If my mom threw herself a 90th birthday party with her money, and than ends up going on medicare in three years, will they penalize her for this?

Not likely unless it's a very, very large party! (I'm assuming you mean Medicaid, right? With Medicare, it doesn't matter). She's allowed to spend her money, but she can't hide or give away large sums if she's trying to qualify for Medicaid. By the way, the look back period now is five years, so there may be other splurges she's had. She may want to keep the receipts, just to be sure. If you are thinking of a large sum, you may want to check with local Medicaid officials. You all want to relax about it. Happy birthday to your Mom! Carol

Imho what Medicaid NH application review looks for is patterns of spending, so if 3 years ago she had 100K in the bank and now has only 2K and lives on $900 a mo in SS, that's alot of $ to be accounted for. Now if she had been paying IL or AL 3K a month then that's 108K and that pattern will be easily viewed in her bank statements so the Medicaid financial review will be fine. But if she was living at home then where the $ could have went will be more scrutinized - she can spend her money on her needs, her property but NO gifting to others as the $ gifted could incur a transfer penalty. If she wants to do a cruise or get a face lift or 40K in dental work or pay off her mortgage or put a swimming pool in she can do that. The caseworker may ask for documentation on a withdrawal for significant amounts in order for those amounts not to incur a transfer penalty. Whenever possible she needs to write checks out to a business name rather than the person's name.
You just need to keep documentation for large amounts or something that could be viewed as questionable. Party On!

You mean medicaid.