Medicaid Look-Back Period and Selling a House in Washington

Does selling a house count against you under the Medicaid look-back period in Washington? Not by itself. Washington’s look-back penalizes transfers made for less than fair market value, not the sale of a house. It reviews transfers made in the 60 months before a long-term care application.

The five-year look-back does not penalize selling a house. It looks at what happened to the value: a sale at market price, or a gift or below-market transfer. That distinction is where the sale paperwork matters, and it is the part a broker can describe.

A note before you read on. This article is general information, not legal, tax, or financial advice. I am a real estate broker, not an attorney, CPA, or lender, and no attorney has reviewed this article. Most rules below link to their source. Where the sources used here do not answer a question, the article says so plainly, and that question becomes one to ask a lawyer or DSHS before you act. The companion guide Selling a Home in Washington When a Spouse Needs Care covers the wider picture. This one stays on the look-back.

What the look-back period is

When someone applies for Medicaid long-term care in Washington, the Health Care Authority (HCA) rule at WAC 182-513-1363 says the agency or its designee looks at asset transfers made within the 60-month period before the month the person reached institutional status or applied for long-term care services. For people already receiving services, it evaluates transfers made during or after the month they reached institutional status.

Federal law, 42 U.S.C. 1396p(c), sets the same 60 months for transfers made on or after February 8, 2006.

According to WashingtonLawHelp, a Washington legal aid site, DSHS will look back at your financial records for five years to see if you have given away money or property. That page also says to talk with a lawyer familiar with Medicaid rules before giving anything away.

This applies to care that Medicaid might pay for over months or years. If long-term care is not on your horizon, this is background. If it might be, read on.

What counts as a “transfer”

The rule’s definitions sit in WAC 182-513-1100. Four of them do most of the work:

Term	What the rule says
Transfer	Changing ownership or title of an asset, by an intentional act or by a failure to act
Fair market value	The price an asset may reasonably be expected to sell for on the open market, in an agreement made by two parties freely and independently
Adequate consideration	What was received approximates the fair market value of what was transferred
Uncompensated value	The fair market value of the asset on the date of transfer, minus the fair market value of what the person received

Read together, those definitions explain why a sale and a gift are treated differently. A sale at fair market value is a transfer of title, but the seller receives something of roughly equal value, so, by the rule’s definitions, the gap should be small or zero. A gift has an uncompensated value equal to the full value. A sale to a relative well under market value falls in between: the gap is the uncompensated value.

What the sources do not say is how DSHS decides, in a particular case, that a price was fair market value. That is a question for DSHS or a lawyer, and it comes up again below.

Knowing what a home would likely sell for comes first. A free seller report and consultation shows what comparable homes sold for and the reasoning behind a list price.

How the penalty is figured

The rule at WAC 182-513-1363, subsection 6, gives the formula. Add together the total uncompensated value of all transfers in the look-back, then divide by the statewide average daily private cost for nursing facilities. The answer is a number of days when the client is not eligible for long-term care services.

The federal law uses the same idea with a different unit. It divides by the average monthly cost to a private patient of nursing facility services in the state (42 U.S.C. 1396p(c)(1)(C)).

The rate is a dollar figure the state sets. According to WashingtonLawHelp, the state updates it every October 1, so any number printed here could be out of date. The Health Care Authority posts its program standards for income and resources, which is the place to look for the current rate.

An illustration with round numbers, not a real case. Suppose the daily rate were $500 and someone gave away $100,000 within the look-back. Dividing $100,000 by $500 gives 200 days of ineligibility. The real rate is different, the real calculation adds up all transfers, and it depends on facts this example leaves out.

When the penalty clock starts

Many people assume the clock starts at the gift. For an applicant, subsection 7 of the rule says the period begins on the date the client would be otherwise eligible for long-term care services but for the transfer, based on an approved application, or the first day after any earlier penalty period ended. As the rule is written, the clock does not start on the day of the gift. It starts when the person would otherwise be covered.

For someone already receiving services, the period starts the first of the month after ten-day advance notice, but no later than the first day of the month following three full calendar months from the date the transfer was reported or discovered. Subsection 8 says the period ends once the whole number of days has passed.

Small transfers and listed exceptions

The rule lists situations where no penalty period applies for the uncompensated value. Under WAC 182-513-1363, subsection (4)(d) for the home and subsection (4) for the rest, they include:

• The total of all transfers in a month does not exceed that same daily rate.
• The asset was an excluded resource, except a home, unless the home transfer meets the home conditions below.
• The home went to the person’s spouse.
• The home went to a child who meets the rule’s disability criteria, or a child under 21.
• The home went to a sibling who lived in the home and had an equity interest in it for at least one year immediately before the person reached institutional status.
• The home went to a child who lived in the home and provided care, but only if every one of six conditions is met. They include living in the home at least two years, providing verifiable care for at least two years immediately before the institutional stay, care that Medicaid did not pay for, care that kept the person at home, and a physician’s documentation that the care was necessary to prevent the stay.

Federal law lists matching home exceptions in 42 U.S.C. 1396p(c)(2)(A). Each has conditions, and this list is a summary. Whether any exception fits a particular family is a question for a lawyer.

Other ways the rule allows a penalty to be avoided

When an asset was transferred for less than fair market value, subsection (4)(c) also lets the client establish one of a few things. As the rule is written, these include showing an intent to transfer at fair market value, showing the transfer was exclusively for a purpose other than qualifying for Medicaid, continuing to qualify, or avoiding estate recovery, or showing that all assets transferred for less than fair market value have been returned to the client or the client’s spouse.

