Medicaid Look-Back Period: How the 5-Year Rule Works (2026)

A gift made in the 60 months before a parent applies for Medicaid long-term care delays coverage by a set number of months, not for life, and some transfers are exempt outright.1 If you helped Mom or Dad move money to family, or you're wondering whether you can, you may be scared you've already ruined their chances. You probably haven't. The Medicaid look-back period triggers a penalty you can work out with simple division: the value given away, divided by your state's average monthly private-pay nursing home cost.1 Before you assume the worst, check whether the gift fits one of the federal exemptions below.

In This Guide

• What the Medicaid Look-Back Period Is
• How the Penalty Is Calculated
• When the Penalty Clock Starts
• What a Penalty Blocks, and What It Doesn't
• Which Transfers Are Exempt From the Look-Back Penalty?
• The Undue Hardship Waiver
• Trusts, Annuities, Loans and Life Estates
• Does the Gift Tax Exclusion Protect You?
• How the Medicaid Look-Back Period Differs by State
• SSI and VA Have Their Own Look-Backs
• If You Already Gave Money Away
• Frequently Asked Questions
• Learn More

What the Medicaid Look-Back Period Is

When someone applies for Medicaid to pay for long-term care, the state looks at more than what they own today. Federal law at 42 U.S.C. 1396p(c) tells every state to look back at what the applicant and the applicant's spouse gave away. For transfers made on or after February 8, 2006, the Medicaid look-back period is 60 months.1

The 60 months run backward from the application, not forward from the gift. The statute counts back from the first date the person is both institutionalized and has applied for Medicaid, and the Centers for Medicare & Medicaid Services (CMS), the federal agency that runs the program, describes the same window as 60 months before the date the individual applied.1 So a gift made four years before the application falls inside the window, while one made six years before falls outside it.

What the caseworker is looking for is a transfer "for less than fair market value": a gift, a sale to a relative at a discount, or money moved out of the applicant's name with nothing equal coming back. A sale at full market price isn't a penalized transfer at all, because the penalty reaches only a disposal for less than fair market value.1

How the Penalty Is Calculated

The Medicaid transfer penalty is a period of ineligibility for long-term care, and the arithmetic behind it is simple. Federal law divides the total, cumulative uncompensated value of everything the applicant or spouse transferred on or after the look-back date by the average monthly cost to a private patient of nursing facility care in the state at the time of application.2 That state average is what people call the penalty divisor.

Two details trip families up. First, a state may not round the result down or ignore a fraction of a month, so even a small gift produces a partial-month penalty.2 Second, a state may, as an option it elects in its state plan, add every transfer in the window together and impose one continuous penalty rather than a separate one for each month.2 In CMS's implementing guidance to states, $1,000 given away in each of the 60 months becomes one $60,000 transfer divided once.2

Some states use a daily divisor instead of a monthly one, which turns the same math into a penalty measured in days. Pennsylvania, for example, publishes a 2026 divisor of $421.20 per day and computes the penalty in days.3 You'll find more state figures in the table further down.

When the Penalty Clock Starts

The start date is where families get hurt most, so understand it before anyone applies. For a transfer made on or after February 8, 2006, the penalty begins on the later of two dates: the first day of the month of the transfer, or the date the person is eligible for Medicaid and would be receiving nursing-home-level care under an approved application but for the penalty.2

In real life the second date is almost always the later one. That means the penalty can't start until your parent is otherwise eligible, which in practice means their countable savings are already down to the state's limit, and is receiving nursing-home-level care under an approved application.1 Before 2006 the penalty started in the month of the gift (or, at state option, the month after), which let some people wait it out before applying. Federal law closed that door.2

Once a penalty period starts, it keeps running. CMS tells states the penalty period isn't interrupted or suspended even if the person later stops receiving institutional-level care, and a new penalty can't begin while another period of ineligibility is still running.2 States can also differ on the exact start day. Texas, for instance, starts the penalty on the first day of the month of the medical effective date when the person meets every other eligibility rule.1

