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.

Where you live can have a major influence on the long-term care benefits you might qualify to receive from Medicaid.  Since Medicaid is in large part funded by state and local dollars, and administered under state law, the state in which you reside will determine whether and how you can qualify for benefits, and the scope of the benefits that may be available to you. 

New York has a particularly generous Medicaid program, probably more than any other state.  If you are anticipating the need for long-term care, access to the Medicaid program and its benefits may be an important factor to consider if you are thinking about where to reside in your “golden years.”  

You do not want to find yourself in a situation where you are paying out-of-pocket for ruinously expensive long-term care services, and rapidly depleting your life’s savings.  Especially since, in New York, with proper planning you can protect your savings and still qualify for Medicaid benefits.

The lure of retiring to and residing in a state with a warmer climate, for example, needs to be balanced against your ability to afford care if you live there. You may want to investigate whether you could qualify for Medicaid, and the benefits and services available in the state where you think you would like to live.  

In the end, you may find that it’s to your best advantage to stay in New York, or to move back here if you’re now living elsewhere. You’ll then have access to the most well-funded Medicaid programs in the entire country, as well as a wide choice of high-quality long-term care facilities and providers, top doctors, and other health care resources.

Federal estate and gift taxes are no longer a concern for all but the wealthiest people. The Federal exclusion (non-taxable) amounts currently (in 2020) are $11,580,000 for individuals and $23,160,000 for married couples.  The New York State exclusion amount has increased as well, and is currently (in 2020) $5,850,000 per person. While the focus of estate planning for about 99% of our population is no longer on taxes, estate planning remains important for many people. The main issues are (1) how do you make sure that your estate is distributed in the manner you wish, (2) how do you reduce costs and inconvenience for your heirs and beneficiaries, and (3) how can you provide for immediate liquidity so that necessary obligations can be met without undue delay.

The absence of a carefully considered estate plan can lead to unintended consequences, or to painful bickering or lawsuits among your family members. While it is important to have a Will, for many a Trust will become the main vehicle for distribution of their estate. Here's why...

1. First, a trust can avoid probate of your estate. Probate can be a complicated legal process of identifying and acquiring the deceased’s assets, and then paying their bills and finally making distributions to beneficiaries. It can take months and even years before your spouse, children, family members and friends get anything. The court process can be slow, costly, and frustrating. When your money and property are placed in a trust that has been properly drafted, distributions can be made quickly and efficiently. Liquidity is usually immediately available for the payment of obligations.
2. Second, your beneficiaries get protection against the possibility of lawsuits that might be filed by unhappy relatives who disagree with the way you want your assets distributed. Trusts are a far better shield against litigation, and that means your wishes will be carried out as you intended with a much smaller risk of dispute.
3. Third, your family gets privacy. Unlike Wills, with rare exceptions, trust documents are not required to be filed with the courts. Your intentions are kept secret from prying eyes, and that affords greater peace and protection for your beneficiaries.

For a detailed discussion of trusts, click here. Lamson & Cutner advises clients regarding efficient, cost-effective estate plans, whether they live in New York City, Bronx, Brooklyn, Queens, Westchester, Nassau, Suffolk, or other counties in New York State.

Many people understandably have a difficult time deciding when it is appropriate to put a parent or other family member in a nursing home, and then choosing which home is best.

Other professionals, such as geriatric care managers or social workers, may be better placed than lawyers to guide clients on these questions, but, as Elder Law attorneys, we believe that we can make some helpful suggestions.

Anyone who still has mental capacity probably does not want to go into a nursing home. It’s human nature. People want to be at home, in familiar surroundings. However, there may come a time when it is no longer a good choice, or even tenable, to stay at home. Some people, due to loss of physical capacity, become virtual prisoners in their own homes, and then lose the possibility of any social interaction. For them, a nursing home opens up opportunities for new friendships and social activities.

Other people, due to physical or mental issues, may no longer be safe in the home environment, even if they have aides to help them. They simply need skilled care, in a nursing home.

Sometimes it is important for children to recognize that the time has come to put mom or dad in a nursing home, even though this decision seems to be against mom or dad’s wishes. Feelings of guilt are hard to overcome, and it is a difficult decision under almost any circumstances. However, mom or dad’s desire to remain at home was probably expressed at a time when they still had the capacity to live independently. When circumstances change, it may not make any sense to try to stick to a plan that just won’t work anymore.

Once the decision is made to seek nursing home care, the question becomes: which home? This is a very personal decision, and the “best home” for one person may not be a good choice for another person.

Here are some guidelines:

1. Geography is often an important factor. Choosing a home that is convenient for visitation can be meaningful. If it is easy to stop by the nursing home for a visit, friends and family will come more often.
2. A private room is usually of little or no importance to the patient. Often family members feel better if their relative is in a private room, but the patient may in fact prefer the company of a "roommate," and will enjoy visits from the roommate’s family and friends as well as his or her own visitors.
3. If the patient is or will be on Medicaid, the cost of the home should not be a consideration. Medicaid negotiates a special rate that is typically far below the private pay rate in any home that you may choose. Virtually every nursing home in New York accepts Medicaid.
4. If you find that you don’t like the nursing home that you selected, you can move to another home. If there is a bed available in the home that you prefer, you should not have any trouble in making the change.
5. Although all homes are non-sectarian, some have a look or feeling that is tied to a particular religion. Some patients may feel more comfortable in a “Catholic” or “Jewish” or “Methodist” home, etc., depending on their religious sensibilities.
6. Take the time to visit a few homes before making a final decision. Every home has an individual atmosphere and feeling about it. There is no substitute for a personal visit.

Moving a parent, friend, or other family member into a nursing home takes an emotional toll. At the same time, most of our clients report a great sense of relief when the decision is finally made.