Because of the high cost associated with long-term care, most people who need such care look to Medicaid to pay for it. In New York there are two main Medicaid programs that cover long-term care: Community Medicaid (where the care is administered in the home by an aide) and Chronic Medicaid (where the care is administered in a nursing home).
For 2022, both Medicaid programs have asset limits of $16,800.00, and both have a lookback period for transfers (sort of). Chronic Medicaid has a 5-year lookback. Community Medicaid had a 2.5-year lookback put into law on October 1, 2020, but it has yet to go into effect. It is unclear when the Community Medicaid lookback effective date will be, but it could be as early as at the end of 2022.
The lookback periods are designed to find impermissible transfers, which, generally speaking, are transfers made by a person ahead of a Medicaid application for the sole purpose of reducing the person’s assets under the asset limit. In other words, transfers made in order to qualify for Medicaid. If such a transfer is uncovered, a penalty will be assessed. The penalty is a period of months during which the person will not qualify for Medicaid benefits. With Medicaid unavailable, the person must privately pay for the care services he or she needs.
The penalty is calculated by dividing the total value of the transfer(s), by the Medicaid Regional Rate, which is what Medicaid sets as the monthly cost of care in a nursing home for a specific region. Here on Long Island, the most relevant regions are Long Island and New York City ($14,012.00 and $13,415.00, respectively, for 2022). For example, assume a person living on Long Island makes impermissible transfers totalling $150,000.00 during the 5-year period preceding his Chronic Medicaid application. A penalty would be calculated as follows: $150,000.00 ÷ $14,012.00 = 10.71 months. So, for a period of 11 months, the applicant will not be eligible for Chronic Medicaid benefits.
What is the best way to avoid incurring a penalty? Advanced planning. With the help of an experienced Estate Planning & Elder Law Attorney, a person can take action to preserve and protect assets by making transfers far enough in advance to clear any applicable lookback period. This advanced planning customarily involves making transfers to an Irrevocable Asset Preservation Trust, which is a trust that is specifically drafted with the Medicaid laws in mind to protect assets to the greatest extent possible.
By Wayne R. Carrabus, C.P.A., Esq., at Futterman, Lanza & Pasculli, LLP, with offices in Smithtown, Bay Shore and Garden City, NY, and clients throughout metro New York. He concentrates his practice on Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate and Estate Administration and Estate Taxes.