Medicaid Eligibility for Nursing Home Care

Most families have a moment, somewhere into a long nursing-home stay, when they realize the bill is not going to stop and the savings are. That is the moment Medicaid enters the picture.

Medicaid covers more than half of the long-term nursing home care in this country. Medicare only pays for the first 100 days of skilled care, and only under certain conditions. After that, the money has to come from somewhere. For most families, that somewhere is Medicaid.

To qualify, your loved one has to meet income and asset limits. The rules are strict on purpose , Medicaid is meant for people who cannot pay any other way. Some families need to do careful planning to qualify. None of that planning is shady, by the way. It is the same kind of work people do for tax returns or estate planning. The rules exist; you can use them.

This article walks through the income limits, the asset limits, and the planning options. So you know where you stand and what choices are open to you.

For an unmarried individual (or a married person whose spouse is not in the nursing home), the national asset limit for Medicaid eligibility is $2,000 as of 2024.

• Assets include:
• Cash and bank accounts
• Stocks, bonds, mutual funds
• Real estate (with specific exceptions)
• Vehicles (with specific exceptions)
• Life insurance policies with cash surrender value
• Retirement accounts that are not protected

• Exempt assets (not counted toward the limit):
• Your primary residence (with some limits)
• One vehicle
• Household furnishings and personal effects
• Burial funds and burial plot
• Engagement and wedding rings (in some states)
• Life insurance with no cash surrender value

If you have more than $2,000 in non-exempt assets, you must spend down to that level before Medicaid will pay for nursing home care. This is where planning becomes important.

The rules are more generous if you are married and the healthy spouse (called the "community spouse") remains at home. The goal of these rules is to prevent the well spouse from becoming impoverished while the other spouse receives care.

Community spouse resource allowance: The spouse at home can keep a portion of marital assets up to a maximum limit. For 2024, that maximum is $156,300 (indexed annually). This means the couple can protect significantly more assets than the $2,000 individual limit.

The calculation works like this: Add up all marital assets as of the month your spouse enters the nursing home. Divide by two. The community spouse keeps their half (up to the maximum limit). The nursing home resident must spend down to $2,000, but the community spouse can keep their protected amount plus any separate property in their name.

Example: A married couple has $300,000 in savings. When the husband enters a nursing home, they have $150,000 each (if joint). The wife can keep her $150,000 up to the $156,300 maximum. The husband must spend down his half to $2,000. Result: The wife keeps $150,000; the husband must have only $2,000.

Income allowance: The community spouse is also entitled to keep enough of the couple's income to maintain a modest household. This is separate from the asset allowance.

To prevent people from transferring away assets immediately before applying for Medicaid, the government looks back 5 years (60 months) at all assets you gave away or transferred for less than fair market value.

Look-back period: Medicaid examines all financial transfers made during the 5 years before you apply for nursing home coverage.

Penalty period: If you transferred assets for free or for less than their value, you become ineligible for Medicaid coverage for a calculated period. The penalty period is based on the value of the assets you transferred.

Penalty calculation (2024): If you gave away $60,000, and the average cost of nursing home care in your state is $8,000/month, you would be ineligible for 60,000 ÷ 8,000 = 7.5 months. During those 7.5 months, you must pay for care privately. After that period ends, Medicaid coverage begins.

• Important exceptions (not penalized):
• Transfers to a spouse
• Transfers to an unmarried child who is blind or disabled
• Transfers to a trust for a disabled child
• Transfers to a caregiver child (with strict conditions)
• Your home (with conditions)

This look-back rule is why advanced planning matters. Large gifts to children or grandchildren made within 5 years can be very costly.

Medicaid does not have a strict income limit for nursing home care (unlike for community-based care). Instead, if your income is high, you can still qualify for Medicaid, but Medicaid becomes the secondary payer and you must contribute your income toward the cost of care (called the "patient responsibility" or "patient contribution").

• How it works: If you are a nursing home resident receiving Medicaid:
• All of your monthly income is counted except specific protected amounts
• You are allowed to keep a small personal needs allowance (typically $35–$75 per month)
• If you are married and your spouse lives at home, you can transfer some of your income to your spouse (spousal support)
• Any remaining income must be paid to the nursing home as your share of the cost
• Medicaid pays the balance

This allows higher-income individuals to qualify for Medicaid while still contributing what they can.

