Let’s start simple. What exactly is Michigan Medicaid? It is a health care program that provides medical and health-related assistance to low-income individuals and families. Typically with no health insurance or inadequate health insurance. It mostly serves the elderly – 65years +, disabled people, pregnant women, families with dependent children, children in foster care, and people whose financial situation would be best described as low or very low income.
Since we have been talking about planning for our futures, our focus today will be Medicaid eligibility for residents of Michigan who are at least 65 years old. And how the five year look back in Michigan can affect eligibility.
Medicaid is designed to pay for long-term care once the individual’s funds and assets are gone. In layman’s terms, if you have $100,000 in savings, you are expected to use that to pay for your care, once it’s gone, Medicaid will kick in (you cannot have assets greater than a certain limit.) Now that doesn’t seem like a fair idea if you have children or a spouse you would like to leave that money to. You can gift that to them now, up to $14,000 per year to avoid being taxed on those “gifts,” but should you apply for Medicaid within 5 years of this, you are subject to penalties. In fact, ANY assets (money, cars, real and personal property…) are subject to penalties if they were gifted, transferred, or sold for less than the fair market value within 5 years of someone applying for Medicaid – this is Michigan’s “look-back period.” The reason for this is to prevent applicants from giving everything away in order to qualify for Medicaid – they want you to use up your money and qualifying assets (they won’t make you sell your home or vehicle to pay for things) before they step in.
The penalty for violating this look-back period is becoming ineligible for Medicaid for a period of time. The length of time is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of care. For example – You gave your daughter $10,000 a year over the past 5 years, which equals $50,000 in violation of the look-back period. The average daily cost determined by Medicaid for nursing home care is $200. You will be ineligible for Medicaid for 250 days ($50,000 divided by $200 = 250.) However, it should be noted that the penalty period beings on the date that you became eligible for Medicaid, not the date of the transfer or gift. For example – You gifted your daughter $10,000 on Christmas Day in 2018, but you became eligible for Medicaid on September 23rd in 2017. Your period of ineligibility would begin on September 23rd, 2017.
There are ways to avoid violating the look-back period and still be able to retain some assets and/or gain eligibility for Medicaid. There are also ways to plan for this, way before the look-back period. This is something that you should discuss with a Medicaid planner or an elder law attorney, as this is a precarious situation and needs to be handled correctly and carefully. Even if you don’t have time to pre-plan, have already made transfers within the look-back period, or just aren’t sure, consult a Medicaid planner or elder law attorney – this is your best bet to repair violations or avoid them.