If you need long-term care—such as nursing home care, assisted living, or home health care—your costs can add up quickly. In 2022, the median cost of nursing home care was $94,900 a year, while the cost of assisted living was $54,000. Many people are unpleasantly surprised to discover that Medicare pays very little of long-term care costs, if any. However, if you have a low income as well as (in most states) limited assets, Medicaid (an entirely different program from Medicare) can help you pay for your care.
Medicaid is a joint federal and state program, and the states have some flexibility in setting the benefits they will offer and the eligibility criteria for those benefits. As a result, there are significant variations among state Medicaid programs.
Long-term care includes care provided at:
If you require long-term care and both your income and your assets fall below certain levels established by your state, then federal law requires your state's Medicaid program to pay for nursing home care. In the past, this was the only type of long-term care covered by Medicaid. But in more recent years, states have also begun to cover at-home care and assisted living care (which fall into the category known as home or community based services, or HCBS) through new pathways. Most commonly, coverage for HCBS is provided through a state "waiver" program—so called because the program waives certain federal requirements that restrict states, and allows states to operate more freely.
All states now offer some level of benefits for use in home settings, but the breadth of coverage varies widely. For example, state waiver programs for home care do cover nursing care and home health aide services in your home, as well as physical, occupational, and speech therapy, but only some states will cover personal care—meaning assistance with bathing, dressing, eating, and using the bathroom.
The same coverage trend applies to assisted living. While care in assisted living facilities did not used to be covered by Medicaid, more and more states are offering assisted living coverage in recognition of the fact that both at-home care and assisted living care are less expensive than nursing facility care, and are also often preferable to the recipient. However, some states might cover only assisted living care in certain counties, or only part of the cost. So while Medicaid pays for nursing home care, whether Medicaid pays for assisted living, and how much, are questions that will have different answers depending on where you live. For guidance, reach out to your county's department of health, social services, or welfare.
Beware that not all nursing homes, assisted living facilities, or other long-term care facilities accept Medicaid payments. A nursing home or assisted living facility can tell you whether they accept Medicaid patients; you can ask them directly. A facility that accepts Medicaid will be licensed by the state and subject to periodic inspections to ensure that the facility meets federal standards. Some facilities can't meet those standards, while others choose not to accept Medicaid payments because they can charge higher rates to privately paying residents.
While most people who receive Medicaid for long-term care needs are elderly, you do not need to be elderly to qualify for Medicaid assistance with long-term care expenses. Children and adults under 65 may need nursing home care for various reasons. But note that the Medicaid eligibility criteria may be different for these people than for those over 65.
Before Medicaid will pay for a nursing home or other long-term care, the care must be shown to be medically necessary for the patient. States have different rules that determine when long-term care is medically necessary, but usually a doctor must state that this care is needed.
States have different rules regarding who qualifies for Medicaid, but usually you must have both (1) very low income and (2) very few assets (savings and other resources). Even within a state, the financial eligibility guidelines may differ depending on whether you are covering nursing facility care or at-home care. Below, we discuss typical income limits and asset limits, but some states can veer drastically from the norm. For example, California is beginning to phase out asset limits entirely, and New York also has a much higher asset limit than most other states.
For those over 65, most states have more flexible income guidelines for Medicaid coverage of long-term care. In most states, you can make up to 300% of the SSI income limit and still qualify. (300% of the SSI limit, $841, is $2,523 per month in 2022). In addition, some states offer an additional way of measuring income: If your medical medical expenses are so high that they reduce your income to below a specified, usually very low, limit, you can also qualify for Medicaid. This is called qualifying as "medically needy."
Even if your income is too high to qualify the traditional way (called the "categorically needy" way), you might still qualify as medically needy.
In addition to an income limit, states also impose a limit on the amount of assets you can have while still qualifying for Medicaid. Again, the exact asset limit varies widely by state, but for many states, it's $2,000 ($3,000 for a married couple).
Note that in a handful of states (notably New York), the asset limit is significantly higher. And California is in a multi-year process of phasing out the asset test altogether. Check with your local county's department of health, social services, or welfare to find out the specific limits in your state.