• Income includes:
• Social Security benefits
• Pensions
• Wages or self-employment income (unlikely if in nursing home)
• Rental income
• Interest and dividends
• Annuity payments

A "spend-down" is when you use your assets to pay for nursing home care until you reach the Medicaid asset limit of $2,000. Once you reach that limit, Medicaid begins paying.

How it happens in practice: When you enter a nursing home and apply for Medicaid, you and the facility work together. You spend your own money first until your remaining assets equal $2,000. Then Medicaid takes over and pays for ongoing care.

Example: You have $50,000 in savings when you enter a nursing home. The facility charges $8,000/month. After paying the first 6 months ($48,000), you have $2,000 left. Starting in month 7, Medicaid pays for your care, and you keep your $2,000.

• Strategic spend-down: Some families work with an elder law attorney to plan how to spend down wisely. You can:
• Pay off debts (legitimate spend-down)
• Invest in home repairs or modifications (if the home will be protected)
• Pre-pay for funeral and burial (allowed)
• Invest in exempt assets
• Pay for care not covered by Medicaid

• You cannot:
• Give away money to avoid Medicaid (this triggers the look-back penalty)
• Hide assets
• Transfer assets below market value

Beyond financial eligibility, you must also be medically eligible. Medicaid requires that you need a level of care that can only be provided in a nursing facility.

• Typically, this means:
• You have functional impairments (unable to perform activities of daily living independently)
• You need skilled nursing care or assistance throughout the day
• Your condition requires the facility environment for safety or supervision
• You have been assessed by a physician or clinical social worker as requiring facility-level care

The assessment process varies by state, but generally: 1. Your doctor or a state assessor evaluates your medical and functional status 2. They determine the level of care you require 3. If institutional care is necessary, you are medically eligible 4. If you could live safely at home with in-home services, you may not qualify

This is less restrictive than Medicare's "skilled care" requirement. Medicaid will cover custodial care (help with bathing, dressing, eating) as long as you need facility placement for safety.

Applying for Medicaid nursing home coverage involves several steps:

1. Contact your state Medicaid agency or your nursing home's social worker. They will provide applications and explain your state's specific rules (some states have variations).

• 2. Gather financial documents:
• Bank statements (usually 2–3 months)
• Investment account statements
• Deed to your home
• Life insurance policies
• Pension statements
• Social Security benefit letter
• Tax returns

3. Disclose all assets and income. Be thorough and honest. Fraudulent claims can result in criminal charges.

4. The state will assess your financial eligibility based on assets and income.

5. The state will request medical documentation (doctor's orders, clinical assessments) to establish medical need.

6. You will be asked to spend down your assets if you have more than the allowed limit.

7. Once you reach the asset limit and all documentation is approved, Medicaid coverage begins.

8. The facility bills Medicaid directly for your care.

Timeline: The application process typically takes 4–8 weeks, though it can take longer if documentation is incomplete. Start the process early, and have your social worker follow up regularly.

If you are concerned about future nursing home costs and want to plan ahead, consider:

Consult an elder law attorney: An attorney specializing in Medicaid planning can review your specific situation, explain your state's rules, and suggest strategies such as irrevocable trusts, caregiver agreements, or timing of gifts.

Understand the 5-year look-back: Major gifts made within 5 years of needing care can trigger penalties. If you want to help family members financially, consider doing it more than 5 years before you anticipate needing care.

Document caregiver arrangements: If an adult child is providing care to you, a formal caregiver agreement (drafted by an attorney) can allow you to compensate them fairly without it being a gift. This is exempt from the look-back.

Consider long-term care insurance: If you are healthy and have assets, a long-term care insurance policy can protect your assets and give you more choices about where to receive care.

Protect your home strategically: Your primary residence is exempt from the asset limit. Some planning involves ensuring the home is titled properly and protected.

Review beneficiaries: Ensure your life insurance, retirement accounts, and bank accounts have current beneficiary designations. Assets that pass by beneficiary designation avoid probate and can pass directly to heirs.

Start conversations early: Talk with family members about your wishes, concerns, and values regarding long-term care. These conversations should happen before crisis forces decisions.