Two points from the text itself. First, the rule says a transfer is presumed to be for the purpose of establishing or continuing Medicaid eligibility, avoiding estate recovery, or both, and a client can rebut that presumption by providing convincing evidence. Second, the return-of-assets language refers to all assets transferred for less than fair market value, and the sources used here say nothing about partial returns. That is another question to take to DSHS or a lawyer.

Federal law has parallel language in 42 U.S.C. 1396p(c)(2)(C).

Undue hardship

WAC 182-513-1367 covers undue hardship. It defines it as the client being unable to obtain medical care to the extent that health or life is endangered, or food, clothing, shelter, or other basic necessities of life. The rule also lists situations where hardship does not exist, so the text matters here. A request must be in writing and, according to the rule, submitted within 30 days of the date of the denial or termination. Whether hardship could apply to any given transfer is not something this article can answer.

What this means when the asset is a house

The home can reach the look-back in three common ways:

1. It is sold on the open market. The seller receives the price. By the rule’s definitions, the question is whether what was received approximates fair market value.
2. It is sold or deeded to a relative for less than it is worth. The difference can be uncompensated value, unless one of the home exceptions above is met.
3. It is sold on the open market, and then the cash is handed out. The sale itself and the later gift are separate events. The proceeds are money, and the rule’s definition of a transfer covers income, real property, and personal property.

Gifting sale proceeds is easy to overlook, and the sources used here do not spell out how the two events are viewed together. The question is what happens to the money afterward, and whether anyone has asked a lawyer before it moves.

The cash a sale produces depends on price, selling costs, and what is owed. The costs of selling a home page walks through each one, so the number is known before any decision.

For the practical side of clearing out and selling a long-held house, see Downsizing in Shoreline: what to know before you list. If the owner has passed away, the sale follows different steps, which probate real estate in Washington covers.

What exists on the real estate side

Here is the part I can speak to as a broker, and it is a description of facts, not a promise about how DSHS will react. When a home is sold on the open market in King County or Snohomish County, a paper trail usually exists:

• A listing on the NWMLS. The home is exposed to buyers through the multiple listing service, with a date, a list price, and any price changes recorded.
• A written market analysis. A broker can prepare a comparative market analysis that shows recent sales of similar homes and the reasoning behind the list price.
• Offers and the accepted contract. Competing offers, if there were any, and the signed purchase and sale agreement show what two unrelated parties agreed to.
• A closing statement. The settlement statement from the title and escrow company shows the price, what was paid out, and where the proceeds went.

That list describes what is typically created when a home is sold. It is not a claim that any of these will satisfy DSHS. The sources used here do not say whether DSHS asks for an appraisal, a market analysis, or any particular document to support a fair market value sale, so I will not guess. Those are questions for DSHS or a lawyer.

What records DSHS can ask for

The general verification rule is WAC 182-503-0050. It says the agency first uses information from state databases, federal databases, or commercially available databases before asking you for records. It may require information from third parties when the information it received cannot be verified, did not verify the factor, or is contradictory, confusing, or outdated. The agency allows at least 10 calendar days to submit requested information, and extends the time if you ask for more.

The rule does not list a specific set of documents for a home sale, and the sources used here do not either.

Questions to ask before you sell

Take these to DSHS or a lawyer. Some have partial answers above, but none should be treated as settled for your situation.

• How does DSHS decide a sale price was fair market value, and does it ask for an appraisal or other support?
• If the home is sold on the open market and the proceeds are later spent or given away, how are those events treated?
• If a family member buys the home, how is the uncompensated value figured?
• Does any transfer in the last 60 months need to be reviewed before an application?
• Would any of the home exceptions apply to our family, and what documents would prove it?
• If a transfer happened, how does returning assets work, and what about a partial return?

Frequently Asked Questions

How far back does Medicaid look in Washington?

For long-term care, the HCA rule looks at transfers made within the 60-month period before the month a person reached institutional status or applied for services. For people already receiving services, it evaluates transfers made during or after the month they reached institutional status. Federal law also uses a 60-month look-back for transfers made on or after February 8, 2006.

Does selling my house at market value cause a Medicaid penalty?

The penalty is built on uncompensated value, which the rule defines as the fair market value of an asset on the date of transfer minus the fair market value of what the person received. By the rule’s definition, a sale at fair market value leaves little or no gap, but DSHS decides, so confirm with DSHS or a lawyer. The sources used here do not say how DSHS decides a price was fair market value, so that is a question for DSHS or a lawyer.

What happens to the money after the sale?

The rule’s definition of a transfer covers income, real property, and personal property, so cash from a sale can be transferred too. Gifting proceeds is a separate event from the sale. The sources used here do not say how the two are viewed together, so a lawyer is the place to ask before any proceeds move. Keep in mind that Washington reviews 60 months of transfers.

Can I sell my house to my child for less than it is worth?

The rule has home exceptions for a spouse, a child who meets the disability criteria, a child under 21, a sibling with an equity interest, and a caregiving child who meets six listed conditions. Outside those, the gap between value and price can be uncompensated value. Each exception has conditions, so a lawyer should read the rule against your facts.

Talk through the real estate side first

If a spouse or parent may need long-term care and you own a home in King County or Snohomish County, I can help with the real estate side: a market analysis that shows what comparable homes sold for, a timeline for listing and closing, and a clear picture of what the home would net after costs. The legal questions go to DSHS or a lawyer, and I am glad to work around their answers. More on how I help is on the page about selling a home when a spouse needs long-term care.

I am Emily Cressey with HomePro Associates at Keller Williams Greater Seattle. You can reach me at 206-245-8813, or download the Seller’s Guide. More at HomeProAssociates.com.

This article is general information, not legal, tax, or financial advice. Emily Cressey is a real estate broker, not an attorney, CPA, or lender. Rules change and every situation is different, so consult a qualified professional before acting on anything here.