Medicaid's 5-Year Look-Back: What If a Parent Gave Money Away?

When someone applies for Medicaid to pay for nursing home care, federal law has the state look back 60 months for gifts and other transfers made for less than fair market value. A transfer found in that window can make the applicant ineligible for nursing facility coverage for a set number of months, called a penalty period. Federal law also lists exemptions and requires each state Medicaid program to offer an undue hardship waiver process, and a recent New York decision shows why asking for it promptly matters.

What is the Medicaid look-back period?

The look-back period is a window of time before the application date during which Medicaid reviews what the applicant and the applicant's spouse gave away. Under 42 U.S.C. § 1396p(c), the look-back date is 60 months before the first date on which the person both is institutionalized and has applied for Medicaid. That 60-month rule covers disposals made on or after February 8, 2006. For earlier transfers, the statute used 36 months in most cases.

The rule applies when a person "disposes of assets for less than fair market value." Handing a grandchild a check, signing a car over to a relative for nothing, or selling a house to a neighbor for far less than it is worth would all fit that description. The statute also says that when property is held jointly with someone else, the asset (or the affected portion of it) counts as transferred when anyone, the owner or another person, takes an action that reduces or eliminates the owner's ownership or control of it.

For an institutionalized person, the penalty blocks Medicaid payment for nursing facility services, for a level of care in any institution equivalent to nursing facility services, and for home and community-based services provided under certain federal waivers. The statute lets states apply a similar penalty to people who are not institutionalized, but that is optional, and what counts as covered long-term care can differ by state.

The penalty is aimed at those long-term care services. The statute makes the person ineligible for those services during the penalty period, not for Medicaid as a whole. In the New York case discussed below, the agency granted Medicaid with "limited coverage" because of the transfer penalty.

How is the penalty period calculated?

The federal formula takes the total, cumulative uncompensated value of all assets transferred on or after the look-back date and divides it by the average monthly cost to a private patient of nursing facility services in the state (or, at the state's option, in the community where the person is institutionalized) at the time of application. The result is the number of months of ineligibility.

Two features of the formula matter to families. First, the numerator adds up everything given away in the window, so several small gifts add up. The statute also gives a state the option to treat multiple fractional transfers made in more than one month as a single transfer and start the penalty on the earliest date that would apply to any of them. Second, a state may not round down or otherwise disregard a fractional period, so a result of a few months and a few days produces a penalty with a partial month in it.

Each state works out its own divisor, and the statute ties it to the time of application, so this article gives no figure. Your state Medicaid agency can tell you the number it uses.

When does the penalty period start?

For transfers made on or after February 8, 2006, the statute sets the start date as the first day of a month during or after which assets were transferred for less than fair market value, or the date on which the person is eligible for Medicaid and "would otherwise be receiving institutional level care" based on an approved application "but for the application of the penalty period," whichever is later. The start date also cannot fall inside another period of ineligibility.

In practice, that means the clock does not begin merely because a gift was made. Under the statute, it begins no earlier than the date the person is eligible for Medicaid and would otherwise be receiving the institutional level of care, based on an approved application. A penalty can therefore be triggered by a gift made several years earlier, inside the look-back window, and still take effect during a nursing home stay.

Which transfers are exempt from the penalty?

Section 1396p(c)(2) says a person is not made ineligible by a transfer to the extent that one of the following applies:

• The asset was a home, and title went to the person's spouse.
• The home went to a child under age 21, or to a child who is blind or disabled as the statute defines it.
• The home went to a sibling who has an equity interest in it and lived there for at least one year right before the person became institutionalized.
• The home went to an adult son or daughter who lived there for at least two years right before institutionalization and, as determined by the state, provided care that let the parent stay at home instead of in a facility.
• Assets went to the person's spouse or to someone else for the spouse's sole benefit, or moved from the spouse to another person for the spouse's sole benefit.
• Assets went to a blind or disabled child, or to a trust set up solely for that child.
• Assets went to a trust set up solely for the benefit of a disabled person under age 65.

Each category has its own conditions, and the state decides how to apply them to the facts. The statute also treats some arrangements as transfers on their own terms. Money used to buy a life estate in another person's home is treated as an asset for these transfer rules unless the buyer lives there for at least one year after the purchase, and annuities, promissory notes, and certain trust payments have their own rules. For background, see life estates explained and irrevocable trusts explained.

Can a person show a transfer should not count?

Yes, in three situations. The statute says a person is not ineligible to the extent that a "satisfactory showing is made to the State" that the person intended to dispose of the assets at fair market value or for other valuable consideration, that the assets were transferred "exclusively for a purpose other than to qualify for medical assistance," or that all assets transferred for less than fair market value have been returned to the person.

The New York decision shows how this worked under that state's rules. The agency told the applicant in a notice that any prohibited transfer during the look-back period was presumed to have been made to qualify for Medicaid, and that she could present evidence to rebut that presumption. She submitted none, and the petitioners did not argue in court that she could have. The court also noted that the applicant bears the burden of demonstrating eligibility. Receipts, bank statements, and letters that explain a payment are the kind of records worth gathering early. Which proof a given state accepts depends on state rules and federal regulations that this article does not cover.

