to help clients qualify for Medicaid while preserving as much of their clients’ assets as possible. While we will give some examples of some common strategies used in Medicaid planning, it is important to consult with a qualified attorney.

Spending Down Assets

This involves reducing the countable assets to meet Medicaid’s eligibility threshold. It’s done by spending the assets on non-countable items or services.

For example, spend down strategies include paying off debt, home improvements, buying a car, paying for medical expenses, prepaying funeral expenses, and purchasing household goods or personal items.

Asset Conversion

Assets conversion involves converting countable assets into exempt assets. This strategy is often used in tandem with the spending down approach.

Often conversion is done by using cash (a countable asset) to pay off a mortgage or to make home modifications. Another example is purchasing an annuity that complies with Medicaid’s rules, thus turning a liquid asset into an income stream.

Establishing Trusts

Certain types of trusts can be used to protect assets. There are irrevocable trusts designed to hold assets outside of the Medicaid applicant’s estate.

Examples of such trusts is an Irrevocable Income Only Trust (IIOT) where the individual does not have direct access to the principal but may receive income generated by the trust.

Caregiver Agreements

Formal agreements where a family member is paid for providing care. This must be a formal and legally binding agreement that stipulates the scope of services and compensation.

A common scenario would be a contract between a parent and an adult child who provides caregiving services, with compensation that is in line with local rates for similar services.

Utilizing Exemptions For Spouses

Protecting the financial stability of the healthy spouse through spousal impoverishment rules.

This can be done by setting aside a certain amount of assets and income for the non-applicant spouse, known as the Community Spouse Resource Allowance (CSRA) and the Minimum Monthly Maintenance Needs Allowance (MMMNA).

Gifting And The Look-Back Period

Gifting assets can lead to penalties if done within the look-back period. However, small, carefully planned gifts might sometimes be used in certain planning strategies. Gifts are usually highly scrutinized.

Purchasing Long-Term Care Insurance

Long-term care insurance can help cover the costs of care without depleting assets, potentially avoiding the need for Medicaid entirely.

The five-year look-back period is a complex aspect of Medicaid planning, but understanding it is crucial when preparing for the potential need for long-term care. Hiring an elder law attorney to tailor these strategies to you or your loved one’s specific circumstances can potentially save thousands of dollars. The complexities of Medicaid rules and the variations by state necessitate careful planning and legal guidance. Working with a knowledgeable elder law attorney can ensure that these strategies are implemented effectively, preserving the dignity and financial stability of the elderly while ensuring they receive the care they need. If you have any questions, please call our office, or send us a call-back request.

Table of Contents

New York proposed to amend its Medicaid section 1115 demonstration, also known as the New York Medicaid Redesign Team (MRFFCRAT) waiver.

The amendment seeks to implement a 30-month transfer of assets lookback period for coverage of community-based long-term care (CBLTC) services, and approval to exclude certain enrollees from these rules. This is similar to the current 60 month look back period for institutional based (nursing home and assisted living) Medicaid benefits. Currently, New York does not consider assets transferred in determining eligibility for community based long-term care services.

The earliest date that the state will seek implementation is March 31, 2024, due to the federal Covid-19 public health emergency declaration and the maintenance of effort requirements under the Families First Coronavirus Response Act (FFCRA). However, importantly, there has been an unofficial announcement that the look back period will not be implemented until at least 2025. These dates have been moving for quite some time and we will continue to monitor them.

What Are Community-Based Long-Term Care Services and Why Are They Important?

CBLTC services help individuals with chronic conditions or disabilities to live independently and avoid institutionalization. These services include personal care, home health care, adult day health care, private duty nursing, consumer directed personal assistance, and managed long-term care. CBLTC services are essential for improving the quality of life and health outcomes of many Medicaid beneficiaries, especially older adults and people with disabilities.

What is The 30-Month Transfer of Assets Lookback Period for Medicaid, Who Will Be Affected?

The 30-month transfer of assets lookback period is a policy that requires Medicaid applicants to disclose any transfers of income or resources that they or their spouses made within the 30 months prior to the month of application for CBLTC services.

If the state determines that a transfer was made for less than fair market value and was not for a valid purpose, such as paying for medical expenses or supporting a dependent, the state will impose a penalty period during which the applicant will not be eligible for CBLTC services.

What Are the Penalty Periods?

The penalty period is calculated by dividing the amount of the transfer by the average monthly cost of nursing home care in a particular region of the state, which ranges from $11,328 (Central) to $14,012 (Long Island). For example, if someone on Long Island transferred $280,240 to someone during the lookback period, their penalty period would be 20 months of ineligibility ($280,240 /$14,012 = 20 months). During the 20 months, they would be responsible for paying for services out of pocket.

The 30-month transfer of assets lookback period will apply to certain categories of non-institutionalized individuals who are aged, blind, or disabled and subject to non-magi budgeting rules. These include the ticket to work basic group, the ticket to work medical improvement group, and the medically needy aged, blind, and disabled.

The State is seeking approval to exclude individuals enrolled in Mainstream Managed Care and Medicaid Advantage from the 30-month transfer of assets lookback period, regardless of whether they are in a category that is subject to the lookback.

When is The New Rule Effective?

If the effective date for Community-Based Long-Term Care transfer rules is March 31, 2024, and an application CBLTC services  is made April 1, 2024, then a penalty period would be assessed for any transfers made in the previous 30 months.

New York’s addition of a lookback period for asset transfers when applying for Community Based Long-Term Care services brings its program in line with most of the other states. However, this change can have eligibility consequences for those who have too many assets when trying to qualify for Medicaid.

What Should You Do If You Need CBLTC Services and Medicaid?

You should definitely speak to a competent Medicaid planning attorney to avoid common mistakes which can impact eligibility and have possible tax consequences. A short consultation with an attorney can answer many questions and potentially save you thousands of dollars or get you qualified for Medicaid quicker.