The high cost of long-term care means that, as a senior, the likelihood that you will need to qualify for Medicaid increases substantially. Consequently, it is wise to plan for the possibility by learning more about the Medicaid eligibility requirements, including the Medicaid “look-back” rule. To help you better understand, the Coral Gables Medicaid planning attorneys at Stivers Law explain the Medicaid look-back rule.
Why Might I Need to Qualify for Medicaid as a Senior?
Why would you suddenly need to qualify for Medicaid as a senior? The answer is directly related to the likelihood that you will need long-term care (LTC) during your retirement years. When you reach retirement age, around age 65, you will already stand more than a 50 percent chance of needing some type of LTC services before the end of your life. Every year, those odds increase, and your spouse shares the same odds if you are married. If either of you ends up in LTC, the cost of that care will be steep. The nationwide average for a year in LTC for 2021 was over $100,000. As a Florida resident, you can expect to pay just over the national average at an annual average cost of around $115,000.
How Will You Pay for LTC?
As a senior, you will likely rely on Medicare for most of your health care expenses. Medicare, however, will not cover LTC expenses nor will most private health insurance plans. In fact, unless you purchased a separate long-term care insurance policy at an additional cost, you will probably be faced with covering your LTC expenses out of pocket. Not surprisingly, over half of all seniors in LTC turn to Medicaid, because Medicaid does cover LTC expenses. First, however, you will need to qualify for Medicaid.
Qualifying for Medicaid and the Look-Back Rule in Florida
Because Medicaid is a “needs based” program, Medicaid uses both an income and a “countable resources” limit when determining eligibility. Although some assets are exempt from consideration, it is still easy for a retiree to have non-exempt assets that exceed the countable resources limit. If that is the case, your application will be denied. To prevent applicants from transferring assets out of their name in anticipation of applying for benefits, Medicaid imposed the “look-back” period. The look-back period in almost all states, including Florida, is 60 months. The look-back rule allows Medicaid to review your finances for the 60-month period preceding your application for asset transfers made for less than fair market value. If any transfers are flagged, it may trigger a penalty period during which you will be responsible for covering your LTC expenses.
The length of the penalty period is calculated using the value of the assets you transferred and the average monthly cost of LTC in your area. By way of illustration, imagine that you gifted non-exempt assets valued at $200,000 to an adult child during the look-back period. Using the average monthly cost for a private room in LTC in the Coral Springs area in 2021 of almost $11,000, the length of the penalty period imposed by Medicaid is determined by dividing your excess assets by the average monthly cost of LTC. Using the above figures, you would incur a penalty period of 18 months ($200,000/$11,000 = 18.18). During the waiting period, you would be forced to use your own assets to pay for your LTC expenses. Incorporating Medicaid planning into your estate plan early on is the best way to make sure you do not run afoul of the Medicaid look-back rule.
Contact Coral Gables Medicaid Planning Attorneys
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about including Medicaid planning in your estate plan, contact the experienced Coral Gables estate planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.
Justin serves as a member of the American Academy of Estate Planning Attorneys (AAEPA), a national organization comprised of legal professionals concentrating on estate planning. As a member of the Academy, he receives ongoing, comprehensive training on modern estate planning techniques.
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