Medicare is a federal program that provides health coverage for people aged 65+ or those under 65 and with a disability. Eligibility for Medicare is not affected by income level.
Medicaid is a jointly funded state and federal program that pays for medical assistance services for many categories of low-income individuals including those aged 65+.
When a senior (65+) applies for long-term care Medicaid, whether that is for services provided in one’s home, at an assisted living residence, at or a nursing home, they must meet an asset limit requirement to qualify for Medicaid. Individuals cannot transfer assets for the sole purpose of qualifying for Medicaid.
Medicaid has a “look-back period” which is meant to prevent Medicaid applicants from gifting, transferring, or selling assets under fair market value to meet Medicaid’s asset limit requirement.
- All asset transfers during the look-back period are reviewed.
- If a Medicaid applicant is found to have violated this rule, a penalty period, or a period of Medicaid ineligibility, is established.
- This restriction exists because had the assets not been gifted, transferred, or sold under fair market value, they could have been used to pay for the senior’s long-term care.
- If assets are gifted or transferred prior to the look-back period, there is no penalty period.
- The date of one’s Medicaid application is the date from which the applicant’s look-back period begins. Other than California, all states and D.C have a look-back period of 60 months or 5 years. For example, if an Illinois resident applies for Medicaid on Jan. 1, 2021, their look-back period extends back 60 months to Dec. 31, 2015. All financial transactions during this timeframe are subject to review.
- Examples of the type of transactions that could result in a penalty include:
- a money gift to a grandchild for high school graduation
- a house transferred to a cousin
- collectors’ coins sold for half their value
- a valuable vehicle donated to a charity
- payments to a personal care assistant without a formal care agreement in place or
- assets gifted, transferred or sold under fair market value by a non-applicant spouse.
- Even after the look-back period, if a Medicaid beneficiary comes into money, for example, via an inheritance, and gives all or some of it away, the beneficiary could be in violation of the look-back rule. That is, even if no initial violation occurs, a Medicaid beneficiary may violate the rule subsequently and become disqualified for Medicaid benefits.
In Illinois, for a household of 1 person, the maximum allowable annual income is $17,775 and non-exempt assets can be no more than $2,000. Assets that are not exempt from being counted for Medicaid purposes may include bank accounts, certificates of deposit, certain life insurance policies, real estate, stocks and bonds and vehicles.
Additionally, if a senior assigns their home into trust, upon their passing the estate will not trigger probate (unless other assets qualify the estate for probate), but if there are Medicaid claims, then the estate may still be subject to those claims. Federal law requires the state’s Medicaid program to try to recover all Medicaid costs from the probate estate. States also have the option of seeking recovery against property which passes outside of probate, which is called “expanded” estate recovery. This includes jointly held assets and assets held in a living trust.
- States that have not opted for expanded estate recovery may not make a claim against a Medicaid recipient’s home if it is not in their probate estate. Illinois is one such state.
- Assets held in an irrevocable trust are also not counted for Medicaid purposes.