Medicaid is a government program that pays your nursing home care expenses, and sometimes long-term care expenses at home or elsewhere, if you cannot afford it. But if you gave money or other assets away in the five years before applying for Medicaid, Medicaid may penalize you. This is the five-year look-back rule.

What is the penalty? In Kentucky, for example, for every $270.16 given away (Indiana’s figure is a little higher), Medicaid can refuse to pay for one day of nursing home care. That means that you will have to pay one month’s care in a nursing home for every $6,000 you gifted in the last five years.

• A mother, who is 70 years old and healthy, gives her daughter $24,000 for the down-payment on a home.
• Three years later, the mother is admitted to a nursing home after suffering a stroke and becomes bedridden. She spends all of her money in the first eight months in the nursing home and is left with only $2,000 to her name.
• Her daughter goes to the Medicaid office and applies for Medicaid for her mother.
• The mother is otherwise eligible, but because of the $24,000 she gave her daughter three years and eight months ago, her application was denied. Kentucky Medicaid tells her to re-apply in four months when her penalty period expires ($24,000/$6,000 per month = four months). (Note: the penalty would be a little shorter in Indiana.)
• If the mother doesn’t pay for those four months, the nursing home can discharge her.

This does not necessarily mean that you cannot fix the problem. A skilled law firm like Kentucky ElderLaw, PLLC, can help you mitigate the impact of the five-year look-back rule on your finances. We can also help you understand how the gifts you wish to make in the future may affect your Medicaid eligibility.