Prior to October 1, 2020, a person in need of Community Medicaid (meaning Medicaid that covers home care and all medical expenses for a person not living permanently in a nursing home) can become Medicaid eligible by transferring assets or establishing various trusts. A critical change in New York law is taking place effective October 1,2020 – from that date forward, Medicaid will “look back” at all transfers/gifts made within 30 months of a Medicaid application. The look back rules are similar to the current nursing home Medicaid eligibility rules that require a 60 month look back for nursing home/institutional Medicaid. The new community Medicaid 30 month look back period means that any non-exempt transfers (to be explained below) within two and a half years of applying for Medicaid will be penalized. The penalty means that the value of the asset transferred is divided by the regional cost of chronic care (approximately $13,000 per month in New York); the resulting number represents the time period Medicaid will not provide coverage.
To illustrate, let’s take a simple example of Ms. Smith who is 65, not married, and retired; she has $250,000 in the bank and gives $240,000 to her child as a gift in April 2020, leaving her with a balance of $10,000. In the year 2020, Ms. Smith would be eligible for Medicaid if she had less than $15,850 (not including retirement accounts; also, for purposes of this example, we will ignore Ms. Smith’s retirement income such as social security and pension). If Ms. Smith applied for Medicaid after transferring the money to her daughter but before October 1, she would be eligible. However, if Ms. Smith applied on or after October 1, Ms. Smith would not be eligible until her penalty period elapsed. How long is her penalty? We divide the value transferred ($240,000) by the regional rate ($13,000) and the result is 18.46—meaning that Ms. Smith would not be eligible for Medicaid for almost 19 months!
The new law surrounding Medicaid eligibility requires much clarification from the legislature and much remains unknown. For example, will the use of Medicaid Asset Protection Trusts for personal primary residences be permitted without a lookback and penalty? Will Pooled Trusts currently used to shelter excess monthly income be penalized or will they continue to be an effective Medicaid planning tool? Will the new 30 month lookback law be grandfathered in to exempt those already receiving Medicaid? What is crystal clear, however, is the need to act now. The need to protect your assets from medical bills has never been as pressing and urgent as today.