“What is the 5 year look back and penalty period in Alabama Medicaid?”

“What is the 5 year look back and penalty period in Alabama Medicaid?”

"What is the 5 year look back and penalty period in Alabama Medicaid?"5-Year look-back rule

What we do if we more assets than we’re allowed to keep?  That really leads us into this look-back period. This is probably the area that we spend the most time on when we meet with families who have a loved one in a nursing home. We have to make sure that they understand this.

When you’re qualified – and that’s important, you have to actually qualify – that means that you are very sick, that you need a nursing home, and your assets are down $2,000 or less and you apply for Medicaid, then Medicaid looks back five years.

What are they looking for? They’re looking for gifts.

What’s a gift? A gift is anything that is less than full fair market value. So if the fair market value of a piece of land is $100,000 and you sell it for $100,000, then that’s not a gift. If you sell it for $80,000, that’s not the full fair market value. That’s 80% of the full fair market value. The gift would be that difference: $20,000.

You have to be honest with Medicaid. We don’t want to hide stuff or being deceptive. First of all, it’s wrong. Second of all, some people go to prison. Also, Medicaid is very good at finding out stuff. It’s like with your taxes: don’t play any games. Stay within the rules.

If we apply let’s say August 2014, then Medicaid would look back in time five years to about that time in 2009. They’d say, “During all of this time period, were there any gifts at all whether it’s $100, $100,000, $1 million? That’s the look-back rule. We’re looking back in time.

Looking back from when? When we’re qualified and when we apply, then Medicaid looks back five years.

Let’s say here we are in August 2014. Medicaid is going to look back to about this time in 2009. They look back and they see a gift. What does that mean?

“If gifts exist, what is penalty?”

That leads us into this concept of a penalty, sometimes called the “penalty period.” What does Medicaid do? They look back and they total up all those gifts. Whatever that amount is, they divide it by 5,500. Now, $5,500 is what Alabama Medicaid says is basically the average cost of a nursing home. I think it’s a little bit more. I think $6,000 is more accurate, but it’s fairly close.

That number then is going to give us the number of months that we must privately pay for the nursing home. Remember, to qualify, the sick or institutional spouse has to have $2,000 or less and now he’s going to have to pay one or more months privately.

Let’s look at what this means. If we give away $55,000 within that five-year look-back, then the penalty is ten months ($55,000 divided by $5,500). That means for ten months, that person in the nursing home (and really, it would mean their family) must privately pay this nursing home. What if the nursing home is $10,000 a month? You still pay for ten months. It doesn’t matter what the actual cost is. That’s why this number of $5,500 may be a little bit low. That can hurt us because our cost might actually be more than $5,500 a month.

What if we give away $550,000? That sounds like a staggering number, but we see families who have given away a $300,000 house, they’ve given away maybe an annuity or an investment that’s a couple of hundred thousand dollars, and you total it all up and it’s $550,000. The penalty for that is 100 months that the family is going to have to pay.

Contact Us.

If you live in Alabama or your loved one lives in Alabama, feel free to get in touch with us.

You can reach us by phone at 1-205-879-2447.

Or, if you prefer, you can fill out our contact form here and we will get back with you.

We’ll be glad to help you understand your family’s options on using Medicaid to pay for long term care costs in a nursing home.

Thanks for reading, and have a great day!

-John G. Watts

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