If you need long term skilled nursing care and are financially eligible under New York’s laws, you can have your nursing home care paid for by Medicaid. This is different from Community Medicaid, the other type of Medicaid available to New Yorkers. Since New York has a generous Medicaid program, it is possible for nursing homes to operate profitably even if most of their income is coming from Medicaid. The result is that there are many nursing homes in New York, and almost all of them accept Medicaid. In most nursing homes, Medicaid pays for a large majority of their residents.

Nursing Home is the type of Medicaid that involves the “five year look back.” In brief, this is how it works: If you are over 65, you are not eligible to apply for Medicaid unless you have less than $15,150 in total “resources” in your name (2018 figure). Resources are assets such as savings accounts and investment accounts, cash value of life insurance policies, and your home. Once you are at or below this level and you apply for Nursing Home Medicaid, Medicaid requires you to provide all of your financial records for the past five years. They are extremely thorough in this regard, and the application is complicated under the best of circumstances.

Once the application is filed, Medicaid will carefully examine your records, looking for gifts and uncompensated transfers of money or property. Any non-eligible transfers to third parties (such as gifts to children or relatives) at any time within the past five years will result in a “penalty period.” There is no accusation of wrongdoing, and it does not mean that Medicaid will sue anyone, or that the nursing home will refuse to take you. What it means is that Medicaid will not begin paying for the nursing home until after the penalty period is over. You will have to find a way to pay privately until then. Theoretically, the penalty period is the amount of time in the nursing home that the transferred funds would have covered. However, in practice, the nursing home bill incurred during the penalty period is almost always larger than the amount gifted or transferred.

If you need to enter a nursing home, depending on the amount of your assets, there are strategies that can permit you to save some of your money by reducing the length of the penalty period.

Private annuities and promissory notes are a time tested way to minimize the nursing home penalty period. For a discussion of how this strategy works, click here.