Quick Answer
Under the provisions of the Health Insurance Portability and Accountability Act which became the law on January 1, 1997, persons who knowingly and willfully dispose of assets in order to become eligible for Medicaid payment of Long-Term Care expenses are subject to criminal penalties if doing so results in a period of ineligibility for Medicaid benefits.
This was modified by the Deficit Reduction Act (DRA) of 2005. The period of ineligibility is now 5 years. This law encourages people to plan for long-term care in advance and avoid hiding or disposing of assets in order to qualify for Medicaid benefits.