Change to Medicaid Look-Back Period
- What took place? Congress passed, and the President signed into law, a bill called the “Deficit Reduction Act” (DRA) that includes provisions dealing with the Medicaid “look-back” period. Specifically, the law changes the “look-back” period from three years (36 months) to five years (60 months). As you know, “look-back” is the term for the period of time during which financial transactions of a Medicaid applicant/recipient are subject to review in determining whether or not that person is eligible for Medicaid.
- Does this impact preneed funeral/burial contracts? The law effectively “grandfathers” in all preneed contracts that are established before a yet-to-be-determined effective date. In other words, the new five-year look-back provision will not apply to any contracts that are entered into before that date. In any case, the law is NOT retroactive.
- Are preneed contracts still excluded as an asset? Yes! Even with the change in the look-back period, preneed funeral/burial contracts are still excluded as an asset for Medicaid purposes. The new law concerns only the look-back period.
- When does the new five-year “look-back” period start? Federal law states that it applies to assets transferred on or after its date of enactment (February 8, 2006).
- Can states choose to “opt-out” of the new requirement? No. The Federal law mandates that states comply with the new five-year look-back period. However, it does provide for "hardship waivers" in limited circumstances.
- How does this work now that it has taken effect?
When a person transfers assets before applying for Medicaid benefits that cover nursing home services, the local Department of Social Services “looks back” at all financial transactions made within a certain period of time. Any transfer of assets by either a Medicaid applicant or their spouse will affect the eligibility of the one applying for Medicaid-covered nursing home services. The applicant would be considered ineligible for a period of time equal to the value of the asset transferred, divided by the average cost of nursing home services to a private patient in that county. The Deficit Reduction Act of 2005 changed the look-back period from three years to five years. This change was phased in, with February 2009 being the first month affected by this phased-in increase from 36 to 60 months, as follows:
Date of Application Asset Transfers
- 1993 – Jan. 31, 2009 . . . . . . . . . . 36 months
- February 1, 2009 . . . . . . . . . . . . . 36 + 1 = 37 month look-back
- March 1, 2009 through Jan. 31. 2011 . . . . . . . . . . . . . . . Look back increases by one additional month,
March 1, 2009 . . . . . . . . . . . . . . . 36 + 2 = 38 month look-back
February 1, 2011 . . . . . . . . . . . . . 60 months for all transfers
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