Some financially strapped seniors who might need Medicaid for their long term care sometimes find that their assets and income exceed eligibility requirements to receive Medicaid coverage. To make sure that they do qualify, some seniors spend their assets down to Medicaid’s income and asset eligibility level. However, any Tennessee senior should be careful that their activities do not run afoul of Medicaid’s look-back period.

According to Aging Care, the Centers for Medicare and Medicaid Services (CMS) reviews the financial history of Medicaid applicants. The idea is to make sure that applicants have not spent down their assets for less than fair market value or simply gifted their assets to family and friends in order to shrink their income and asset level enough to receive Medicaid. Violating these requirements can cause an applicant to be disqualified for a period of time.

The period of time during which a person is denied Medicaid is known as the Medicaid penalty period. This interval of time is determined by the number of assets the applicant had transferred or given away in violation of look-back requirements. The penalty period is also calculated by the state’s penalty devisor, which is the average cost of a nursing home in the state per month.

The actual look-back period may vary in length depending on how the state makes the rules. Generally, many states set the look-back period as lasting no more than five years. Any financial transaction that has taken place before this period, even if the transaction was below fair market value or just a gift, will not be counted against a Medicaid applicant.

Since many seniors depend on Medicaid for health care, it is important to make sure your estate planning comports with state and federal law concerning spending down your estate. Keep in mind that this article is not written to provide legal counsel. The estate needs of people will vary, so only read this information for your educational benefit.