What a Penalty Blocks, and What It Doesn't

A look-back penalty is not a denial of Medicaid. The federal Medicaid transfer-penalty statute makes the person ineligible, for the penalty months, only for nursing facility services, an equivalent level of care in another institution, and home or community-based services under a 1915(c) or (d) waiver.1 The Medicaid transfer penalty doesn't withdraw the rest of the person's Medicaid coverage; only those long-term care services are blocked during the penalty months.1

That distinction matters when you're deciding what to do. A parent serving a penalty may still have Medicaid coverage for other services, but the nursing home bill during those months has to come from somewhere else. Federal law also lets each state decide whether to apply the transfer rules to people who aren't institutionalized, so the treatment of someone seeking only community care can vary by state.1

When a state imposes a penalty, it has to tell you in writing. CMS says a new applicant gets a denial notice, someone already on Medicaid gets a 10-day adverse action notice, and either notice must include information about the undue hardship exception.2

Which Transfers Are Exempt From the Look-Back Penalty?

Federal law lists specific transfers that never trigger a penalty, even inside the 60-month window.1 If a gift your family already made fits one of these, it may not count against your parent at all.

The table above reflects the categories in the federal statute.1 The caregiver-child exemption is the one families ask about most, and it isn't automatic: it turns on the state's own determination that the child's care is what allowed the parent to stay home.1 Keep proof of where the child lived and what care they gave, because that's exactly what the state will ask for.

Federal law also excuses a penalty when you can make a satisfactory showing to the state that the applicant meant to get fair market value or other valuable consideration, that the transfer was made only for a reason other than qualifying for Medicaid, or that everything given away has been returned.1 A paid caregiving arrangement with a written agreement is one situation where the "other valuable consideration" question comes up; our guide to a personal care agreement explains how families set one up.

The Undue Hardship Waiver

Every state has to run a hardship process. Under federal law, undue hardship exists when the penalty would deprive the person of medical care such that their health or life would be endangered, or of food, clothing, shelter or other necessities of life.2 States must give notice that the exception exists, decide requests in a timely way, and offer an appeal of a denial.2

You don't have to file it alone. The nursing home where your parent lives can file the hardship application for them with consent from the resident or their representative, and while it's pending the state may, but isn't required to, pay to hold the bed for up to 30 days.2 CMS says states keep considerable flexibility in deciding when hardship applies, so the forms, criteria and deadlines are your state's.2

Tennessee shows how specific those deadlines can be. TennCare requires a hardship request within 90 days of the application, or no later than 40 days after a denial or termination notice, answers within 30 days, and allows an appeal of a hardship denial within 40 days.4 If your parent has nowhere else to turn, ask the caseworker about hardship the same day the penalty notice arrives.

Trusts, Annuities, Loans and Life Estates

Some transfers look safe and aren't, while a few that look risky are specifically protected. These are the four that come up most, and each has strict federal conditions.

Special needs and pooled trusts. Money placed in a properly drafted first-party special needs trust for a disabled person under 65, with a Medicaid payback provision, is exempt from both the trust-counting rules and the transfer penalty.1 A pooled trust run by a nonprofit has no age cap on who can have an account, but the Social Security Administration warns that a transfer into a trust for someone 65 or older may result in a transfer penalty.1 For an older applicant, funding a pooled trust account at or after 65 can be treated as an uncompensated transfer, though another exception may still apply.5

Annuities. Buying an annuity is treated as a transfer unless the state is named as a remainder beneficiary in the required position, and a non-retirement annuity also has to be irrevocable, nonassignable, actuarially sound and pay in equal amounts with no balloon payments.6 States add their own requirements on top, so check your state's manual before buying one.

Promissory notes and loans. Money lent to a family member counts as a transfer unless the note is actuarially sound, pays in equal amounts with no deferral or balloon payment, and forbids cancelling the balance when the lender dies.2 For Medicaid, a promissory note that isn't actuarially sound, doesn't pay in equal amounts, or can be cancelled at the lender's death is valued at the outstanding balance on the date of the application.2

Life estates. Buying a life estate in someone else's home counts as a transfer of the whole purchase price unless the buyer lives there for at least one year after the purchase, with no proration for a shorter stay.2 Medicaid's one-year residence requirement for buying a life estate doesn't apply when a parent deeds away their own home and keeps a life estate; in that case CMS says the value of the remainder interest is what's measured.2

Does the Gift Tax Exclusion Protect You?

