Indiana Medicaid Planning and the Five-Year Lookback: What Families Need to Know

The cost of long-term care in Indiana is significant and rising. A private room in an Indiana nursing facility costs, on average, more than $80,000 per year. Assisted living facilities typically run $40,000 to $60,000 annually. Home health care, while less expensive per hour, can add up quickly for families managing a loved one's care around the clock.

For most Indiana families, these costs cannot be sustained indefinitely from personal savings. Medicare provides only limited coverage for skilled nursing care — typically up to 100 days following a qualifying hospital stay, and only for skilled care, not custodial care. Private long-term care insurance can help, but many families either did not purchase it or find that their policies do not cover the full cost of care.

That leaves Medicaid — the joint federal-state program that covers long-term care costs for individuals who meet financial eligibility requirements — as the primary payer for nursing home care for a large portion of Indiana's elderly population.

But qualifying for Medicaid is not as simple as spending down your assets. The program includes a five-year lookback period that scrutinizes asset transfers made before the application and can impose significant penalties for transfers that do not meet the rules. Understanding how the lookback works — and planning well in advance — is essential for families who want to protect their assets while ensuring access to Medicaid-covered care.

How Indiana Medicaid Works for Long-Term Care

Indiana's Medicaid program for long-term care is administered by the Indiana Family and Social Services Administration (FSSA). The program covers nursing facility care, as well as home and community-based services through various waiver programs, for individuals who meet both medical and financial eligibility requirements.

Medical Eligibility

To qualify for Medicaid-covered nursing facility care, an individual must require a level of care that meets Indiana's criteria for nursing facility placement — generally, a need for assistance with activities of daily living (bathing, dressing, eating, mobility) or supervision due to cognitive impairment.

Financial Eligibility

Financial eligibility for Indiana Medicaid long-term care involves two components: income and assets (also called resources).

Income: Indiana uses an income cap for Medicaid long-term care eligibility. In 2026, the income limit is $2,829 per month (this figure adjusts periodically). Individuals whose income exceeds this limit may still qualify through a Qualified Income Trust (also called a Miller Trust), which is a specific type of trust that redirects excess income to allow Medicaid eligibility.

Assets: To qualify for Medicaid, an individual's countable assets must generally not exceed $2,000. This is a very low threshold — one that requires most middle-class families to spend down or strategically transfer assets before qualifying.

Exempt Assets

Not all assets count toward the $2,000 limit. Indiana Medicaid exempts certain assets from the resource calculation, including:

• The primary residence, if the applicant intends to return home or if a spouse, minor child, or disabled child lives there (subject to Medicaid estate recovery after death)
• One vehicle of reasonable value
• Personal belongings and household furnishings
• Prepaid funeral and burial arrangements up to certain limits
• Term life insurance with no cash value
• Whole life insurance with a face value of $10,000 or less

The home is the most significant exempt asset for most Indiana families — and it is also the asset most commonly at risk from Medicaid estate recovery after the recipient's death.

Spousal Protections

When one spouse needs nursing facility care and the other remains in the community (the community spouse), Indiana Medicaid provides important protections to prevent the community spouse from being impoverished.

The community spouse is permitted to retain:

• The primary residence (exempt from the resource calculation)
• A Community Spouse Resource Allowance (CSRA) — in 2026, the community spouse may retain up to approximately $154,140 in countable assets (this figure adjusts annually)
• A Minimum Monthly Maintenance Needs Allowance (MMMNA) — a minimum monthly income to cover living expenses

These protections are important but have limits. For families with significant assets, the community spouse may still be required to spend down a substantial portion of the couple's savings before the institutionalized spouse qualifies for Medicaid.

The Five-Year Lookback Period

The five-year lookback period is the most important — and most misunderstood — aspect of Medicaid planning for long-term care.

What the Lookback Is

When an Indiana resident applies for Medicaid long-term care benefits, the FSSA reviews all asset transfers made by the applicant (and, for married applicants, the applicant's spouse) during the 60 months (five years) immediately preceding the application date.

If the applicant transferred assets for less than fair market value during this period — gave away money, transferred property to children, or otherwise disposed of assets without receiving equivalent value in return — those transfers may trigger a penalty period during which Medicaid will not pay for nursing facility care.

How the Penalty Is Calculated

The penalty period is calculated by dividing the total value of disqualifying transfers by the average monthly cost of nursing facility care in Indiana. In 2026, Indiana uses a divisor of approximately $7,500 per month (this figure is updated periodically).

For example: if an applicant transferred $75,000 to their children in the three years before applying for Medicaid, the penalty period would be approximately 10 months ($75,000 ÷ $7,500 = 10). During those 10 months, Medicaid would not pay for nursing facility care — even if the applicant is otherwise eligible and has no remaining assets to pay for care.

The penalty period begins not when the transfer was made, but when the applicant is otherwise eligible for Medicaid — meaning they have already spent down their remaining assets to the $2,000 limit. This creates a situation where the applicant has no money and no Medicaid coverage, which can be devastating for families.

