The Listen to Lawrence Letter: Medicaid look-back period and penalties for transfers

May 12, 2021
Perhaps the most commonly asked questions that I have been receiving are about Medicaid: eligibility, look-back periods, penalties, etc. And this is for good reason — it’s confusing! Not only is the concept of Medicaid and how it works confusing but to add to it, everyone seems to have a different understanding of the facts. This, no doubt, is because no one truly understands all the details and in trying to figure it out, wrong information is constantly passed around.
So here we go! Another answer to another excellent and specific question that should definitely help to understand how Medicaid works.
Hello.  I was reading your notes regarding look-backs and regional rates. My Mom has an annuity that is maturing.  She will be getting a lump sum of $54,000. She’ll have to pay tax on the gain for about $5000. She wants to give me $49,000. I will invest this $49,000 in a mutual fund I have. The fund already has approximately $65,000 in it. If she needs Medicaid will they look at the $49,000 she will gift me or the whole amount of money in my combined fund, $114,000 (65,000 plus 49,000)? I live in Suffolk County, what would the Medicaid penalty be?
Also, has the Community Medicaid look-back taken effect yet? If you transferred assets prior to 4/21/21 there is no look back for Community Medicaid, correct? What about Medicaid for a nursing home? Thanks.
There will be a penalty for any transfer caught in the look-back period. The look-back for nursing home Medicaid is 5 years and has been for about 20 years in all cases. The $49,000 transfer will be subject to a Medicaid penalty. Your own money will never be subject to Medicaid’s reach; in other words, your $65,000 will always be safe. However, it would simplify your mother’s Medicaid application if you did not co-mingle funds.
If your mother needs Medicaid for a nursing home within the 5-year look-back, the $49,000 will cause a Medicaid penalty of about 3.42 months. How did I figure this? Glad you asked.😊  You take the amount transferred and divide it by what Medicaid calls the average cost of a nursing home in the county. The number in Suffolk County in 2021 is $13,834. 49,000/13,834 = 3.42.
Therefore, your mother would not be eligible for Medicaid for the first 3.42 months of being in the nursing home, having applied at the right time and otherwise poor enough to receive Medicaid. The .42 months works out by her being responsible for 42% of the 4th-month’s bill (plus you have to add her income to the bill as well).
If your mother needed Community Medicaid (i.e., home care), there is a 2 ½ year look-back which has been postponed until sometime in the future (likely around January 2022). Once it applies, transfers caught in the look-back will be subject to the same penalties, but only if the transfer occurred on or after October 1, 2020 (not 4/21/21).
For all my readers, a reminder: If you need help in the house, apply for Medicaid now, before the new look-back is applicable.
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
And, if anyone you know would like to receive this
Listen to Lawrence Letter, just have them email me at and I’ll add them to the list!
As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
Let’s stay connected.
Stay safe!