MassHealth planning and the look-back period

On Behalf of | Nov 14, 2023 | MassHealth

Long-term care is enormously expensive. MassHealth can help you pay for it, but only if you meet the financial eligibility requirements to qualify for the program. To do so means having a low income and limited resources.

This situation puts many Massachusetts residents in a bind: They can’t afford to pay for their long-term care without MassHealth, but they’re considered too wealthy to qualify for MassHealth.

When faced with such a problem, some people might be tempted to start giving away their assets, or selling them at a discount in order to get their income and resources under the the number required to qualify for MassHealth. There are a number of problems with this idea. One is that MassHealth’s test of financial eligibility doesn’t begin and end on the day the person applies. It looks back in time.

The look-back period

MassHealth employs a five-year look-back period in its eligibility test. This means that, when assessing an applicant’s financial eligibility, MassHealth looks at the person’s financial history for the five years prior to their application.

When looking at this period, MassHealth checks to see if the person gave away or sold assets below market value. If so, the program assumes the person got rid of the assets as a way of fooling the system. It will then declare the person ineligible for MassHealth for a penalty period.

Note that making gifts can interfere with MassHealth eligibility under the five-year rule even if the gifts would otherwise be permissible under the federal gift tax rule. In 2023, the gift tax rule allows taxpayers to give up to 17,000 per recipient without having to file any special gift tax return. But doing so could count against the person’s MassHealth eligibility.

Medicaid trusts

As you can see, the look-back period can present a great roadblock for people who are trying to apply for MassHealth.

A good way to get around the problem is by putting assets in trust. When done properly, this can render the assets outside the scope of MassHealth’s financial eligibility rules. It can also mean that a person can use MassHealth without giving up the assets they hoped to pass on to their loved ones.