Medicaid is the primary payer for nursing home care in the United States, covering room, board, nursing services, and personal care that Medicare and most private insurance plans do not pay for long-term. To qualify, you must meet both financial and medical criteria, and the rules around income, assets, and spousal protections are detailed and consequential. Here’s how the system actually works.
What Medicaid Covers That Medicare Doesn’t
Medicare covers short-term skilled nursing care after a hospital stay, typically up to 100 days, and only when you need ongoing rehabilitation or skilled medical care. Once that window closes, or if you simply need help with daily living because you can no longer manage on your own, Medicare stops paying.
Medicaid fills that gap. It pays for long-term nursing home residence, including room and board, nursing care, rehabilitative services, medications, and personal care assistance. A Medicaid-participating nursing facility is required to provide or arrange for services that help each resident maintain the highest possible level of physical, mental, and psychosocial well-being. For most families, Medicaid is the only realistic option for covering indefinite nursing home stays, which can cost $8,000 to $10,000 or more per month out of pocket.
Financial Eligibility: Income and Asset Limits
Medicaid eligibility for nursing home care has two financial tests: income and assets. Both are strict, and the specific numbers vary by state. As a reference point, the individual income limit in many states is set at 300% of the federal benefit rate, which in 2025 comes to $2,901 per month. If your income falls at or below that threshold, you generally qualify on the income side.
Asset limits are much tighter. In most states, an individual applicant can keep only about $2,000 in countable assets, though some states add a small resource disregard (for example, an additional $6,000 in Pennsylvania). Countable assets include bank accounts, investments, and most property. Your primary home is typically exempt while you live there or intend to return, though this protection has limits and can change after death.
If your income is above the threshold, some states allow you to set up a special trust (sometimes called a Miller Trust or Qualified Income Trust) to channel excess income so you still qualify. If you have excess assets, you may need to “spend down” by paying off legitimate debts like medical bills, a mortgage, or utilities until your resources fall below the limit. This is not the same as giving money away, which triggers penalties described below.
The 60-Month Look-Back Period
One of the most important rules in Medicaid planning is the look-back period. When you apply for nursing home coverage, your state reviews every financial transfer you’ve made in the previous 60 months (five years). Any assets you gave away or sold below fair market value during that window can trigger a penalty period during which Medicaid will not pay for your care.
The penalty is calculated by dividing the total value of all uncompensated transfers by the average daily private cost of nursing home care in your state. For example, if you gave away $100,000 and the average daily nursing home cost in your area is $300, you’d face a penalty of roughly 333 days of ineligibility. During that penalty period, you’d be responsible for paying for your own care.
The penalty clock doesn’t start when you made the gift. It starts when you’ve entered a facility, applied for Medicaid, and would otherwise be eligible. This means the financial consequences of gifting assets can hit at the worst possible time, when you’re already in a nursing home and out of money. Planning well ahead of any anticipated need is critical.
Medical Eligibility: Level of Care Requirements
Financial qualification alone isn’t enough. You also have to demonstrate a medical need for nursing facility care. Each state sets its own “level of care” criteria, but the general standard is that you need the kind of daily skilled nursing or personal assistance that can only be provided in an institutional setting.
In practice, this means you typically need substantial help with activities of daily living like bathing, dressing, eating, transferring, or toileting, or you have a medical condition requiring ongoing monitoring and nursing intervention. A state assessment team evaluates your functional abilities and medical needs to determine whether you meet the threshold.
People with serious mental illness or intellectual disability go through an additional screening called the Preadmission Screening and Resident Review (PASRR) program, which determines whether a nursing facility is the right setting or whether specialized services elsewhere would be more appropriate.
How Your Income Is Handled Once You’re Approved
Once you qualify and move into a Medicaid-funded nursing home, nearly all of your monthly income goes toward the cost of your care. Social Security, pensions, and any other income are turned over to the facility, with Medicaid covering the remaining balance of the bill.
You’re allowed to keep a small personal needs allowance for incidentals like toiletries, clothing, or phone calls. The exact amount varies by state. In Minnesota, for instance, the personal needs allowance is $132 per month. Some states set it higher, others lower, but it’s universally modest. This is the only money from your income that remains yours to spend freely.
Protections for a Spouse Living at Home
If you’re married and one spouse enters a nursing home while the other stays in the community, federal law provides significant financial protections so the at-home spouse isn’t left destitute. These rules are known as spousal impoverishment protections.
The community spouse can keep a portion of the couple’s combined assets, called the Community Spouse Resource Allowance. In 2025, this ranges from a minimum of $31,584 to a maximum of $157,920, depending on the state and the couple’s total countable resources. Everything above that maximum generally must be spent down before the nursing home spouse qualifies for Medicaid.
The community spouse is also entitled to a monthly income allowance drawn from the institutionalized spouse’s income if their own income is too low. The minimum monthly maintenance needs allowance in 2025 is $2,643.75, and the maximum is $3,948. This ensures the at-home spouse can cover basic housing, food, and living expenses. If the community spouse’s own income already exceeds the maximum, no additional allowance is provided.
Choosing a Nursing Home on Medicaid
Not every nursing home accepts Medicaid, and among those that do, availability can be limited. Facilities that participate in Medicaid are certified by the state and agree to accept Medicaid’s reimbursement rate, which is lower than what private-pay residents typically pay. This financial difference means some facilities limit the number of Medicaid-funded residents they accept at any given time.
Many nursing homes are “dual certified,” meaning they accept both Medicare (for short-term rehab stays) and Medicaid (for long-term care). It’s common for someone to enter a facility on Medicare after a hospitalization, transition to private pay once Medicare coverage ends, and eventually shift to Medicaid after spending down their assets. Facilities cannot legally discharge you solely because you’ve transitioned from private pay to Medicaid, though finding an initial placement on Medicaid can sometimes be more challenging than finding one as a private-pay resident.
Estate Recovery After Death
Medicaid is not a gift. After a Medicaid recipient dies, the state has the right, and in most cases the obligation, to recover the costs it paid for nursing home care from the deceased person’s estate. This is called the Medicaid Estate Recovery Program (MERP), and it most commonly affects the family home.
There are important exceptions. States cannot pursue estate recovery if the deceased is survived by a spouse, a child under 21, or a blind or disabled child of any age. States can also place liens on real property while someone is permanently institutionalized, but not if a spouse, minor child, disabled child, or sibling with an equity interest in the home still lives there. Beyond these protections, states must also have a process for waiving recovery in cases of undue hardship.
For families, this means a home that was exempt during the eligibility process may still be subject to a claim after the Medicaid recipient and their spouse have both passed away. Understanding this timeline matters when making decisions about whether to keep or sell a family home.
How the Application Process Works
Applying for Medicaid nursing home coverage involves submitting a detailed financial application to your state Medicaid agency, along with documentation of income, assets, property, and any transfers made in the last five years. You’ll also need medical documentation supporting your need for nursing facility care.
Processing times vary, but it’s common for applications to take 45 to 90 days or longer, especially if financial records are complex or incomplete. Many families apply while a loved one is already in a facility, paying privately or relying on Medicare while the application is pending. If approved, Medicaid coverage can sometimes be retroactive to the month of application or even a few months prior.
Because the rules are state-specific and the financial stakes are high, many families work with an elder law attorney or Medicaid planning specialist, particularly when significant assets like a home, retirement accounts, or a spouse’s financial security are involved. Small missteps in timing, asset transfers, or documentation can delay approval by months or create penalty periods that leave families covering nursing home costs out of pocket.