Medicaid is a health insurance program for low-income individuals and needy people. It covers not just the elderly, but children as well. Specific examples of individuals eligible for coverage under Medicaid include:
1. Low-income adults between the ages of 19 and 64
2. Adults over the age of 65
3. Disabled adults
4. Blind adults and children
5. Pregnant women
For an elderly person to be eligible for nursing home care, assisted living, or in-home care from Medicaid, they must have limited income and assets. The income and asset limits an individual must meet also depend on whether they are applying solely for themselves or including dependents.
There is also a general residency requirement which requires the applicant must live in the state where he or she is (or will be) receiving Medicaid coverage/benefits.
All Medicaid applicants must meet an income threshold in order to successfully apply for and, potentially receive, coverage. The requirement is not universal and varies among the categories listed above.
*Federal Poverty Level - per https://www.healthcare.gov/glossary/federal-poverty-level-fpl/
Number of People Covered
$12,060 $16,240 $20,420 $24,600 $28,780 $32,960 $37,140 $41,320
Individuals Family of 2 Family of 3 Family of 4 Family of 5 Family of 6 Family of 7 Family of 8
As previously mentioned, in addition to the income-limit requirement, applicants must also not be in possession of excessive assets. For purposes of applying for Medicaid, assets are defined as quantifiable assets including stocks, bonds, investments, and checking and savings accounts.
Some items that one may consider assets are exempt from consideration under Medicaid. These include vehicles, personal belongings, and the applicant’s home (provided either the applicant or their spouse lives in the home and the home isn’t valued over $560,000).
The “look back” period is a specified period of time dating back from the date an individual applies for Medicaid. In Illinois, the “look back” period if 5 years - meaning when reviewing an application, the applicant’s records are checked for suspicious transfers of assets. If the applicant failed to include ownership of assets, or transfers of assets that aren’t exempt per Medicaid, he or she may be subject to a penalty period. Typically, most states do not consider transfers “improper” if the transfer is for less than $500.
The penalty period is a period of ineligibility for Medicaid benefits. The way this is calculated is by taking the value of the asset transferred and dividing it by the average monthly cost of a nursing home. For example, if the applicant made a gift to a family member two years before applying for Medicaid, that gift was $100,000, and the average monthly cost of a nursing home is $10,000, the penalty period would be 10 years before the applicant is eligible for Medicaid coverage.
Value of Transferred Asset / Average Monthly Cost of Nursing Home = Penalty Period
$100,000 / $10,000 = 10 years
There are certain forms of asset transfers that do not trigger the look back period. Among those are transfers to a spouse, sibling, disabled child, adult caregiver child(ren), and debt payments.
Spouses - An applicant for Medicaid can transfer up to $119,200 to their spouse who (1) is NOT also applying for Medicaid coverage and (2) continues to live independently from the applicant.
Sibling - An applicant can also transfer the primary residence to a sibling if (1) the sibling has an interest in the residence prior to the transfer and (2) has lived there for one year prior to the applicant’s nursing home placement.
Disabled Child - If the applicant has a disabled child under 21 years of age, including those who are blind, the applicant may transfer assets or establish trusts for the benefit of the disabled child
Adult Caregiver Child(ren) - If the adult child (or children) of the applicant lives with the applicant and provides care for the applicant, asset transfers to said child(ren) should not trigger the look back period.
Debt Payments - Paying off debts is exempt from consideration of a look back period. Plainly stated, paying one’s bills is not a form of transferring assets for the purpose of meeting the eligibility requirements for Medicaid. For this category, think of home equity lines of credit or mortgages as an example of acceptable debt payments.
The following are forms of asset transfers that are not exempt from the look back period, though they may be less commonly known.
Gifts - While the income tax laws provide that gifts (up to statutory limits) are exempt from taxable income, they are not, however, exempt from the look back period. Wedding gifts, charitable donations, and the like can create a period of ineligibility for the applicant.
Lacking Documentation - If the applicant sold or transferred assets, even those sold or transferred for their fair market value, but fails to keep any form of documentation showing said sale or transfer, they may be in violation of the look back period. For this category, think of the bill of sale for a car, typically you would keep such a document.
Irrevocable Trusts - Irrevocable trusts made during the look back period are considered gifts and are, therefore, a violation of the look back period. Irrevocable trusts made prior to the look back period are not considered violations.
If you are looking to become eligible for Medicaid and/or have concerns regarding the potential penalty periods associated with the look back period, please contact one of our experienced Medicaid attorneys.