Fortunately, some of your assets are exempt. That means when tallying up your assets, you can leave out the following:
Many states set limits on the categories of exempt assets listed above. For example, most states allow you to exclude a life insurance policy only if the face value is $1,500 or less. And even if your home qualifies as an exempt asset because you intend to return home, most states will allow only a certain amount of equity in your home to be excluded—usually $636,000 or $955,000. (This amount rises each year with inflation.)
If your countable (non-exempt) assets exceed the asset limit set by your state, you will qualify for Medicaid coverage only after you have spent enough (for example, on long-term care out of your own pocket) to reach these limits—a process referred to by Medicaid as "spending down" your assets.
If you're spending down your assets to qualify for Medicaid, you can't just give away all of your money to your family to qualify for Medicaid faster. Beware of a major Medicaid rule limiting your ability to transfer assets: Any asset transferred out of your name during the "look-back period" can result in a penalty period during which you are not eligible for Medicaid.
The look-back period is usually 60 months (5 years), counting back from the date of your Medicaid application. The exception is California, whose look-back period is halved: 30 months (2.5 years). Some states also have more lenient look-back periods for HCBS coverage as opposed to nursing facility coverage; for example, New York historically did not have a look-back period for HCBS, though in 2022 it began phasing in a look-back period of 30 months (2.5 years).
Once a long-term care facility resident qualifies for Medicaid and begins to receive benefits, that resident must contribute nearly all of their income to the facility. Medicaid will pay the balance of the bill for the costs of care. However, the resident can retain a small amount of income in the following forms:
If only one member of a married couple needs long-term facility care, every state has its own rules protecting the spouse who stays at home from becoming impoverished while the other spouse receives Medicaid. This protection comes in two forms:
The MMNA is reserved for the at-home spouse if the at-home spouse would otherwise become impoverished when the spouse needing long-term care contributes nearly all income to Medicaid. In other words, the MMNA provides some income protection for at-home spouses with little or no income of their own. Federal law says that the MMNA amount should equal at least 150% of the federal poverty level, but states have the option to use a higher level. As a result, the MMNA varies by state, but falls within the federally set range of $2,177-$3,435. (These numbers creep up each year.)
While the MMNA reserves some income for the at-home spouse, the CSRA protects some assets for the at-home spouse. Most states use both a minimum CSRA (typically $27,480) and a maximum CSRA (typically $137,400). (These amounts are raised slightly every year.) In these states, the at-home spouse is able to retain half of the couple's combined assets, up to the maximum CSRA. But if the at-home spouse's half of the assets do not hit the minimum CSRA, then the at-home spouse can retain all of the assets, up to the minimum CSRA.
About a quarter of states (including California and Florida) use a different approach: The at-home spouse can retain all of the combined assets up to the single CRSA cap in that state, which is most often $137,400, but is sometimes lower.
Check with your local social services agency to find out your state's MMNA limits and CRSA amounts.
Medicaid has the right to collect the entire amount it has spent on the long-term care of anyone age 55 or over—whether that care is home care or care in a long-term care facility. It most often recoups this money out of any assets in the Medicaid recipient's estate at death. If assets have been lawfully transferred out of the Medicaid recipient's name before death, without violating Medicaid's transfer rules, those assets usually cannot be taken for Medicaid reimbursement. And if the recipient dies without any property left, that's usually the end of the story; the state will not ask the recipient's heirs to repay the costs.
However, estate recovery practices and rules vary by state. For example, in some states, only assets in a Medicaid recipient's "probate estate" can be used to reimburse the costs of care. (A probate estate consists of any property that must go through probate; assets that do not go through probate, such as property transferred by trust, would be protected from recovery.) And whether you might qualify for an exception from estate recovery will also vary by state. To find out the particulars of your state's estate recovery procedures, find an experienced estate planning lawyer who has experience with Medicaid planning.
If you don't think you'll ever meet Medicaid's eligibility requirements, you can consider buying private long-term care insurance, which offers to pay some of the costs of long-term care if you should ever need it. But long-term care insurance is expensive, and not for everyone.
Updated May 20, 2022