A very important program for many seniors is Medicaid coverage of long-term nursing home costs. In deciding on eligibility for nursing home coverage, Medicaid looks carefully at the applicant's financial records, including current income and assets and any funds spent or property transferred out of the applicant's name within the previous five years. Any amount that Medicaid determines was given away or transferred to another for less than fair value may be considered by Medicaid as still belonging to the applicant. This could disqualify the applicant for Medicaid coverage for many months, the length of time calculated using the amount transferred and the average cost of nursing home care in the applicant's home state.The purpose of this rule is to prevent people with assets from giving them away and then having the government pay for their long-term care out of funds specially allocated for people who are poor.
The 5-year "look-back" rules don't necessarily apply to every gift. Small gifts – to grandchildren, for example – are not normally considered in this calcultion. Medicaid certainly looks at any transaction larger than $1,000, but there is no "minimum amount" rule preventing it from looking at smaller gifts or transactions. This is especially true when there appears to be a pattern of smaller transactions which total up to large amounts.