Most older adults preparing for retirement count on Medicare as their primary source of health insurance. Medicare and supplemental policies can cover costs for standard treatment throughout someone’s retirement years. Unfortunately, Medicare does limit certain types of coverage. Long-term care, in particular, is usually not eligible for Medicare coverage. People who want a nurse to care for them in their homes or who move into nursing homes typically need to pay for those costs themselves or apply for Medicaid.
The Pennsylvania Medicaid program does provide long-term care support to older adults, but it also has strict limits regarding the income and personal holdings of those who apply for benefits. Those preparing for retirement may need to plan for long-term care costs ahead of time because of the Medicaid lookback period.
What is the lookback period?
A review of someone’s finances is a key aspect of the Medicaid application process. Professionals look at not just someone’s current resources and income but also any significant transactions or transfers from within the last few years. Currently, Medicaid professionals go back over five years or 60 months of financial records looking for large gifts and transfers, such as intentionally moving assets into a trust.
Any large transfers that occur during the lookback period may trigger a penalty. The state determines the value of those transfers and then converts that into a number of months of care costs. Medicaid does not cover someone’s expenses for that set number of months as a penalty for improper financial conduct prior to applying.
The only way to avoid that penalty and qualify for benefits quickly is to plan at least five years before applying for Medicaid. People may want to change how they hold certain assets, including real property and financial accounts. Many adults preparing for retirement may feel a greater sense of financial security if they plan ahead of time to protect their assets and qualify for the medical care coverage they may eventually require.
Advance planning also protects someone from estate recovery efforts. Even those who qualify without a penalty have to worry about the state making a claim against their estate to recruit whatever funds Medicaid distributed to pay for their care. Older adults who take for granted that they can quickly apply for Medicaid when they need benefits sometimes end up disappointed and experiencing significant financial struggles because of current Medicaid rules.
Learning about the Medicaid lookback period, Medicaid penalties and even the estate recovery program may help people see the benefit of planning for their long-term care needs before they actually arise.
