Five Things to Know About the Medicaid Look-Back Period

When you apply for Medicaid benefits, you’ll be asked what seems like 1000 questions. Perhaps the most important question in the application process, though, is essentially “What have you done with your stuff in the past five years?”

This is a question about divestments. A divestment is any transaction in which you give something away without receiving the equivalent value in return. Any gift is a divestment. Any sale in which you sold an item at a discount is a divestment.

And any divestment can be a big problem.

Medicaid basically looks at all divestments as attempts to buck the system. Gifts and discounts are only given so as to qualify for Medicaid benefits sooner, so they seem to believe. And all such actions occurring within five years of Medicaid application must be ruthlessly penalized, so appears to be Medicaid’s maxim.

Unfortunately, most such actions will indeed be penalized, and these penalties can severely hamper your ability to get the care you need when you need it.

With that in mind, here are five things you need to know about Medicaid’s look-back period in Wisconsin.

Five years: no more, no less. The Medicaid look-back period in Wisconsin is exactly five years. In fact, it is exactly five years in every state in the country aside from California (where it is 30 months). Any gift you made more than five years prior to applying for Medicaid benefits is none of Medicaid’s business. But everything you’ve done with your assets within that five-year window will be scrutinized.

Many people have asked me if that five-year window is going to be increased. I’m not sure if there is a rumor going around that it will be stretched to more than five years, but at this moment there aren’t even whispers of adjusting the look-back period in Wisconsin. So, all planning done today should be done with confidence that the look-back period will remain as is.

Not every gift, but close to every gift. Will that sweater you bought for your grandson for Christmas three years ago come back to bite you if you are applying for Medicaid? No. Technically, a divestment is only problematic if it is done “with the intent of receiving Medicaid.” Unfortunately, the burden is on the applicant to show that a divestment was not made with such intent. An applicant does show this by proving that there had been a pattern of making similar gifts for many years before the look-back period.

So, gifts to friends and family at birthdays or during the holidays won’t be a problem if they are consistent with past gifts. Donations to churches or charities should also be fine so long as they are in-line with prior donations. A sudden uptick in the value of these gifts or donations, however, likely will cause problems. If you’ve been writing $20 checks to your grandchildren for their birthdays for decades but suddenly raised that to $1000 in the past few years, you’ll likely be looking at a penalty.

How to calculate your penalty period. When Medicaid determines that you’ve made a penalizable divestment, you will be given a penalty period, during which time you will be ineligible for Medicaid benefits. Medicaid calculates this period by taking the total value of the assets you gave away (minus the value you received in return) and dividing that by an amount that equates to the average daily nursing home private pay rate. Currently (as of November 5, 2018), that rate is $286.15.

So, if Medicaid determines that you had divested yourself of $100,000 during the look-back period, you will be given a penalty of 349 days ($100,000/$286.15 = 349.47).

The penalty won’t start until you are otherwise eligible for Medicaid. Perhaps the cruelest aspect about Wisconsin’s Medicaid divestment penalty rules is that the penalty period does not start until you are otherwise eligible for the benefit. When would that be? After you have applied, and after you have lowered your asset levels to Medicaid’s limits. Basically, Medicaid won’t start penalizing you until you actually need their help. Yikes.

All divestment cures must be completed in full. A divestment can be “cured” if the divested asset is returned to the Medicaid applicant. Unfortunately, in Wisconsin it is all-or-none. This means that if you divested yourself of $50,000, but in an attempt to cure the divestment you only receive $40,000 back, you will still have a $50,000 penalty period! Other states allow for divestments to be partially cured, so in the previous example the applicant would only have a $10,000 penalty period. Not so in the Badger State. You must get it all back.  This requires Wisconsin residents to be extra cautious in their retirement years about making gifts and donations.

For more information on long-term care planning or to schedule your free initial appointment, contact me at (920) 221-0320 or By Email.