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She has now been accepted under PA medicaid. Dept of Human Resourses is keeping $719 of her $1,149 VA monthly check (along with ALL other income) and she is to receive the $430 balance. I was told she is allowed to give away up to $500 a month? Under PA Medicaid rules she is only allowed to have $2,400 in assets .

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No, she is not allowed to give away anything. Pennsylvania is a filial responsibility state and can force children who took money to pay it all back. All her income will go to the nursing home. ALL of it, every penny. The nursing home will give her a personal needs allowance from that. You get nothing.
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