What is the Penalty Period/Divisor?

What Is Medicaid’s Look-Back Rule?

When you apply for long-term care Medicaid — either Nursing Home Medicaid or Home and Community Based Services (HCBS) Waivers — the state reviews your financial history for the past 60 months (5 years in most states). They check for any transfers of assets for less than fair market value, including gifts. These are called disqualifying transfers and can result in a penalty.

Regular Medicaid (Aged, Blind, and Disabled) does not have this look-back requirement.

What Counts as a Violation?

• Giving away money or property
• Selling assets for below fair market value
• Transferring countable assets to someone other than your spouse without an approved exemption

Common exemptions include the spousal transfer, the Caregiver Child Exemption, and the Sibling Exemption.

What Is the Medicaid Penalty Period?

The penalty period is the length of time you must wait before Medicaid will cover your long-term care costs, due to a violation of the Look-Back Rule. It generally starts on the date you apply for Medicaid and are otherwise eligible — except for the disqualifying transfer.

During this period, you are responsible for paying care costs yourself.

What Is the Penalty Divisor?

The Penalty Divisor is the state’s average private-pay nursing home cost. This figure is used to calculate how long you’ll be ineligible. It varies by state, and in some cases, by region or facility. States may update it annually and use either monthly or daily rates.

How Is the Penalty Calculated?

Formula: Total value of disqualifying transfers ÷ State’s Penalty Divisor = Months (or days) of ineligibility.

Example: In Florida (2025 rate: $10,458/month), gifting $115,000 would cause 10.99 months of Medicaid ineligibility.

2025 Medicaid Penalty Divisors by State

Who Pays for Care During the Penalty Period?

Because Medicaid won’t cover your care during the penalty period, you must use personal resources or get help from family. This can be financially devastating since most applicants already have limited assets and income.

Can the Penalty Period Be Reduced or Removed?

• Return of funds: If all gifted/sold assets are returned, some states will remove the penalty entirely.
• Partial return: In states that allow it, returning part of the assets can reduce the penalty length.
• Undue Hardship Waiver: Rarely granted, but possible if penalties would cause severe harm.
• Appeals: If you believe no violation occurred, you can challenge the decision.
• Relocating: Moving to a state with a shorter look-back period may help, though it requires careful planning.

Why Consult a Medicaid Planning Professional?

Because the rules are complex and state-specific, working with an experienced Medicaid Planner can help you avoid costly mistakes, calculate potential penalties, and develop a strategy to qualify without unnecessary delays.