Many people have heard of the Medicaid “look back” and “penalty period,” but don’t understand what they are or how they work.  Here are the rules and the situations in which they are applicable in New York.

First of all:  In New York, there are two categories of Medicaid services:  Community Medicaid and Nursing Home (Institutional) Medicaid.  Community Medicaid covers a wide variety of services, including Home Care and Assisted Living.  Institutional Medicaid covers care in a Nursing Home.

What is the "penalty period" and what is the "look back?"

A “penalty period” is a period of ineligibility that is imposed if a Medicaid Nursing Home applicant has transferred assets during the five (5) years preceding their application. The five years prior to the Medicaid application date are known as the “look back” period. For now, in New York, the “look back” and “penalty period” only apply to Nursing Home Medicaid. 

Community Medicaid and the look back and penalty periods

Currently there is no look back for New York’s Community Medicaid services.  Legislation was passed in 2020 that would impose a look back, but to date it has not been implemented.  Implementation remains uncertain, but at this time it is scheduled for 2025. 

Not having a look back means that there is no Medicaid penalty period if you transfer assets out of your name prior to filing your Community Medicaid application. 

Institutional Medicaid and the look back and penalty periods

Institutional Medicaid works differently.  If you transferred assets out of your name at any time during the five years preceding your Medicaid application, a penalty period will be imposed, during which time you will not be eligible to receive Medicaid benefits.  The period of ineligibility will begin when all of the following are true:

a) You are residing in the nursing home;

b) You have applied for Nursing Home Medicaid; and

c) You would be eligible for Medicaid (because you have only a small amount of money) except for the transfers you made during the five year look back period. 

How the Look Back and Penalty Period work

If you are in a nursing home and apply for Medicaid to pay the nursing home’s bills, Medicaid will first check to see whether you have made any gifts or transfers of your assets during the five years prior to your application date (the “look back period”).   To enable Medicaid to determine whether that is the case, your application will need to include five years of bank records from every single bank account, brokerage account, savings account, or any other institution where you keep or have kept your money during the past five years.  You will also need to include your records concerning real estate, co-ops, life insurance, annuities, and other assets owned during this period.

If you have made any gifts or transfers of your assets during the look back period, Medicaid will not pay your nursing home costs for a period of time that depends on the amount of money you gave away. The number of months that you are not eligible for Medicaid benefits is called the “penalty period.”

How to Calculate the Penalty Period: An Example

Here is an example of how the penalty period works. Let’s say you live in New York City, and you gave your son or daughter a gift of $143,000 in January 2020. If you need nursing home care at any point up to January 2025, and you file a Medicaid application, your gift would fall within the look back period.

Medicaid would perform a calculation as follows: the amount or value of your gift would be divided by Medicaid’s monthly “regional rate” (the amount is set by Medicaid, and the current rate can be found here).  The result is a number that represents the period of time in months that you are not eligible for Medicaid nursing home benefits. The regional rate applicable to you depends on your county of residence within New York State.

In New York City, the Medicaid regional rate for 2024 is $14,273.  Thus, for our example, the calculation is:  $143,000 (the amount of the gift) divided by $14,273, resulting in a “penalty period” of about 10 months. Remember, the penalty period does not begin until you are in the nursing home, and “otherwise eligible” for Medicaid, meaning you have almost no money in your name.  This means that during the penalty period, someone other than you (probably, the person to whom you gave your money in the first place) would have to pay for your care.

Last-minute Planning Can Still Save You Money

Plan ahead, because steps you can take before you need care can make a huge difference in your financial situation later on, especially if you need to enter a nursing home. 

However, if you are “caught” in the look back period, or fear you will be, do not despair!  An Elder Law attorney will likely have a strategy that can save you a significant amount of money even if you have made a gift or transfer.  Don’t let the “look back” and “penalty period” deter you from seeking legal advice from an experienced attorney in this field.  Call us today to gain valuable information, as well as invaluable peace of mind.