Are tuition and student loan payments included in Medicaid's look-back period?

A fellow caregiver asked...

My father has passed and my mother (age 82) has been in a nursing home in Tennessee unable to to get out of bed since January. Her health will never recover enough for her to leave. (I could not convince my older sibling who is also the executor of my parents will into obtaining a trust when the look back period was 3 years.) I have read in a book written by a elder law attorney that my mother could pay for school tuition and student loans which would not be affected by the look back period. Is this correct?

Expert Answer

I'm not sure exactly what you've read, but there is no specific exception for school tuition or loans in the Medicaid nursing home coverage look-back rules. Medicaid decides on whether to penalize a gift based on what the intent or purpose of the gift was. If the gift was made with the purpose of depleting funds to qualify for Medicaid, then Medicaid imposes a penalty, delaying coverage for a period of time based on the amount of the gift. If the gift was made for a different purpose and just happens to have had the secondary effect of depleting funds prior to the gift-giver applying for Medicaid, then the gift will not result in a penalty.

The problem for Medicaid is figuring out when a gift was made with the purpose of qualifying for Medicaid and when it was not. In the case of someone paying school tuition (for a child, grandchild, godchild or other family member, for example), Medicaid would consider whether this was done prior to entering a nursing home or only after, whether it was an ongoing practice or a one-time giveaway, whether the person knew at the time of the gift that she would soon need nursing home care, whether it completely depleted the person's funds or was only a relatively small portion, etc. Consider two examples, below, which might help explain how this works.

Example 1. Ruth, who is healthy and lives at home, regularly helps out her two grandchildren with school tuition. She has given each of them $5,000 a year for tuition for the past three years. Ruth now suddenly has a debilitating stroke that leaves her badly disabled and requires long-term nursing home care. After six months of paying for the care herself, all her assets are gone. Because Ruth clearly did not expect to have the stroke, and because the tuition gifts were made regularly during a period when she had no reason to consider needing Medicaid nursing home coverage anytime soon, Medicaid would be unlikely to consider the tuition gifts as being made for the purpose of qualifying for Medicaid, and so would probably not try to penalize Ruth.

Example 2. Betty has been in failing health for years, depending on her husband to help with her care at home, along with occasional help from her two adult children. Betty's husband dies, and Betty's children cannot care for her at home, so she enters a nursing home. Soon thereafter, Betty takes her entire $100,000 in savings and gives it to her three grandchildren for their school tuition and to pay off their existing student loans. She's never before paid any of their tuition or contributed to paying off their loans. She then immediately applies for Medicaid coverage of her nursing home. In this case, Medicaid is very likely to consider this sudden large gift as having been made with the purpose of qualifying for Medicaid and would probably penalize Betty.

Where your mother's situation would fall between these two examples is difficult to say based on the information you've provided, but as you can see, the question would be whether or not her gifts were a sudden move made for the purpose of qualifying for Medicaid.