The Medicaid Look-Back Period, Explained
Medicaid checks five years of gifts and transfers before it pays for nursing home care. Here’s how the rule works and which transfers are exempt.
When someone applies for Medicaid to pay for nursing home care, the state checks what they gave away in the past. Gifts made in good faith can still delay coverage.
This rule is called the look-back period. Knowing it before you move any money can save your family a costly surprise.
What the look-back period is
Federal law sets a look-back period of 60 months, or five years. The state reviews money and property given away during the five years before the person is in a nursing home and has applied for Medicaid.
The rule covers transfers by the applicant and by their spouse. States run their own Medicaid programs, so the paperwork and some details differ. Check your state’s Medicaid page.
What counts as a transfer
A transfer is a problem when money or property is given away for less than it is worth. The state looks at the “uncompensated value”: what it was worth minus anything received in return.
- Cash gifts to children, grandchildren or friends.
- Selling a house or car to a relative for far less than it is worth.
- Putting property or accounts into someone else’s name.
Paying a fair price for goods or services is not a gift. But expect to explain large withdrawals and keep records of what money was spent on.
How the penalty is calculated
The state adds up the uncompensated value of all transfers in the look-back period. It divides that total by the average monthly cost of private-pay nursing home care in the state.
The result is the number of months Medicaid will not pay for nursing home care. Federal law says states may not round down or ignore part of a month.
When the penalty starts
The penalty does not start on the day of the gift. It starts once the person has applied, is receiving nursing home care, and would otherwise qualify for Medicaid.
In practice, that is usually after savings have already been spent down. So the family may face months of nursing home bills with little money left to pay them. That is why gifts made shortly before a move can be so costly.
Transfers that are exempt
Federal law lists transfers that do not cause a penalty. These include:
- Anything given to a spouse, or for the spouse’s sole benefit.
- Assets given to a child who is blind or disabled, directly or in a trust for that child.
- Assets put in a trust solely for a disabled person under age 65.
- The home, given to a spouse, a child under 21, or a child who is blind or disabled.
- The home, given to a brother or sister who owns part of it and lived there for at least one year before the move.
- The home, given to a son or daughter who lived there for at least two years before the move and gave care that kept the parent at home.
There is also no penalty if all the assets are returned. The same applies if the person shows the transfer was for fair value, or was made for a reason other than qualifying for Medicaid.
A state can also waive the penalty if it would cause undue hardship. Each state sets its own process, and you will usually need proof for any exception.
Before you move any money
Rules like these are easy to get wrong, and mistakes can be hard to undo. This guide is general information, not legal advice.
A few steps help any family:
- Gather five years of bank and investment statements.
- Write down any large gifts or sales, with dates and amounts.
- Keep receipts for big expenses, such as home repairs or medical bills.
- Read your state’s Medicaid rules on our site.
- Use our cost planner to see how long savings may last.
For free public help, contact your state Medicaid office. Your Area Agency on Aging, found through the Eldercare Locator, can point you to local benefits help.