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Long-Term Care Insurance and Medicaid Planning

Published June 23, 2009

When applying for Medicaid benefits, the look-back period for individuals seeking nursing home care is five years. The look-back period is the time period prior to the Medicaid filing Medicaid reviews to confirm the applicant’s financial eligibility. Any assets gifted to children or other individuals within 5 years of the need for nursing home care will cause a penalty period, or the amount of time the applicant must wait before qualifying for Medicaid benefits.

It may seem as though individuals who plan on purchasing long term care insurance and individuals who plan on taking advantage of Medicaid fall into different categories. However, in most cases, long term care insurance can be used as a part of overall Medicaid planning.

For example, anticipating the need for long term care, one could purchase a plan with a benefit period of five years. Assets can be transferred into a Trust, allowing for the individual to spend down their assets and become Medicaid eligible. If the individual falls ill during the five year look-back period, s/he now has the long term care insurance to cover the cost of the nursing home or at home care. If this same individual had not purchased the long term care insurance but had transferred his/her assets into the Trust, s/he may now not be eligible for Medicaid benefits until the expiration of a penalty period. While premiums on long term care insurance can be expensive, they are often more cost effective than paying out of pocket for care during a penalty period. A good estate planning attorney can advise on the best way to plan for the need for future long term care.

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