For purposes of the transfer ineligibility rules, transfers include any voluntary gift or transfer of an asset for less than its fair market value. Involuntary transfers, such as those resulting from a divorce or foreclosure, do not disqualify a Medical Assistance applicant no matter when the transfers occurred. 
(Note: This is why divorce may be an effective technique to shelter assets. More about this later.)

     Almost any gift or transfer of assets (money or property) by a Medical Assistance applicant or spouse will make the applicant ineligible for Medical Assistance for a period of time. This is known as the "period of ineligibility." The actual length of the ineligibility period will depend on the amount of the transfer.

     In Pennsylvania, the ineligibility period is determined by dividing the value of the gift by the average monthly cost of nursing home care set by Pennsylvania. The ineligibility period will begin with the month of the first transfer of assets. For example, if a gift was made in May, May will count as the first month of the penalty period. However, under OBRA 1993, states are permitted to delay the ineligibility period one month. This means that a gift made in May would trigger an ineligibility countdown period beginning in June, giving the state a one month money-saving bonus. Currently, this is not the case in Pennsylvania but this rule could change at any time.

     The potentially unlimited ineligibility period created by OBRA 1993 would devastate the life savings of many middle-class Americans, if that is all the law did. But there is a saving grace period for most gifts or transfers. This means that the state can "look back" only thirty-six (36) months to see if any gifts or transfers were made by the Medical Assistance recipient or his or her spouse. If no gifts or transfers were made within those thirty-six (36) months, then there is no ineligibility period.

     If you're already on Medical Assistance when you enter a nursing home, the look-back period starts the day you enter the facility. If you're already in a nursing home when you apply for Medical Assistance, the look-back period begins the day you apply. If you made no gifts within the prior thirty-six (36) months, you won't be penalized no matter how much you may have given away more than thirty-six (36) months earlier.

     Keep in mind that the look-back and ineligibility periods apply only to gifts or transfers made by a Medical Assistance recipient or his or her spouse. Both spouses can still spend money on personal purchases and routine living expenses, such as clothes, debts, home repairs, or vacations, without worrying about triggering any penalty for transfers.