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Understanding the 'look back period' for Medicaid eligibility

As people get older, their future care needs become increasingly important to think about. How will they pay for care if they suffer a serious illness or injury? What will their quality of life look like if they live in a nursing home or assisted living facility?

These are not easy questions to answer; some people don't even like to think about them. However, taking the time to think about them sooner, rather than later, can be crucial. This is especially true in the context of Medicaid planning, as waiting too long to plan can affect eligibility and lead to costly consequences. This is due in part to the look back period.

What is the look back period?

When people apply for Medicaid in Colorado, which is called the Health First Colorado program, they must meet certain criteria. If you want Medicaid to cover the cost of a nursing home for long-term care needs, then you must not exceed the income or asset limits to qualify.

If you have too many assets to meet eligibility requirements, you might think you can just give away the excess to friends or family. However, this results in penalties if you do it within five years before applying for Medicaid. This time period is the look back period.

The look back period is in place to ensure people do not have Medicaid pay for care they could actually afford. 

How does planning help?

Planning can help people organize their assets and gifts in such a way that they don't have to spend everything to qualify for Medicaid. Again, though, it is important not to wait too long. 

If you give $150,000 to your children and then apply for Medicaid within five years, that gift is a transfer of assets. This leads to a penalty of ineligibility for a period of time. That time depends on how many months of care that $150,000 could have paid for.

To avoid having to pay this penalty, parties can work with Medicaid planners so that they do not wind up paying out-of-pocket for care or exhausting assets to qualify.

And because of the look back period, it is important to start planning long before you ever need to apply for Medicaid. Starting your planning early can give you the opportunity to utilize strategies to preserve your resources and get you into a position to qualify for Medicaid.

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