Now, more than ever before, it is imperative that applicants for Medicaid benefits retain their financial records. In 2006, the federal laws governing the Medicaid program were changed extending the looback period from three to five years. The “lookback period” is the period of time that the Medicaid Office examines to determine whether or not an applicant for Medicaid benefits has made an uncompensated transfer of an asset.
An uncompensated transfer occurs anytime that an individual gives something of value away and does not receive an equivalent dollar value in return for the item. In other words, if you give your car to your son and your car is worth $5,000, you made an uncompensated transfer of $5,000.
When an individual makes an uncompensated transfer of an asset during the lookback period and applies for Medicaid benefits, the Medicaid Office imposes a penalty period, or period of ineligibility for Medicaid benefits, based upon the dollar value of all transfers made during the lookback period. In other words, if you gave away $1,000 in December 2008, $5,000 in March 2009, and $12,000 in June 2010, the Medicaid Office will aggregate those transfers ($18,000) and assess a period of ineligibility for Medicaid benefits based upon the aggregate transfer.
The penalty period is calculated by taking the aggregate transfer amount ($18,000) and dividing it by a divisor number, which is supposed to represent the average statewide cost of a nursing home room. The divisor figure is $7,282. So, $18,000 in uncompensated transfers will result in approximately two and one half months of ineligibility.
When you file an application for Medicaid benefits, the Medicaid Office asks you if you have made any uncompensated transfers. (The application asks if you have made any uncompensated transfers in the past thirty months. The lookback period hasn’t been thirty months since around 1990, which is, I suspect, the last time that the application form has been updated. But the lookback period is now sixty months.) You must disclose any transfers that you have made.
Not being ones to simply count on your honesty, however, the Medicaid Office also requests financial statements from you. Through these financial records, the Medicaid Office can ascertain whether or not an individual has made any uncompensated transfers.
An issue that has become more pronounced with the increase of the lookback period from three to five years is the availability of bank records. When I apply for Medicaid on behalf of a client, I like to supply the Medicaid Office with copies of each and every bank statement for the past five years as well as copies of the checks that coincide with the statements.
The hope is, that by providing these documents, the Medicaid Office can more quickly resolve, and approve, the application. By law, the Medicaid Office must process an application in forty-five days. From a practical standpoint, that timeframe is more of a dream than reality.
When you have a $10,000 a month nursing home bill accruing, you want as fast of a result as you can obtain, but you also want the result to be correct. For these reasons, I supply the Medicaid Office with a full financial picture of the applicant.
The problem for client is, five years’ worth of financial records is burdensome to produce. Most people destroy their financial records after a few years and banks frequently charge exorbitant amounts to reproduce these records. The moral of the story is save your records, particularly after you have attained the age of seventy. You never know when you might need them.
It might seem simple, but holding onto your bank statements can make big tasks — like applying for benefits or finalizing an estate — go much more smoothly. A little organization today can prevent a lot of stress later.