No. This is one of the most common and costly misunderstandings. The IRS annual gift tax exclusion is $19,000 per recipient for 2026, but that's a federal tax threshold and says nothing about Medicaid.7 A gift that owes no gift tax can still be a transfer for less than fair market value inside the look-back period, and the Medicaid penalty counts the cumulative value of every such transfer.1 Years of small birthday and holiday checks to grandchildren can add up to a real penalty.

How the Medicaid Look-Back Period Differs by State

Federal law sets the framework, but states fill in the numbers. The biggest difference is the divisor, which each state sets from its own nursing home costs and updates on its own schedule. Here are the figures we've verified, each with the date it took effect.

Minnesota's divisor is a little different from the federal description: its statute uses the average Medical Assistance rate for nursing facility services, a figure adjusted each July 1 and published by the Minnesota Department of Human Services.8 Tennessee's manual is blunt about how long a penalty can run: there's no limit on the maximum months of ineligibility.4 Ohio calls the penalty a restricted Medicaid coverage period and sets its rules in the Ohio Administrative Code.4

For state-specific detail, see our guides for Georgia, Ohio, Pennsylvania and Tennessee. For other states, your state Medicaid agency's eligibility manual lists the current divisor.

California: A 30-Month Look-Back

California is the big exception to the 60-month rule. Effective January 1, 2026, Medi-Cal applies a 30-month look-back for nursing facility care and counts only transfers made on or after January 1, 2026, alongside a reinstated asset limit of $130,000 for one person.1 Older transfers aren't counted, so California families are looking at a much shorter history than the rest of the country.

New York: A 30-Month Rule Not Yet in Effect

New York law authorizes a 30-month look-back for community-based long-term care, but the state's own materials describe it as a proposal subject to federal approval, and the sources we reviewed don't show it has taken effect.9 Our New York 30-month lookback guide tracks its status.

SSI and VA Have Their Own Look-Backs

Medicaid isn't the only program that looks back, and the rules don't match. Supplemental Security Income (SSI) and VA Veterans Pension, including Aid and Attendance, each run their own transfer rules. If your parent is applying for more than one, line them up side by side.

The VA rule has one more difference that matters: a VA penalty follows only a transfer that would otherwise have pushed net worth over VA's limit.11 Our SSI transfer penalty guide and our guide to the VA net worth limit and look-back cover each program in detail.

The 60-month look-back is also different from Medicaid's retroactive coverage, which reaches back to covered services furnished as early as the third month before the month of application.12 Medicaid's retroactive coverage window is shrinking: under section 71112 of Public Law 119-21, for applications made on or after January 1, 2027, retroactive coverage reaches back two months for most people and one month for adults covered through the Affordable Care Act (ACA) Medicaid expansion.12 The three-month retroactive coverage window is also only the federal Medicaid default, and a state with an approved Section 1115 demonstration can provide less, so confirm your state's window with your state Medicaid agency.12 Our guide to Medicaid retroactive eligibility explains how that works.

If You Already Gave Money Away

Take a breath. A transfer inside the window is a problem to work through, not a verdict, and the earlier you face it the more choices you keep.

1. Gather the records. Pull five years of statements and any deeds, notes or written agreements. You'll need them anyway, and they're your evidence for an exemption.
2. Check the exemption table. A gift to a spouse, a disabled child or a qualifying caregiving child may not count at all.1
3. Ask about returning the money. Federal law excuses a penalty when everything transferred for less than fair market value has been returned.1 How your state handles a partial return is a question for the caseworker or an attorney.
4. Know the hardship route. If a penalty would leave your parent without care or necessities, ask for a hardship waiver, and remember the nursing home can file it.2
5. Read the notice closely. A penalty notice must include information about the hardship exception, and a hardship denial can be appealed.2
6. Talk to an elder law attorney before making any new transfer. The Medicaid planning strategies guide covers the legal options families use, and when professional help is worth it.

Learn More

Find personalized help sorting out a Medicaid look-back penalty or exemption at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.