How Far Back Does Medicaid Look for Assets?

When planning for long-term care, understanding the distinction between Medicare and Medicaid regarding asset consideration is crucial. While both are government healthcare programs, their eligibility criteria and financial rules differ significantly. The “asset look-back period” primarily applies to Medicaid, a program designed to assist individuals with limited financial means, especially for long-term care services.

Medicare’s Approach to Assets

Medicare, a federal health insurance program for individuals aged 65 or older and certain younger people with disabilities, does not consider a person’s assets for eligibility or benefits. Eligibility for premium-free Medicare Part A (hospital insurance) depends on having paid Medicare taxes through sufficient work history, usually around ten years. While income can influence the monthly premium for Medicare Part B (medical insurance), the program does not involve an asset look-back period. This also applies to Medicare Advantage plans (Part C) and Medicare Part D (prescription drug coverage), which do not review past asset transfers. Medicare focuses on providing health insurance coverage, not long-term care assistance, unlike Medicaid.

The Medicaid Look-Back Period

The Medicaid look-back period is a specific timeframe during which state Medicaid agencies review an applicant’s financial transactions. This period is a central component of Medicaid eligibility for long-term care services, including nursing home care and home and community-based services (HCBS) waivers. Its purpose is to prevent individuals from intentionally reducing their assets to meet Medicaid’s financial eligibility limits, ensuring only those with genuine financial need receive assistance.

In most states, the look-back period extends 60 months before an individual applies for Medicaid long-term care benefits. Any transfer of assets for less than fair market value made within this five-year window is subject to review. Transactions like gifting money or property, selling assets below market value, or making informal payments to caregivers without a formal agreement can trigger a violation. This look-back period applies to Medicaid programs covering long-term care, but generally not to basic Medicaid coverage, such as Aged, Blind, and Disabled (ABD) Medicaid.

While the 60-month standard is widespread, some states have variations. For example, some states may have shorter periods or different rules for specific programs. The strict review process emphasizes Medicaid’s role as a payer of last resort, expecting individuals to use their own resources for care before relying on public assistance.

Penalties for Asset Transfers

If an applicant violates Medicaid look-back rules, a penalty period of ineligibility for long-term care benefits is imposed. During this time, Medicaid will not cover nursing home care or HCBS costs, requiring the individual or their family to pay privately. The penalty period is calculated by dividing the total value of assets transferred for less than fair market value by the state’s average monthly cost of nursing home care, known as the “penalty divisor.” This divisor varies by state and is updated annually.

For example, if an individual transferred $50,000 and their state’s penalty divisor is $10,000, the penalty period would be five months ($50,000 / $10,000 = 5 months). There is no maximum limit to how long a penalty period can last; it directly corresponds to the amount of the uncompensated transfer. The penalty period generally begins when the individual has applied for Medicaid, is otherwise financially and medically eligible, and is already receiving long-term care services.

Transfers made by an applicant’s spouse are also subject to the look-back review and can result in a penalty for the applicant. The average monthly cost of nursing home care in the United States was around $10,965 for a private room in 2025. These costs vary significantly by state, meaning the same uncompensated transfer amount could result in a vastly different penalty duration.

Counting Assets for Medicaid Eligibility

To qualify for Medicaid long-term care benefits, applicants must meet specific asset limitations. For a single individual, the countable asset limit is typically $2,000 in most states, though this threshold can vary. Countable assets include liquid resources like cash, funds in checking, savings, and credit union accounts, and investments such as stocks and bonds. Real estate that is not the applicant’s primary residence and additional vehicles beyond one exempt vehicle are also considered countable.

For married couples, all assets are considered jointly owned. When one spouse applies for long-term care Medicaid while the other remains in the community, specific rules prevent the community spouse from becoming impoverished. The Community Spouse Resource Allowance (CSRA) permits the non-applicant spouse to retain a portion of the couple’s combined countable assets. In 2025, federal guidelines set the minimum CSRA at $31,584 and the maximum at $157,920, with states determining their specific limits within this range.

Certain assets are considered “non-countable” or “exempt” and do not count toward Medicaid’s eligibility limits. A primary residence is often exempt, provided the applicant, their spouse, or a dependent resides there, or if the applicant expresses an “intent to return” home. Most states impose an equity limit on the home, though some states have no such limit. One vehicle is generally exempt if used for transportation by the applicant or a household member.

Other common exempt assets include:
Household goods, personal effects, and jewelry.
Term life insurance policies, as they lack cash value.
Whole life insurance policies, usually if their face value is below a certain threshold (often $1,500). If the face value exceeds this, the policy’s cash surrender value may be counted.
Pre-paid funeral plans, burial plots, and designated burial funds up to specific amounts.

Allowable Asset Transfers

While Medicaid generally penalizes asset transfers made within the look-back period, several types of transfers are exempt from these penalties. These exceptions protect certain family members or individuals with disabilities and are important for long-term care planning.

One primary exemption allows for the transfer of unlimited assets between spouses without incurring a penalty. Medicaid considers all assets of a married couple as jointly owned for eligibility. An individual can transfer assets directly to their spouse, or to another entity for the sole benefit of their spouse, without affecting Medicaid eligibility. This provision helps ensure the community spouse is not left without resources.

Assets can also be transferred to a biological or adopted child of any age who is blind or permanently disabled. Such transfers, regardless of asset value or type, are exempt from the look-back penalty. This exemption acknowledges the ongoing support needs of disabled individuals. The transfer can be made directly to the child or into a trust established exclusively for their benefit, provided the trust meets specific requirements.

Another exception involves transfers to a trust created for the sole benefit of a disabled individual under 65 years of age. These Special Needs Trusts enable assets to be held and managed for the disabled person’s supplemental needs without disqualifying them from Medicaid or other public benefits. These trusts must be structured to ensure no one else benefits from the assets and often include a provision for state reimbursement upon the beneficiary’s death.

A specific exemption allows for the transfer of a home to an adult biological or adopted child who has served as a caregiver. To qualify, the child must have resided in the parent’s home for at least two years immediately before the parent applied for Medicaid long-term care. During this period, the child must have provided care that effectively delayed the parent’s need for institutionalization. Additionally, a home can be transferred to a sibling who has lived in the home for at least one year before the applicant’s institutionalization and holds an equity interest in the property.