The average person knows very little about the Medicaid program unless they have been a Medicaid recipient in the past. You may assume that you have no reason to know much about the program because you will never need it; however, chances are good that you, or someone close to you, will need Medicaid benefits in your older years. For this reason, it is important to understand some of the basic eligibility criteria for Medicaid now so that you can include Medicaid planning into your overall estate plan. One very important part of the Medicaid program that may impact you should you need to apply for benefits is the Medicaid five year look back period.
Just because you have never needed Medicaid benefits in the past does not mean you will not need them in the future. If you are like most people, your private health insurance plan does not cover the costs of long-term care. If you are counting on Medicare to cover those costs, think again. Medicare only covers long-term care costs under very specific circumstances and then only for a short period of time. For many older Americans this means that they will need to qualify for Medicaid or pay the costs of long—term care out of pocket. At an average cost of $75,000 a year, paying out of pocket is not an option for the average person.
Unlike Medicare, the Medicaid program is a means program. This means that you must meet income and resource limits to qualify for benefits. Although the resource limits vary by state and by category, they can be as low as $2,000. If you have resources worth more than the limit you will have to exhaust those resourced before being eligible for benefits. Simply transferring assets right before you apply isn’t an option either because the Medicaid program has a five year “look-back period”. In simple terms, this means that when you apply for Medicaid benefits they will “look-back” five years for asset transfers. If any are found they will attribute the value of the asset to you as if you never transferred it in the first place.
Because of the look-back period it is crucial that you include Medicaid planning into your estate plan now. There are perfectly legal strategies that can be used to ensure that you will qualify for Medicaid should the need arise while still protecting your hard-earned money and assets.