You may make it to your retirement years without ever needing to qualify for Medicaid because you were fortunate enough to be covered by employer-sponsored or privately purchased health insurance. The likelihood that you will need to qualify for Medicaid increases substantially, however, when you reach your retirement years because of the high cost of long-term care. For many of my clients, the Medicaid look-back period is where they run into problems qualifying for Medicaid when they need it.
Why Might I Need Medicaid as a Senior?
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 2022 was over $100,000. For that same year, the average yearly cost of LTC in North Carolina was just under $100,000. Given that the average time spent using LTC services is three years, it becomes easy to see how you could deplete your entire retirement nest egg if required to pay out of pocket for LTC.
Medicaid May Be Your Only Option
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.
How Does the Medicaid Look-Back Rule Work?
Because Medicaid is a “needs based” program, Medicaid uses both an income and a “countable resources” limit when determining eligibility. Although some assets, such as a primary residence and a vehicle, 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 North Carolina, 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. Transferred assets 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 $150,000 to an adult child during the look-back period. 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 average monthly cost of LTC in North Carolina for 2022 of $8,213, you would incur a penalty period of 18 months ($150,000/$8,213 = 18.26 rounded down to 18). You would be responsible for paying your LTC expenses for the duration of the waiting period, after which Medicaid would begin paying for your care.
Contact Durham Medicaid Planning Attorneys
If you have additional questions or concerns about how Medicaid planning can help ensure that you qualify for Medicaid when you need it, please contact the Durham Medicaid planning attorneys at Clarity Legal Group by calling us at 919-484-0012 or contact us online.
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