The Medicaid “look back rule” is a big source of confusion regarding the use of gifting as part of a Medicaid asset protection plan in Texas. The term “look-back period” is Medicaid lingo for the period of time a person’s financial records can be reviewed. This period begins with the date of the application and covers the 60 months immediately before.
Most people believe the period is an exclusion period. It’s not. The look-back is a review period. Transfers during that time are not necessarily going to disqualify, but they must be reported to the Texas Department of Health and Human Services (TDHS). TDHS is the state agency responsible for managing the Medicaid program for the state of Texas. Caseworkers from that agency review the application and supporting documentation then either approve or deny an application based on how the information provided interacts with Medicaid’s complicated rules.
Federal law requires the full financial disclosure of all financial transactions during the 5-yr look back. Caseworkers have the right to demand proof of all deposits as well as all transfers of assets through gift or sale. Currently, the practice in the Houston area is to request financial verification of activity during the immediate 4-6 months. You also need to supply proof of all transferred assets, the value of those assets when transferred and who received the resources. If the person working the application gets suspicious about transactions he or she may request copies of every page of every financial statement received on every asset for the past 5 years.
How Medicaid Gifting Penalties Work In Texas
Medicaid Eligibility Workers also request copies of all checks over $500. Without adequate proof otherwise, expect the caseworker to presume the withdrawals are gifts and subject to penalty. As an example, if during the examination the agency discovers withdrawals equaling $43,000, unless proven differently, Medicaid will assume the funds were gifted. For each $4300, money from Medicaid will be delayed about a month. The person needing care would be denied Medicaid eligiblility for about 10 months.
Bear in mind not all transfers during the five year look-back period are subject to a penalty. Rules provide for a limited number of “exempt transfers”
- between spouses,
- for the benefit of a disabled children,
- of the homestead to a caretaker child and
- of the homestead to a sibling with an equity interest
Even though the above transfers are exempt, you still have the legal requirement to fully disclose them on an application. If you’ve made transfers that are subject to penalty, there may be steps you can take to reduce the penalty you’d otherwise receive. An experienced Houston Elder Law attorney can help.
Remember that the 5-year look back establishes the period of time the state can examine financial affairs. A transfer during that period does not always mean you’ve lost benefits forever.