Elder Law and Medicaid Planning: Protecting Assets Before Long-Term Care

Nursing Home Care Costs $9,733 Per Month on Average

The 2023 Genworth Cost of Care Survey reported that the median annual cost of a private room in a U.S. nursing facility is $116,800 — roughly $9,733 per month. A two-year nursing home stay, which is close to the median duration for residents who remain through death, can consume over $230,000. Medicare pays for only the first 100 days of skilled nursing facility care following a qualifying hospital stay, and only under specific conditions. After that, residents pay privately until they exhaust their assets and qualify for Medicaid — the joint federal-state program that covers long-term care for people with limited income and resources.

Medicaid Eligibility: The Resource Test

For nursing home (institutional) Medicaid, the resource limit in most states is $2,000 for an individual. A married couple has different rules: the community spouse (the spouse living at home) is entitled to retain a "community spouse resource allowance" (CSRA) of between $29,724 and $148,620 in 2024, depending on the state. Assets above these limits must be spent down before Medicaid eligibility begins.

The Five-Year Lookback Period

Medicaid's lookback period is the rule's most consequential feature. When applying for institutional Medicaid, the state Medicaid agency examines all asset transfers made within the preceding 60 months (five years). Any transfer for less than fair market value during that period triggers a penalty — a period of ineligibility during which Medicaid will not pay for care.

The penalty period is calculated by dividing the total value of disqualifying transfers by the state's average monthly nursing home private-pay rate. If the state average is $8,000 per month and a person transferred $80,000 of assets in the lookback period, the penalty period is 10 months. During those 10 months, the person is in the nursing home, owns less than $2,000, and receives no Medicaid — a genuinely dangerous gap.

Common Misconceptions About the Lookback

The lookback applies specifically to long-term care Medicaid, not to all Medicaid programs. Regular Medicaid (community Medicaid for low-income individuals) does not have a lookback period in most states. CHIP, ACA marketplace Medicaid expansions, and home and community-based waiver programs are generally not subject to the five-year lookback.

Exempt Assets: What Medicaid Does Not Count

Not everything a person owns counts toward the $2,000 limit. Medicaid's countable asset rules exempt several categories entirely.

Planning Strategies Used in Elder Law Practice

Medicaid planning is a legitimate legal specialty. The strategies below are commonly used by elder law attorneys; their appropriateness depends heavily on the individual's timeline, state of residence, and specific circumstances.

• Irrevocable Medicaid Asset Protection Trust (MAPT): Assets transferred to this trust more than five years before a Medicaid application are outside the lookback period. The grantor retains income from trust assets but gives up access to principal, which is the legal basis for the transfer.
• Caregiver child exemption: A home transferred to an adult child who lived in the residence and provided care for at least two years prior to institutionalization does not trigger a transfer penalty, under federal Medicaid law 42 U.S.C. § 1396p(c)(2)(A).
• Spousal refusal: In New York and a few other states, the community spouse may refuse to make their assets available to pay for the institutionalized spouse's care. The state must provide Medicaid and then may sue the community spouse for recovery — but in practice, enforcement is inconsistent.
• Annuities: Converting a lump sum into a Medicaid-compliant annuity (immediate, actuarially sound, irrevocable, non-assignable) can transform countable assets into an income stream. The state must be named as a remainder beneficiary up to the amount of Medicaid paid.

Medicaid Estate Recovery

Federal law requires all states to seek recovery from the estates of deceased Medicaid recipients for nursing home and other long-term care services paid. Most states limit recovery to probate estate assets. Some states have expanded estate recovery to include non-probate assets — living trust assets, joint tenancy property, and payable-on-death accounts — under "expanded estate recovery" rules.

California passed AB 1798, effective January 1, 2017, which eliminated estate recovery for community (non-long-term-care) Medicaid recipients. Long-term care Medicaid estate recovery in California remains in place for nursing home costs.

The Role of a Qualified Elder Law Attorney

Medicaid planning is complex, highly state-specific, and changes frequently as states adjust their programs. The National Elder Law Foundation certifies Certified Elder Law Attorneys (CELAs), and the National Academy of Elder Law Attorneys (NAELA) maintains a practitioner directory. Families planning for long-term care should ideally consult an elder law attorney at least five years before anticipated need — well before the lookback period begins.

This article is for informational purposes only and does not constitute legal advice.