What Triggers the Lookback

The lookback applies to transfers of assets for less than fair market value. Common transfers that can trigger a penalty include:

• Gifts of cash to children, grandchildren, or other family members
• Transfers of real estate for less than fair market value (including transfers to children for $1 or "love and consideration")
• Adding a child's name to a bank account as a joint owner (which may be treated as a partial transfer)
• Transfers to a revocable living trust — these are generally not penalized because the applicant retains control, but transfers out of the trust may be
• Transfers to an irrevocable trust — these are generally treated as transfers for less than fair market value and can trigger a penalty
• Paying a family member for caregiving without a written personal care agreement at fair market rates

What Does Not Trigger the Lookback

Not all transfers are penalized. Transfers that are generally exempt from the lookback include:

• Transfers to a spouse — transfers between spouses are not penalized (though the assets remain countable for the couple)
• Transfers to a disabled child — transfers to a child who is blind or permanently disabled are exempt
• Transfers of the home to a caregiver child — if an adult child lived in the applicant's home for at least two years before the nursing home admission and provided care that delayed the need for institutionalization, a transfer of the home to that child may be exempt
• Transfers of the home to a sibling with an equity interest — if a sibling already has an equity interest in the home and has lived there for at least one year before the institutionalization
• Transfers for fair market value — selling an asset at its actual market value is not a disqualifying transfer

Medicaid Estate Recovery

Even after qualifying for Medicaid, families face another significant issue: Medicaid estate recovery.

Under federal law, states are required to seek recovery of Medicaid long-term care costs from the estates of deceased Medicaid recipients. In Indiana, the FSSA may file a claim against the estate of a Medicaid recipient for the cost of nursing facility care provided after age 55.

The most significant asset subject to estate recovery is typically the primary residence. Even though the home is exempt from the Medicaid resource calculation during the recipient's lifetime (and during the community spouse's lifetime), it may be subject to a Medicaid estate recovery claim after both spouses have died.

This means that families who assumed the home would pass to their children may find that Medicaid has a claim against it. Advance planning — including the use of certain irrevocable trusts — can protect the home from estate recovery if done sufficiently in advance of any Medicaid application.

Why Advance Planning Matters

The five-year lookback period means that Medicaid planning cannot be done at the last minute. Transfers made within five years of a Medicaid application will be scrutinized and may trigger penalties. Effective planning must be done well before a nursing home admission is anticipated.

This is why elder law attorneys often counsel clients in their 60s and early 70s to begin thinking about Medicaid planning — not because a nursing home is imminent, but because the five-year clock needs to start running.

Common Medicaid planning strategies that must be implemented in advance include:

Irrevocable Medicaid Asset Protection Trusts (MAPTs). An irrevocable trust that transfers assets out of the applicant's estate can protect those assets from Medicaid — but only if the transfer was made more than five years before the Medicaid application. Assets transferred to a MAPT are no longer countable resources for Medicaid purposes once the lookback period has passed. The applicant gives up control over the assets, but may retain the right to income from the trust.

Gifting strategies. Systematic gifting to family members can reduce the applicant's countable assets over time — but only if the gifts are made more than five years before the Medicaid application. Gifts made within the lookback period will trigger penalties.

Spousal planning. For married couples, various strategies can protect assets for the community spouse while qualifying the institutionalized spouse for Medicaid. These strategies are complex and must be carefully coordinated with Indiana's spousal protection rules.

Annuities. In some circumstances, converting countable assets into a Medicaid-compliant annuity can accelerate eligibility for the institutionalized spouse while providing income to the community spouse. These arrangements must meet specific requirements to avoid being treated as disqualifying transfers.

Personal care agreements. If a family member is providing care to an elderly parent, a written personal care agreement at fair market rates can compensate the caregiver while reducing the parent's countable assets — without triggering a Medicaid penalty.

The Importance of Working with an Elder Law Attorney

Medicaid planning is one of the most complex areas of elder law. The rules are detailed, they change frequently, and the consequences of getting them wrong — a penalty period that leaves a family without coverage and without assets — can be severe.

Generic advice from the internet, well-meaning family members, or financial advisors who are not specialists in this area can lead families into costly mistakes. Transfers that seem logical — giving assets to children to "protect" them — can trigger significant penalties if not done correctly and with sufficient lead time.

An experienced elder law attorney can:

• Evaluate your current asset and income situation against Indiana's Medicaid eligibility rules
• Identify which assets are exempt and which are countable
• Develop a planning strategy that protects the maximum amount of assets while ensuring access to Medicaid coverage when needed
• Prepare the legal documents — irrevocable trusts, personal care agreements, powers of attorney — needed to implement the plan
• Assist with the Medicaid application process and respond to FSSA inquiries

Starting the Conversation

The best time to begin Medicaid planning is before a crisis. Once a family member is already in a nursing home or facing an imminent admission, the options are more limited and the stakes are higher.

At Birch & Associates PC, we work with Indiana families on Medicaid planning and elder law matters — helping them understand their options, protect their assets, and navigate the Medicaid system with confidence. We serve clients throughout Indiana from our Indianapolis office.

If you have questions about Medicaid planning, the five-year lookback, or long-term care planning in Indiana, we encourage you to reach out and schedule a consultation.