Understand Medicaid’s five-year look-back period

Medicaid was created to assist low-income senior citizens with their ever-increasing medical costs. Because Medicaid is a program for people with low income, the financial records and assets of the applicant must be examined before a senior can qualify for the program. This is what’s known as Medicaid’s five-year look-back period.

Seniors may find themselves needing to spend down excess funds in order to qualify. However, they must be careful not to try to create a need where there isn’t one.

Medicaid’s penalty period

A senior citizen who is declared eligible for Medicaid may experience a delay in receiving benefits. Should the five-year look back reveal that they have given financial gifts to family, friends or various charitable organizations, they will be disqualified from receiving benefits for a period of time to be determined by Medicaid. This is what is known as the Medicaid penalty period. 

For example: If the senior applicant made a gift of $20,000 to their child two years ago, the applicant will be temporarily penalized. This is because Medicaid views that gift as money that could have been used to help fund care for the senior applicant. The applicant may still be approved for Medicaid benefits, but the penalty period delays the date that coverage will begin.

How does this affect the applicant? 

If a senior citizen applies for and is approved for coverage but a penalty period is assessed, they could end up having to pay out of their own pocket for their nursing home or health care. Considering that the applicant is already in the low-income bracket, this can cause serious financial hardships.

Medicaid’s look-back period can be complicated, to say the least. That is why it is recommended that the senior applicant consider all of their options before beginning the application process.