Is There a 7-Year Look-Back Period for Medicaid?

There is no 7-year look-back period for Medicaid under current federal law. When you apply for Medicaid long-term care coverage, the state agency reviews the previous 60 months (five years) of your financial transactions, not seven. The seven-year figure comes partly from confusion with IRS gift tax rules and partly from federal proposals to extend the window that have not become law. For now, the answer is five years in nearly every state.

Why People Think It’s Seven Years

The seven-year number is not invented, but it is not the law. Two sources feed the confusion.

The first is the IRS gift tax. The annual gift tax exclusion for 2026 is $19,000 per recipient, and people often assume that staying under that threshold also satisfies Medicaid. It does not. Medicaid treats every dollar given away during the look-back period as an uncompensated transfer, whether or not the gift has any tax consequence. The two systems are entirely separate.

The second is legislative. Federal lawmakers have proposed extending the Medicaid look-back to seven or even ten years as part of broader spending changes. None of these proposals have become law as of 2026. Coverage of the proposals has been broad enough that many people believe the change already happened. If Congress does eventually extend the period, the effective date and transition rules will determine how transfers already made are treated. Until then, the period is 60 months.

What the Five-Year Rule Actually Covers

The look-back rule comes from 42 U.S.C. § 1396p and applies specifically to Medicaid long-term care programs: nursing home coverage and Home and Community-Based Services waivers.¹ It does not apply to regular Medicaid health coverage, Medicaid for pregnant women, or children’s Medicaid.

The agency is looking for one thing: assets you transferred without receiving fair market value in return. A gift of $80,000 to your daughter three years before you apply gets flagged. The same gift six years out falls outside the window entirely.

The net is wider than most people expect. It catches:

Cash gifts to family members and outright transfers of property for no payment.
Below-market sales. Selling a home worth $300,000 to a relative for $100,000 creates a $200,000 uncompensated transfer.
Informal payments to family caregivers without a written agreement at a reasonable rate. Even if real care was provided, it looks like a gift.
Assets placed in an irrevocable trust where payments later become unavailable to you.
Transfers made by your spouse during the same period. Shifting assets to your spouse and then having your spouse gift them to a child does not sidestep the rule.

Intent does not matter. If you helped a grandchild with college tuition three years before an unexpected stroke, the transfer still triggers a penalty unless you can prove the gift was made exclusively for a purpose other than qualifying for Medicaid.¹

How the Penalty Is Calculated

When the agency finds uncompensated transfers inside the five-year window, it calculates a penalty period of ineligibility. The math is straightforward: total the uncompensated transfers, then divide by the average monthly cost of private nursing home care in your state.¹

The divisor varies significantly by state and is published annually. In a state where the divisor exceeds $12,000 a month, a $60,000 gift produces roughly a five-month penalty. In a cheaper state, the same gift generates a longer penalty. States cannot round down fractional months, so a calculation of 10.3 months means 10.3 months of ineligibility.

There is no federal cap on how long the penalty can run. A $500,000 transfer in a state with an $8,000 divisor is 62.5 months of ineligibility, which is longer than the look-back period itself.

When the Penalty Clock Starts

This is the part that catches families off guard. The penalty period does not begin on the date you made the transfer. It begins on the later of two dates: the first day of the month of the transfer, or the date you are in a nursing facility, have applied for Medicaid, and would otherwise be eligible but for the penalty.¹

In practice, that means you make a gift, years pass, you enter a nursing home, you spend down your remaining assets until you meet Medicaid’s financial thresholds, you apply, and only then does the clock start running. During those penalty months, you are in a facility that costs thousands of dollars a month, you have no Medicaid coverage, and by definition you have almost no assets left to pay privately. Someone has to close that gap.

Transfers That Don’t Trigger a Penalty

Federal law exempts several categories of transfers from the penalty, regardless of when during the look-back window they occur.¹

Transfers to your spouse, or to anyone else for the sole benefit of your spouse.
Transfers to a blind or permanently disabled child of any age, or into a trust established solely for that child’s benefit.
Transfers into a trust for the sole benefit of any disabled person under 65, even if that person is not your child.
Transfer of your home to a child under 21.
Transfer of your home to an adult “caretaker child” who lived in the home for at least two years immediately before you entered a nursing facility and provided care that let you stay home rather than enter one.
Transfer of your home to a sibling who has an equity interest in the property and lived there for at least one year immediately before you became institutionalized.

The caretaker child exemption is the one families rely on most and the one that fails most. You carry the burden of proof: a physician’s written statement that the level of care provided would otherwise have required nursing home placement, documentation that the child actually lived at the address for the full two years, and ideally a daily care log kept during the caregiving period. Families rarely start documenting until it is too late.

A paid caregiver agreement with a family member can also survive review, but only if it was signed before the care started, reflects the market rate in your area, is documented with hours and tasks, and (in some states) is notarized. A retroactive contract will be treated as a gift.

Fixing a Problem Transfer

If a penalizable transfer surfaces during your application, the cleanest fix is to get the assets back. Federal law provides that if all assets transferred for less than fair market value are returned, the individual is not ineligible.¹ Most states also allow a partial return, which reduces the penalty proportionally: if you gave away $100,000 and $60,000 comes back, the recalculation uses the remaining $40,000. The obvious catch is that the recipient has to cooperate. If your child already spent the money or refuses to return it, you are stuck.

Every state must also have an undue hardship waiver process.¹ The bar is high. You generally must show that enforcing the penalty would deprive you of medical care needed to sustain your health or life, or of basic necessities like food, clothing, or shelter, and that no other resources are available. Most states also require evidence of a good-faith effort to recover the transferred assets, including seeking legal advice and pursuing court remedies. A hardship waiver is a last resort, not a planning tool. If the agency believes the transfer was structured on the assumption a hardship claim would bail it out, expect a denial.

What You Can Do With Money Without Triggering a Penalty

Spending your own money on yourself at fair market value is not a transfer. That distinction is what makes legitimate spend-down possible:

Paying off a mortgage, car loan, credit card balances, or medical bills.
Home repairs, accessibility modifications, and maintenance on your primary residence.
Buying exempt personal property such as household furnishings, clothing, or a vehicle for personal use.
Prepaying funeral and burial expenses through an irrevocable burial trust or prepaid funeral contract, where the state allows it.

The line is fair market value. Putting a new roof on your own home is not a gift. Buying a $15,000 piece of jewelry and handing it to your granddaughter is.

The Look-Back Isn’t the Only Rule to Know

Clearing the five-year window does not mean Medicaid walks away from the assets you kept. Federal law requires every state to pursue estate recovery from the estates of deceased Medicaid recipients who were 55 or older when they received long-term care benefits. Your home, exempt during your lifetime, becomes a target after death. Recovery cannot be pursued if you leave a surviving spouse, a child under 21, or a blind or disabled child of any age, and states must waive recovery for undue hardship.² For a single applicant with healthy adult children, the house that was carefully preserved through the look-back may still be sold to reimburse the state. Any plan built around the five-year rule alone leaves that piece unaddressed.

1
Office of the Law Revision Counsel. 42 US Code 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
2
Medicaid.gov. Estate Recovery