In Massachusetts, when a person enters a nursing home on a long-term basis, there are generally three ways to pay for their care: privately from their funds, from a combination of private funds and long-term care insurance, or by applying for Medicaid benefits (called MassHealth in Massachusetts). Nursing homes typically charge $12,000-$15,000 per month, so most people run out of private funds fairly quickly. If the only option to fund nursing home care is MassHealth, then the applicant must complete the infamous MassHealth Long-Term Care application.
For an unmarried applicant to be financially eligible for MassHealth, their assets must have been reduced below $2,000. In 2021, for a married applicant, who has a spouse living in the community, the total assets of the couple must be reduced below $132,380. However, it is not enough to simply show current bank statement(s) with a combined balance below the asset limit. The applicant must document how their assets were reduced below the asset limit. This is where the five-year look back comes into play.
During the MassHealth application process, MassHealth may request up to five years of financial records for all assets. In addition, MassHealth routinely requests additional information explaining all large transactions, or patterns of deposits or withdrawals for smaller transactions. If a property has been sold in the past five years, documentation must be provided showing that the applicant received fair market value for the sale.
One home, located in the Commonwealth of Massachusetts, does not count towards the assets limit. However, for individual applicants, if the owner is approved for MassHealth benefits, MassHealth will place a lifetime lien on the property. MassHealth will later recover its contribution to the owner’s care upon the sale of the property during the life of the applicant, or from their probate estate upon their death. In short, even though MassHealth will deem the home “noncountable,” this does not mean that the home is protected from MassHealth.
Each application is reviewed by an individual case worker. While there are general practices and regulations that guide the MassHealth case workers, the way each case worker handles applications can vary. In addition, there are four MassHealth Enrollment Centers in Massachusetts, so there are certain local practices that the case workers follow based upon the enrollment center where they work.
For those who are concerned about the need for nursing home care in the near future, it is prudent to save receipts for all large transactions and avoid gifting, unless it falls under one of the MassHealth transfer exceptions and is clearly documented. In the eyes of MassHealth, no good deed goes unpunished. If it occurs within the five-year look back, a graduation gift to a grandchild or a contribution to the down payment for a child’s home will typically trigger a MassHealth penalty period. This penalty is applied starting on the date that the applicant is “otherwise eligible” for MassHealth, meaning that they are in a nursing home and have total assets below the asset limit. The penalty is applied based upon the number of days that the gifted funds would have paid for the applicant’s nursing home care using the average daily nursing home rate.
If a client wants to protect assets from the MassHealth spend down, the lifetime property lien, and estate recovery, then planning can be done more than five years before the applying for nursing home care benefits. In addition, if nursing home care is needed and no asset protection planning has been completed, or if the planning was implemented less than five years ago, certain assets can still be protected under the limited exceptions to the transfer rules. For example, MassHealth will not penalize a transfer of assets to a disabled child. In addition, the MassHealth regulations allow an applicant to transfer their home to a “caretaker child” who has lived in the applicant’s home for the two years preceding the need for nursing home care, has provided care to the parent that delayed the need for nursing home care, and can provide an affidavit of the applicant’s physician attesting to the same.
While there are exceptions to the penalties for transfers or gifts within the five-year look back, they require onerous documentation, and in certain cases are applied at the discretion of the MassHealth agency. These are crisis-planning techniques, and do not guarantee a desirable result. If an individual wishes to protect assets, it is preferable to execute a plan more than five years in advance of the need for nursing home care.