What is the undue hardship waiver, and how does it work?

The statute says a person is not made ineligible to the extent the state determines, under its own procedures and the Secretary's standards, that denying eligibility "would work an undue hardship." A 2006 federal law, Pub. L. 109-171 § 6011(d), reproduced in the notes to the statute, requires each state to have a waiver process. Under it, undue hardship exists when applying the transfer rules would deprive the person of medical care such that health or life would be endangered, or of food, clothing, shelter, or other necessities of life.

That law also requires the process to include notice to recipients that the exception exists, a timely process for deciding whether to grant it, and a way to appeal an adverse decision. The statute adds that the state's procedures must let the nursing facility file the waiver application for a resident, with the consent of the resident or the resident's personal representative. For a resident of a nursing facility with a pending application, a state may also pay to hold the bed for up to 30 days if the application meets the Secretary's criteria.

The federal statute and note do not set forms, deadlines, or how far back a waiver can reach. Those details come from state procedures, which must follow the Secretary's standards. Nothing in the federal text says a waiver applies automatically.

What happened when a New York family waited to ask for the waiver?

In Matter of Cvetkovic v New York State Dept. of Health, 2026 NY Slip Op 05886, the Appellate Division, Fourth Department, decided on October 9, 2026, that a delay in requesting the waiver limited how much of the nursing home stay it could cover. The court was unanimous. The case came from a Medicaid application submitted on May 4, 2022 for Hildegarde Cvetkovic. Oneida Center for Rehabilitation and Nursing joined her as a co-petitioner.

Her son, acting under a power of attorney, did not ask for a hardship waiver with the application. According to the opinion, he "affirmatively represented" on it that she had made no transfers during the look-back period. An uncompensated transfer was discovered later. On June 17, 2022, the county agency granted limited coverage because of the transfer penalty and told her she could ask for an undue hardship waiver. She did not apply until January 25, 2023.

The waiver was made effective October 1, 2022, which is three months before the month of her request. Because she asked while already receiving limited coverage during a penalty period, the court held that the agency properly applied a New York State Department of Health directive, 06 OMM/ADM-5, under which the waiver period "could extend no more than three months prior to the month in which the application for an undue hardship waiver was made."

The court also rejected the argument that the agency had to weigh hardship on its own, without being asked. The opinion says New York's governing statute and implementing rules "contemplate a process under which an individual may obtain an undue hardship waiver by filing an application for that relief." Two claims that the agency had failed to send required notices did not change the result either, because the petitioners had not shown prejudice. The court said that had she "promptly submitted a request for a waiver in the two months following that notice, the entire period of the nursing home facility care would have been covered by the three-month retroactivity window."

This was a New York decision about a New York directive. The three-month limit comes from that directive, and this article makes no claim that any other state uses it. Other states set their own rules, and the court did not decide how far back any other state's waiver may reach. The opinion is marked as uncorrected and subject to revision before publication in the Official Reports, and further review in New York's courts may still be possible.

What should a family do if a transfer penalty is possible?

These steps follow from the federal statute and the New York case. State forms and deadlines vary, so check any notice you receive and your state Medicaid agency.

1. Gather statements for all accounts covering the 60 months before the application date, and write down any large withdrawals, gifts, or sales and what they were for.
2. List every transfer honestly on the application. In the Cvetkovic case, the application stated that no transfers had been made, and an uncompensated transfer was found afterward.
3. When you file the application, ask the agency in writing whether a hardship waiver can be requested at the same time. The New York directive cited in the opinion allows an applicant for nursing home coverage to apply for the waiver together with the Medicaid application.
4. If a penalty notice arrives, request the undue hardship waiver in writing right away, and keep a dated copy. Ask the nursing facility to help, since federal law says the facility can file on the resident's behalf with consent.
5. Find the deadline to ask for a hearing or appeal, and meet it. Federal law requires a way to appeal an adverse hardship decision, but the deadline comes from state rules, so look for it on the notice or ask the agency.
6. Consider talking to an elder-law attorney or a legal aid office, especially if a home or a trust is involved, but do not let that delay a waiver request or a hearing deadline. If a loved one can no longer handle their own affairs, see guardianship and conservatorship.

Is the look-back the same as Medicaid estate recovery?

No. The look-back and transfer penalty apply before Medicaid pays, when the state decides whether to cover long-term care and for how long. Estate recovery, covered in a different subsection of the same federal statute, is a separate process in which a state seeks repayment of certain Medicaid costs from a recipient's estate. A family can face either one, or both, and the rules for each differ. For the second topic, read Medicaid estate recovery: what families need to know.

States also vary on the penalty divisor, procedures, and some deadlines, so the agency that runs Medicaid in your state is the place to confirm current rules.

This article is general information about federal law and one New York court decision. It is not legal advice, and your situation may turn on state rules and facts not covered here.