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Gifts and Qualifying for Medicaid for Nursing Home Care
by: Legal Hotline for Older Iowans
Medicaid can help elderly or disabled Iowans pay nursing home and home health care expenses. To be eligible, your income and assets must be below certain levels. If you give away money or other assets to anyone other than your spouse, you may not be eligible for Medicaid. Recent changes to these rules mean there are now different ineligibility or "penalty" periods depending on when the transfer was made. In addition, the state can make a claim against the people receiving the gifts.
Eligibility Restrictions.
Gifts On or Before February 8, 2006. If you give away assets on or before February 8, 2006, (prior to the effective date of a new federal law) a three (3) year look-back rule applies. If you gave away any assets during the three (3) year period prior to February 8, 2006 you will be ineligible for Medicaid for a period of time. This"penalty" period is determined by dividing the value of the asset you give away by the average cost of nursing home care in Iowa at the time of application. The current average cost is approximately $4000 per month. The resulting figure is the number of months from the time of the gift that you would be ineligible for Medicaid. To Illustrate:
Example 1. Assume you gave $80,000 to your Daughter on January 1, 2006. If you apply for Medicaid at any time prior to January 1, 2009, your gift will be subject to the Three-Year Look-back Rule. If you apply in January 2008 and the average cost of nursing home care at that time is $4,000 per month, you would be ineligible for a 20-month period ($80,000/$4,000 = 20). The 20-month ineligibility period would begin on January 1, 2006 and end on August 31, 2007. If you apply for Medicaid after August 31, 2007, you would be eligible because your ineligibility period expired before you applied.
Example 2. Assume you gave your Daughter $160,000 on January 1, 2006. In this example, you would be ineligible for a period of 40 months ($160,000/$4,000 = 40), a period even greater than the Three-Year Look-back period. If you apply for Medicaid two (2) years later in January 2008, you would be ineligible for an additional 16 months because you applied for Medicaid 24 months after the gift and 16 months before the end of your 40-month ineligibility period. Gifts Made After February 8, 2006. If you give away assets after February 8, 2006, the date a new federal law took effect, there is a five (5) year look-back instead of a three (3) year look-back. The length of the "penalty" period is calculated in the same way, but does not generally start until you actually apply and are eligible for Medicaid.
For example, assume you gave $80,000 to your Daughter on May 1, 2006. If you apply for Medicaid at any time before the end of the five (5) year period ending on April 30, 2011, you will have a penalty period that will start with the date you would otherwise be eligible for Medicaid. Thus if you apply in May 2008 and the average cost of nursing home care at that time is $4,000 per month, you would be ineligible for a 20-month period ($80,000/$4,000 = 20). The 20-month ineligibility period would begin on May 1, 2008 and end on December 31, 2009. If you apply for Medicaid after May 1, 2011, you would be eligible because your ineligibility period expired before you applied.
Claims Against People Who Receive a Gift. The second rule that protects the Medicaid program against excessive gifts is the "Five-Year Look-Back Rule". Under the Five-Year Look-Back Rule, if you make a gift within Five-Years of applying for Medicaid for nursing home care, the State of Iowa can make a claim against the individuals to whom you gave the gift. In each of the examples above, the gifts were made within five (5) years of the time you applied for Medicaid assistance. In each case, once you qualified for Medicaid, the State may have an immediate claim against your daughter and may attempt to recover the costs of your ongoing nursing home care until the amount of the gift has been recovered. Even if you were eligible for Medicaid because the gift was prior to February 8, 2006, and under a three year look-back, the state may still seek to recover the value of the gift from the person it was given to under the Five-Year Look-Back Rule.
These Medicaid rules are not meant to prevent normal holiday and birthday gifts. They are meant to prevent excessive gifts for the purpose of getting Medicaid to pay expensive medical care. These rules also do not prevent you from selling your assets for their fair market value, or from using your assets to pre-pay burial expenses, buy exempt assets, or pay other living expenses.
There are several important exceptions to these rules on gifts and transfers. For example, gifts to spouses and disabled children are not subject to the rule. Also, a parent can transfer his or her home to a child who lives with and cares for the parent in the parent's home for at least two (2) years, if the care kept the parent from having to go to a nursing facility. In addition to these restrictions on gifts, there are many other rules, including other exceptions to the above rules, that relate to eligibility for Medicaid. Similar restrictions apply to the Elderly Waiver program and other Medicaid programs.
The rules regarding eligibility for Medicaid are often complex and confusing. You may call the Legal Hotline for Older Iowans at 1-800-992-8161 if you have questions or would like more information concerning Medicaid eligibility.
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