Update: The implementation date for the "look back" has been extended from July 1, 2021…
The 2019 Medicaid Regional Nursing Home Rates have been published. How do they affect the penalty for transferring or giving away assets before you apply for Medicaid?
If you transfer assets within the five years before you enter a nursing home, there is a “penalty period” during which Medicaid will not pay for your nursing home care. This is a hugely important topic for people who are encountering long-term care needs, who suddenly realize they run a high risk of spending their entire life savings paying for their care. People can and often do end up completely impoverished, when – at least in New York – that can be prevented.
The Medicaid “Regional Rates” are used to calculate the “penalty period,” or period of ineligibility for Medicaid, that is imposed if a person has made uncompensated transfers (gifts or transfers to a trust or family member, for example) within the five-year period before they apply for Medicaid nursing home benefits. How does that work, and is it applicable in all circumstances?
New York residents should be aware that the rules are different depending on whether you are being cared for in the community, or in a nursing home. If you need home care or assisted living, and you have transferred assets to a family member, friend, or to a trust, these transfers will not subject you to any penalty or stand in the way of your obtaining Community Medicaid benefits. There is no five year look-back, and no penalty, in this circumstance. We talk about this topic at more length on our website; click here to get the details.
For Institutional (nursing home) Medicaid benefits, the rules are very different. If you are in a nursing home, and your resources are at a level that would satisfy Medicaid eligibility requirements (currently, no more than $15,450 in “resources”), your Medicaid application must nevertheless disclose all of your financial transactions over the preceding at five years. This is the “look back.” Medicaid wants to see whether, during the five-year “look back” period, you made any uncompensated transfers. If you did, the applicable Regional Rate comes into play. We’ll use an example to show how it works.
Two years ago, Sally started becoming concerned about the costs of long-term care. She decided to give $100,000 to her daughter Tamara. Now Sally needs to enter a nursing home. She does so, and by now she has less than $15,450 in total “resources.” She is apparently eligible for Medicaid benefits, so she applies.
Medicaid determines that Sally would be eligible for benefits except for the fact that she made the gift to Tamara within the past five years. Sally has not done anything illegal or improper. However, Medicaid is not going to pay her nursing home bill for several months. This is the “penalty period.”
Here’s how the penalty period is calculated. Medicaid sees that Sally resides in New York City, where in 2019, the Regional Rate is $12,419. Medicaid will divide the amount of the gift to Tamara – $100,000 – by the $12,419 Regional Rate. The result – 8 – is the number of months of the penalty period. During those 8 months, Medicaid will not pay for the nursing home. Sally and Tamara have to figure out how to get the nursing home paid some other way.
What many others have done in Tamara’s situation is to use the money Sally had given her two years ago to pay for the nursing home during the penalty period. Unfortunately, the Regional Rate is an arbitrary number that, in most cases, will be less than the actual monthly cost of the nursing home. For purposes of our example, let’s say the New York City nursing that Sally has selected actually costs $18,000 month, which is a realistic number. At that level, the 8 month penalty period will cost Tamara 8 times $18,000, or $144,000. The $100,000 gift she received from Sally won’t come near to covering the cost.
However, it is important to know that, even in a case such as the example of Tamara and Sally, Elder Law strategies could help them save some of the money Tamara received from her mother. In most cases, about 40% to 50% can be saved.
Contact our firm to find out how we can help you navigate the complicated world of health care and elder care planning. Most clients are surprised to learn how much money can be saved with good planning.
Below are Medicaid’s 2019 Regional Rates in New York:
New York City: $12,419
Long Island: $13,407
Northern Metropolitan: $12,636