Many people fear the ALTCS/Medicaid Five-Year Look Back Policy—and they should! (ALTCS stands for Arizona Long Term Care System, which is Arizona’s Medicaid program for long term care, such as assisted living or nursing homes.) The Policy is intended to punish ALTCS applicants or recipients who attempt to hide their assets by giving them away. The consequence is denial of ALTCS coverage for a time. These penalties imposed by the Policy can be devastating for people in need of essential care they cannot afford. However, few people understand how it really applies to their situation and how this knowledge might be used to their advantage.
The Deficit Reduction Act of 2005 (DRA) put in place the Five-Year Look Back Policy, adopted by States who wish to opt into certain Federal Medicaid funding programs. Arizona has adopted the Five-Year Look Back Policy so that it may provide a more flexible array of coverage. Under the Policy, ALTCS assumes that any uncompensated transfers of assets or income within the five years preceding an application was for the purpose of qualifying for ALTCS or keeping them out of ALTCS’ reach for Estate Recovery purposes. Uncompensated transfers may include gifts, loans, disclaimers, unaccounted withdrawals, or just a transfer where the donor did not receive equal value in return. Uncompensated transfers within the five-year look back period may result in a period of time that an ALTCS customer or applicant cannot receive long term care coverage.
Some examples of uncompensated transfers may include:
- Adding your son to the title of your home, as joint or sole owner
- Selling your car to your nephew for less than market value
- Allowing your family to access to your funds for their own needs
- Making the down-payment on your grandson’s first home
- Loaning your friend start-up funds for their new business
- Disclaiming an inheritance, life insurance proceeds, or other funds because you are afraid it may affect your ALTCS eligibility or you think someone else could use it more than you
- Buying an annuity
Even though an ALTCS applicant may be out of money, they may face a delay of long term care coverage by ALTCS for a period of time. This is to encourage people to spend their money on their care, rather than attempt to shelter it through other people.
How is the Five-Year Look Back penalty period calculated?
The length of penalty period is based on the value of the transferred assets. The total value is divided by the average monthly cost of a nursing home in the community. Per the Five-Year Look Back policy, that equals the number of months that the ALTCS applicant could have paid for his/her own care.
For example, if you give your home in Phoenix, AZ to your daughter before you move into an assisted living facility, and the value of your home was $200,000, ALTCS would delay paying your assisted living facility for 25.1 months from the month you apply for ALTCS.
$200,000 divided by $7,968.11 (avg nursing home cost/mo Maricopa Co. 10/1/2021) = 25.1 months
The transfer penalty period begins the first the person is approved for ALTCS or for those already enrolled in ALTCS, the month the transfer occurred.
Are there exceptions to the Five Year Look Back policy?
Yes. There are exceptions to the Five-Year Look Back Policy, such as transfers to spouses, disabled children, and a few other limited exceptions. Or ALTCS may grant a hardship exception in limited situations that are outside of the ALTCS applicant/recipient’s control. As a general rule of thumb, most attempts to gift assets actually prolong your becoming eligible for ALTCS rather than accelerate it, or otherwise do more harm than good.
However, with in-depth understanding of the Five-Year Look Back Policy and other ALTCS policies, our attorneys may help you discover ways to apply the policies to your advantage, such as providing for your spouse or others dependent on you. In fact, our ALTCS planning focuses on 1) eligibility and 2) asset protection.
When it comes to the ALTCS Five-Year Look Back Policy, don’t guess! It is complex and the penalties are harsh. Our knowledgeable attorneys can help you evaluate your situation and explore options for asset protection, if applicable. Contact us today to schedule a consultation.