The Medicaid 5-year look-back is a complex process that determines whether or not an individual is financially eligible for Medicaid benefits. In this article, we explore what the Medicaid 5-year look-back is, what you should expect during the process, how you can avoid Medicaid look-back penalties, common mistakes to avoid, and what to do if you are denied benefits or are penalized, especially if you are applying for Medicaid in Pennsylvania.
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Although individuals who meet Medicaid’s income and resource criteria can apply for Medicaid benefits to help pay for nursing home and in-home care, they are subjected to Medicaid’s 5-year look-back, a process where the Pennsylvania Department of Human Services reviews an applicant’s financial records going back five years to look for gifts and other asset transfers, including real estate transfer. The look-back window consists of the 60 months preceding the filing of an application for Medicaid long-term care benefits for a nursing home resident or a person applying for Medicaid-funded home- and community-based services.
Gifts within the look-back can give rise to a “transfer penalty.” A transfer penalty is a period of ineligibility for Medicaid long-term care benefits. Sometimes these transfer penalty issues are a surprise to family members, as many people are unaware of the look-back and make gifts not thinking they could ever present a Medicaid problem. Others know about the look-back but were perhaps overly optimistic about avoiding the need for nursing home care for five years.
Understanding the risk is important because nursing homes are expensive. In Montgomery, Bucks, and Philadelphia Counties, these facilities often cost between $10,000 and $15,000 a month, or $350 to $530 a day. Even worse, around-the-clock in-home care can exceed the cost of care in a nursing facility.
Medicaid long-term care benefits can pay for in-home care for certain individuals, and it can also pay for nursing facility care—if eligibility requirements are met. The 5-year look-back applies to those applying for Medicaid benefits to pay for in-home care and also for those applying for Medicaid long-term care benefits that pay for nursing facility care.
When examining an individual’s financial records for the 60 months preceding the date of the Medicaid application, the Pennsylvania Department of Human Services reviews the applicant’s finances and the finances of the applicant’s spouse in order to identify gifts and asset transfers. This investigation is the result of the Deficit Reduction Act of 2005, a law which aims to prevent individuals from giving away valuable assets in order to meet Medicaid’s stringent financial requirements in order to receive publicly funded long-term care benefits.
An applicant for Medicaid long-term care benefits must disclose gifts made within the past 60 months on Item 10 of the Medicaid application, Form PA-600L. It is not legal to hide assets or gifting that occurred inside the look-back during the Medicaid application process, and doing so can have adverse civil and criminal implications.
The caseworker reviewing your application will take steps to verify that your disclosure regarding gifting is accurate. Although procedures can vary from county to county, they tend to request complete financial statements for each and every month for all accounts owned the past two years before the application is filed, as well as the January and July statements for the remaining three years of the 5-year look-back. Even closed accounts are normally reviewed by the caseworker.
The Medicaid caseworkers will generally ask for copies of checks over $500 for expenditures within the look-back, as well as receipts or explanations for the same, as they are looking for assets that have been given away or sold for less than fair market value. If they suspect undisclosed gifting, they may also request copies of all financial records. Failure to provide these statements can result in a denial of benefits for “failure to provide verification.” We have even seen the County Assistance Office independently review real estate records to search for gifts of real property that may have occurred in the look-back.
Unfortunately, some people have found that innocently giving to their loved ones can trigger Medicaid penalties down the road—if that gift falls within Medicaid’s 5-year look-back period. As we’ll discuss later, if an individual has gifted a grandchild large amounts of money for college tuition, transferred a house to a relative, helped a family member with a down payment for a home, assisted a child with legal fees for a divorce or criminal defense matter, or donated a large asset to a charity, they could be found in violation of Medicaid’s look-back period, which could delay the authorization of Medicaid long-term care benefits. These are all situations we have seen present the threat of transfer penalty.
An Example of Medicaid Look-Back Penalties in Pennsylvania
The delay of Medicaid benefits authorization is caused by the imposition of a “transfer penalty.” At the time of this writing in 2023, one day of ineligibility for Medicaid long-term care benefits can arise for every $423.11 given away within the 5-year look-back.
So, for example, if the total non-exempt gifting within the lookback window is $20,000, the PA Department of Human Services may impose a transfer penalty of 41 days, unless an exception applies. This transfer penalty can result in a substantial unpaid nursing home bill, one that a spouse can be liable for under the Doctrine of Necessaries, and that children can potentially be liable to pay under Pennsylvania’s filial support laws.
We occasionally talk with individuals who have accidentally violated the rules of the look-back period and are denied Medicaid long-term care benefits. This can happen even when they were acting in good faith.
During the look-back period, Medicaid looks for both “gifts” and “transfers for less than fair market value.” Read our full blog on common mistakes violating Medicaid look-back rules to learn more.
If you are applying for Medicaid, the look-back period cannot be avoided. This audit of your financial records is designed to ensure individuals do not give away or transfer assets that would have otherwise assisted in paying for necessary medical care.
However, there are certain asset transfers that will not trigger penalties if they are made during the 5-year look-back. Read our article on how to avoid the Medicaid 5-year look-back period and its penalties to learn more.
The Medicaid look-back is required for all Medicaid applicants. If you are in violation of Medicaid’s gifting or asset transfer laws, you may likely receive a penalty.
However, you can avoid these penalties in certain cases. Read our article on how to avoid Medicaid’s 5-year look-back penalties for more.
If you’re denied Medicaid benefits because of a gift given during the 5-year look-back period or for another violation, you should address the issue head-on with help from an elder law attorney. Medicaid benefits are complex, and the consequences of denial can quickly grow into an overwhelming financial hardship.
For additional guidance, read our article on what to do if Medicaid is denied.
If you have been denied Medicaid benefits due to an alleged transfer for less than fair market value, you may feel overwhelmed. Fortunately, you can file an appeal, even while communicating with the Medicaid caseworker in an effort to resolve the matter. Appealing your Medicaid denial as quickly as possible is essential for timely processing.
Each case is different, but there are grounds for appeal. We explore the common scenarios in our article on how to appeal a Medicaid transfer penalty.
When a Medicaid beneficiary passes away, their estate may be obligated to pay back outstanding debts, and these debts may include Medicaid long-term care benefits.
The Medicaid Estate Recovery Program generally looks to be repaid from the value of a home, savings, automobile, retirement accounts that fail to designate a beneficiary, and other probate assets in the name of the deceased beneficiary.
However, some assets are exempt. Read our full blog on what assets are exempt from Medicaid estate recovery rights to learn more.
Disclaimer: We recommend that you have ongoing legal advice from an elder law attorney before attempting to navigate the Medicaid application process. If you have questions or wish to secure our services, please contact Gerhard & Gerhard, P.C.