Figuring out Medicaid Penalty Period Divisor

I Gifted $50,000 Within the Past 5 years, How Would I Figure Out How Long the Medicaid Penalty Would Be?

To calculate the penalty for violating Medicaid’s Look-Back Rule, you must know the average private cost of nursing home care in the state in which you reside. This is the Penalty Divisor. The majority of states use a monthly Penalty Divisor, while a handful of states use a daily Penalty Divisor. As an example, let’s say your state uses a Penalty Divisor of $5,000 / month. You gifted $50,000, and therefore, must divide this number by $5,000, which equals a Penalty Period of 10 months ($50,000 ÷ $5,000 = 10 months). It is the same length of time you would have been able to pay your long-term costs had you not gifted the money.

In some states, the length of the Penalty Period is longer than in others, even with the exact same amount of assets gifted. This is because the average cost of privately paid nursing home care is not consistent across the states. Furthermore, there is no limit to the length of one’s Penalty Period, and during this timeframe, an individual, or their family, will have to cover the cost of needed long-term care. However, if a Medicaid applicant is able to recoup all of the gifted assets, the Penalty Period may be lifted. Furthermore, in some states, even recouping part of the gifted assets can reduce the length of the penalty.

There are some exceptions to the Medicaid Look-Back Period, or put differently, there are some asset transfers that can be made without resulting in a penalty. One is the Child Caregiver Exemption, in which a Medicaid applicant’s home can be transferred to an adult child if they were their parent’s live-in caregiver for a minimum of two years, delaying the inevitable need for assisted living or nursing home care.

If you have violated the Look-Back Period, or are looking for ways to reduce the Penalty Period, it is advised that you contact a professional Medicaid Planner for assistance.