This is one of the most confusing and misunderstood aspects of Medi-Cal and benefits for California skilled nursing home care: the look back and penalty periods. First, the look back is the time period, immediately prior to your Medi-Cal application, that Medi-Cal will examine your financial transactions in determining eligibility for benefits. So if you apply today, they will only be looking at the transactions (i.e. gifting your assets) for the last 2 ½ years. Part of the confusion is that most of the rest of the country’s Medicaid has a look back period of 60 months, or 5 years. Further compounding the problem is that the law in California provides for a 60-month look back, but we don’t do that. Medi-Cal looks back 30 months from the time of application.
Okay let’s put down the idea of a look back and talk about a penalty period. Again, this is a problem because most of the rest of the country does this much differently, so it’s tough to get accurate information for California. But in California, a transaction/transfer of assets for less than fair market value, for the purposes of qualifying for Medi-Cal benefits, that happens in the 30 months prior to the individual’s application to Medi-Cal, may be subject to a penalty period. The penalty period is the time in which the applicant is ineligible to apply for Medi-Cal benefits. As an example, if I gave my daughter $5,000 last week because I wanted to “spend down” my estate to qualify for Medi-Cal, then Medi-Cal will look at that transfer (because it’s last month and within the 30 month look back period) and assess a penalty for it. The penalty periods are calculated based on the market value of the transaction ($5,000 here) and the average private pay rate. This calculation is somewhat complex, and the rules rather unusual, so I won’t get into the detail here, but this is the opportunity we have for planning. In many cases we can structure gifting so that any penalty period is not more than a month or so. If you don’t understand the rules, it can be easy to mess this up and cause a lengthy penalty period that’s unnecessary. This is why planning is so critical – the rules are complex and detailed, but there is a right way to plan to be able to save you and your family money, time and preserve your estate and legacy.